In early April, the Securities and Exchange Commission published its IM Guidance Update 2014-4: Guidance on the Testimonial Rule and Social Media, which essentially paved the way for financial advisers to use third-party review sites like Yelp as part of their marketing strategy (See: SEC OKs use of third-party social-media endorsements). This is a significant shift from the previous consensus, which was that third-party review sites were viewed as testimonials, historically a prohibited form of marketing for advisers.
So now that the SEC has cleared the way for Yelp, should you go out and immediately create a Yelp profile for your business? Not so fast! You'll need to calculate the risk before jumping on the Yelp bandwagon.
REASONS TO USE YELP
For some firms, building out a Yelp marketing campaign will seem like a no-brainer. Here's why you might want to get your business on Yelp ASAP:
1. To combat negative reviews. For some firms, reviews already exist on Yelp without their involvement and, unfortunately, many of those reviews are negative. Prior to the SEC guidance, there was nothing a firm could do about a negative review except let it live into perpetuity on the Internet. That was true even for reviews submitted by people who never did business with the company. Now, advisers have the ability to claim their profiles and gather positive reviews to neutralize any negative reviews that may exist.
2. To proactively build a positive online reputation. Yelp is a highly popular website, which means that it will rank high in search results if there is an entry about your firm on the site. You may want to take a proactive approach and create a Yelp profile to gather positive reviews before someone posts a negative review, possibly damaging your online reputation forever. (See: Defend your online reputation before it's too late).
3. To capitalize on the first-mover advantage. Advisers who took advantage of social media in the early days of its popularity clearly benefited from being an early adopter. Since very few advisers are currently using Yelp, or any adviser review site for that matter, there is an opportunity for firms to take advantage of being an industry early adopter before it becomes as mainstream for advisers as LinkedIn.
REASONS TO AVOID YELP
While the advantages of integrating Yelp into your marketing strategy seem appealing, the downside may outweigh the upside. Here is why you should seriously consider avoiding Yelp at this time:
1. Don't introduce unnecessary compliance issues. If you don't currently have reviews on Yelp, it may be best to avoid creating a profile. Reviews will create another level of complexity in your firm from marketing both maintenance and compliance standpoints. For example, do you know the answers to these questions:
• Can you solicit reviews from clients? You can't compensate someone for a review, but can you institute a campaign encouraging reviews?
• How are you supposed to respond to negative reviews? Do they need to be addressed the same way a client complaint must be addressed?
• Does Yelp need to be archived? And if so, which archiving providers support this functionality?
The answers to these questions aren't clear in the SEC guidance, so it's worth obtaining an expert compliance opinion before moving forward. Not having a profile will help you avoid these issues. The absence of a profile may also discourage people from adding a new listing and reviewing your company — which may ultimately be a good thing.
2. It won't be an accurate representation. Yelp works well for companies that have a large customer base such as restaurants and hotels. There are thousands of patrons who can possibly review the business in a single year, so even if a small percentage of customers write a review, there is enough of a sample for an accurate representation of the business. A business with a few hundred clients doesn't have enough potential reviewers to present an accurate representation. Even worse, you may have people reviewing who have never worked with your business resulting in a completely inaccurate picture. On Yelp, an inaccurate representation of your company is worse than no representation.
Think very carefully before using Yelp for your business. While it will be highly likely that Yelp will become the standard for adviser reviews for consumers (as opposed to a financial adviser-focused site), it may be worth waiting a few months to see how other firms adopt the medium, how compliance experts interpret the guidance, and if the SEC will provide any further direction before jumping on that bandwagon.
Kristen Luke is president and chief executive of Wealth Management Marketing Inc. and co-founder of The Mercato, an online marketplace featuring do-it-yourself tools, templates and training for financial advisers. Follow her on Twitter: @KristenLuke.