Outside-IN

Outside-INblog

Outside voices and views for advisers

Why compliance is the "Green Eggs and Ham" of financial services

Following the rules while using social media is not as hard as you think.

Apr 4, 2014 @ 8:49 am

By April Rudin

Compliance is not a word most people like.

It conjures up images of endless boxes that must be checked, raps on the knuckles, stern-eyed regulators, red tape, pages and pages of documents in tiny, incomprehensible print. When it comes to compliance for social media in the wealth management business, it's certainly no different. In fact, there is perhaps no topic that generates more angst among wealth managers and their compliance departments. For a time, the angst was so great that some compliance officers simply opted to opt out: No use of social media, no problem. It was banned at many firms. But then social media got too big, and too important, to ignore. Cue general freakout.

Here's the thing. There really is no need for a freakout. Last week, as I stood in a hotel lobby listening to yet another wealth management executive sweat over how to manage all this free-wheeling social-media stuff, Dr. Seuss popped into my head. Remember "Green Eggs and Ham"? That Seuss classic was a childhood favorite and I read it to my own kids when they were little, too. Green eggs and ham, sounds pretty gross, right? A breakfast gone badly awry. In case you need a little refresher, Seuss' narrator thought so, too, but his friend Sam-I-Am chased him around with a plate trying to get him to sample the neon-emerald colored eggs and ham — in a boat, in a car, in a train, with a fox, a mouse, a goat. The nameless narrator refused at every step of the way. He was determined not to sample them — until the very end, and that's, of course, when we got our surprise. When he did finally try the green eggs and ham, he liked them, a lot. He thanked Sam-I-Am.

Social-media compliance for financial services firms is a lot like green eggs and ham. It sounds scary, but if you try it, you will probably like it. Some of the angst has arisen from a lack of specific guidance from regulators about how to apply everyday rule books to this new form of communication, particularly in the areas of client testimonials, advertising and record keeping. But there is no magic to it! So far, the general rule seems to be 1) Treat your own (business) social-media pages and those of your wealth managers as though they were advertising copy. 2) If you can control what clients say on social-media pages because you own those pages, do. No testimonials or client recommendations of you or your services. If you can't control what they say because you don't own the page, you are not responsible. On March 28, the SEC issued new regulatory guidance that clarified this point. Wealth managers are not responsible for client reviews of their services on websites like Yelp or other third-party sites. They can even point clients to those reviews if they like! Directing clients to write such reviews is a different story, says the SEC guidance, and so is reposting such reviews to one's own social-media pages. (Don't do either thing.) For the most part, regulators seem to be saying, use common sense.

There's another benefit: Online communications are actually pretty easy to record and archive. There are tons of third-party tools out there to help financial services firms monitor and archive this stuff, like PageFreezer, Socialware, Smarsh, Arcovi, Actiance, even when financial advisers are posting and communicating on mobile phones or tablets. It's a whole lot easier than eavesdropping on the offline conversations financial advisers have with clients.

Social-media compliance does not have to be scary. You may as well try it now, rather than running around in circles trying to avoid it. In the end, you will probably find it goes down easy and it tastes pretty good.

April Rudin is the founder of The Rudin Group, a global wealth marketing firm specializing in creating solutions for multifamily offices, wealth management firms, RIA's, hedge funds, private banks, private equity groups and other financial service firms who want to be visible in the UHNW/HNW space.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

May 02

Conference

Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video

Events

The undiscovered cyber threats advisers should really worry about

What's the biggest cyber security threat that could really hamper your practice? Cyber Expert Tony Scott offers some strategies to keep your firm safe.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

One adviser's story of losing his son to the opioid epidemic

John W. Brower, president and CEO of JW Brower & Associates, shares the story behind his son's death from a heroin overdose and how it inspired him to help others break the cycle of addiction.

Tax reform will boost food, chemicals, rail stocks. Technology? Not so much

Conagra and Berkshire Hathaway are two stocks that should benefit most from changes in the tax code.

Brace for steepest rate hikes since 2006 in new year

Citigroup, JPMorgan Chase predict average interest rates across advanced economies will climb to at least 1 percent in 2018.

Why private equity wants a piece of the RIA market

Several factors, including consolidation in the independent advice industry and PE's own growing mountain of cash, are fueling the zeal to invest.

Finra bars former UBS rep for private securities transactions

Regulator says Kenneth Tyrrell engaged in undisclosed trades worth $13 million.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print