Updated Monday, July 28, 2014 as of 10:30 AM ET
Serious Concern, Optimism Follow New SEC Social Media Rules
Financial Planning
Thursday, April 3, 2014

Planner Winnie Sun isn’t afraid of social media. For the past decade, she’s used it to build her firm, Sun Group Wealth Partners of Irvine, Calif.

But the LPL advisor says she has serious concerns about new guidance from the SEC allowing advisors to publish links to third-party testimonials from websites like Yelp that rate and publish public comments about establishments ranging from restaurants and plumbers to investment advisors.

“I didn’t think the SEC would allow this to happen,” Sun says. “Something like this could be quite positive, but it also could be quite damaging for our profession.”

The change is one detailed in a newly published list of guidance from the SEC, released Monday, regarding social media.

Reactions range from optimism to caution and some concern as advisors and other players in the financial services industry try to sort out what it will mean for the marketplace.


As of this week, the SEC will allow advisors to promote their services by linking to such third-party websites, but only if the advisors have no control over that content and are unable to filter positive comments away from negative ones.

“The commission was very concerned about the cherry-picking principle,” says Sara Crovitz, assistant chief counsel in the SEC’s division of Investment Management (which released the guidance), whereby advisors could use positive client comments in advertisements, but not negative ones. “What modern technology allows us to do is to have all the commentary, positive and negative, in real time.”

The SEC published the guidance in response to strong demand from investors who want to be able to research their investment advisors in the same manner they do professionals in other industries.

“If you can research your plumber,” Crovitz asks, “why can’t you research your investment advisor?”

Advisors also now may publish or link to those websites’ mathematically generated ratings to show prospective clients that they are receiving, for example, four stars out of five, based on all published testimonials.

As a result of the new SEC guidance, BrightScope plans to offer members of the public a chance to review the approximately 600,000 advisors for which the online venture maintains profiles in its Advisor Pages database. Brightscope aims to become the go-to marketplace where consumers can research advisors nationwide.

“I think this could be a game changer,” Sonia Ahuja, BrightScope’s vice president of strategy and business development, says of the SEC’s new rules. “This guidance opens up doors for us to allow this.”

In fact, the SEC’s guidance has no bearing on third-party entities’ publication of customer reviews. However, in the future, advisors who choose to could link to their BrightScope profiles that contain reviews.


Sun says she’s concerned that a proliferation of client reviews as a result of this development, could pose some danger to advisors’ practices.

“I think on these third-party sites, there is not a lot accountability,” Sun says. “I have clients in the restaurant business and sometimes there are people who write false complaints.”

For many years, Yelp has been trying to find ways of effectively counteracting the phenomenon of competitors undermining each other by flooding review sites with fictional negative reviews.

Even if the reviews are from real clients, Sun says, they may not always accurately depict an advisor’s practice.

“Our job is not always to tell the client what they want to hear,” she says. “It’s not always delivering happiness and sunshine. I don’t want it to be a situation where you are guilty even when you are not guilty.”

Established firms like hers, with a strong presence in social media, may run a greater risk of attracting negative attacks by smaller firms seeking a competitive advantage, she thinks.

For now, Sun says, she won’t be linking to any third-party sites. “I just wouldn’t jump into it too fast because good, bad, true, untrue, this will stick with you,” she says.

Sun’s independent broker-dealer, LPL Financial, is also approaching the SEC’s move with caution.

“We’ve always been very proactive in supporting advisors’ use of digital and social media as part of their marketing strategy,” Rich Mackey, LPL’s marketing vice president, said,  “and we are evaluating how this update may impact our guidelines and procedures for LPL affiliated advisors.”


One thing the guidance makes clear is that advisors are free to share details of their personal lives and interests – such as religious affiliations and charitable pursuits – without fear of running afoul of the commission.

Sun, who occasionally posts on social media about bringing fresh-grown organic vegetables into her offices or about fundraisers her firm sponsors, says she found this guidance reaffirming.

So did planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Fla., who has a strong presence on Twitter.

“Social media is supposed to be social and it’s supposed to be personable,” says McClanahan. “When you are just pushing information as if it was advertising, then it doesn’t work.”

Like Sun, however, McClanahan says she won’t put her practice of 72 clients and $84 million in assets under management at risk by linking to third-party review sites.

“You have to be really careful about that because if you have one client out there who bad mouths you,” it could negatively impact the whole business, she says. “Our plan is not to do anything with that.”

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(3) Comments
I think this article is missing the point. The positive and negative reviews will now begin to be made on Yelp and Brightscope and others whether the advisor is linking to those sites or not. Yelp and Brightscope are in the business of creating content and they understand our industry so now they know they can encourage reviews. Consumers will find their sites and post what they feel. Advisors should manage their online brand as best they can just like any other business, and be rewarded when that brand appears favorable in the marketplace. www.psgplanning.com
Posted by Brian K | Friday, April 04 2014 at 3:11PM ET
Personally I think it's a step in the right direction as it champions transparency in this space. This industry is no different than any other when it comes to those that offer good service and those that offer bad service. Without a way to evaluate or provide feedback on third-party sites, how is one to tell the difference, especially if they do not have a current relationship with someone that is working with an advisor? I like Yelp and use it often to make decisions on where to eat or visit, and I do take each review either good or bad with a grain of salt. However, if all review are bad, then I avoid the place altogether.

Sadly, as was noted by Richard Ketchum at the SIMFA C&L Annual Seminar this past week, people spend more time vetting out a restaurant on Yelp than doing the research necessary to find a good advisor. Perhaps this will help investors find a better fit.

Victor Gaxiola @VictorGaxiola

Posted by victor g | Friday, April 04 2014 at 3:22PM ET
I agree with both posters. There will be reviews regardless of whether the advisor can manage them or not. It is true, there will be negative comments and reviews posted by people, some of whom are not even clients. Not unlike restaurants, the consumers who use services like Yelp learn to separate the wheat from the chaff, so I am not concerned for the reputation of a good advisor.

Overall, I find this to be promising news. As Victor mentioned, people spend more time vetting restaurants than advisors and I believe this ruling will begin to assist in the research process, and set the stage for better tools to assist younger investors who will rely more on digital than a personal referral when choosing their trusted advisor.

MC Colloquy.Biz

Posted by Mark C | Friday, April 04 2014 at 4:11PM ET
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