After 75 years, the SEC has decided to tiptoe into the 21st century by granting advisors and money managers the legal “okay” to publish and share online ratings and reviews. “The Investment Advisors Act of 1940 — the federal law regulating financial advisors — did not anticipate the development of LinkedIn, Twitter and Yelp,” shares Jack Waymire founder of Paladin Research and Registry.
With this change, advisors and money managers can now share client reviews that may appear on social media networks and third-party websites (Worth.com) without alteration or the repercussions of the Investment Advisors Act of 1940.
According to a recent WealthManagement.com study, over a third of advisors (37%) say they’re a minimal user of social media networks for business purposes. Half of advisors say the biggest reason they don’t use social media is that there’s too much compliance and paperwork.
Why the change?
Clients heavily rely on word-of-mouth (WOM) referrals, which are a form of marketing. And now, more than ever, WOM referrals are no longer driven by a face-to-face conversation, but by a click of a button that simply reads: Share or Post.
As of March 2015, LinkedIn reported more than 364 million professional users in over 200 countries and territories. In 2014, Twitter reported 255 million monthly active users, while Yelp reported 135 million monthly visitors and 71 million reviews.
The SEC recognizes this transition into the digital/online space and sees that online reviews and ratings will help advisors earn more business with little-to-no marketing cost or effort.
With that said, advisors must create and drive their marketing efforts by fueling referrals and reviews . . . online.
Online search tools.
According to a Corporate Insight survey, 67% of millennial will use online search tools to find, select, and review advisors. Today, reviews and ratings are accessible at anytime from any device, which allows advisors to market themselves even when they are not working.
What does this mean for financial advisors and money managers?
The SEC is allowing advisors and money managers to share positive reviews in their marketing. However – in full disclosure – not many, if any, businesses will share negative reviews and this is why the SEC is enforcing that negative or positive reviews cannot be edited.
As advisors, we should share positive reviews online because it also helps with this little thing called: SEO, Search Engine Optimization.
Take online reviews with a grain of salt.
As helpful and insightful online reviews can be, “investors must consider human nature,” writes Jack Waymire. Dimensional Research conducted a survey where 95% of respondents who have had a bad customer experience said they told someone about it, compared to 87% who shared a good experience. And 50% of respondents who had a bad interaction were more likely to share it on social media than those who had a good experience (30%).
Don’t let the statistic get you down!
Use the less not-so positive reviews and ratings as a performance indicator for where and how your practice is meeting customer expectations. Ratings and reviews are the lowest priced survey or focus group your practice can ever find and utilize.
As Jack Waymire says, “The more information, and the more transparency, investors can access, the better their choices will be.”