Blog Article

Archiving: An Essential Task for RIAs Using Social Media

Nov 23, 2021

Social media has become an appealing tool for investment advisers—but advisers must understand their archiving requirements to remain compliant.

Communication and prospecting in the wealth management industry have changed dramatically over the years. The COVID-19 pandemic accelerated the digital evolution already in progress, driving registered investment adviser (RIA) firms to find new, virtual ways to connect with current clients and engage prospects.

So, where are investment advisers turning? Social media channels.

The increase in social media usage among investors, combined with the new Securities and Exchange Commission (SEC) marketing rule, allows social media to be a potentially appealing marketing tool for investment advisers—but not without proper archiving in place.

Increasing Use of Social Media

recent study conducted by Putnam Investments found that 74% of advisers who used social media initiated new relationships or onboarded new clients during the pandemic. And of those advisers, 55% reported increasing their social media usage when COVID-19 hit. 

Those numbers make sense when you consider where investors are looking for their investment advice. Nearly 50% of investors indicate that social media impacts who they hire, and 30% say they seek financial advice online, according to a survey conducted by Hartford Funds.

Social media isn’t just for prospecting, either; it can be a great way to stay top-of-mind for current clients and provide them with relevant, timely educational content, deepening trust and solidifying your expertise.

Investment advisers looking to grow and compete in today’s crowded, digital-led landscape often can’t afford to ignore the impact of social media. They also can’t afford to get it wrong in the eyes of regulators like the SEC. As an adviser, one of the most important things to do to stay on the right side of compliance is make sure to archive all of your social media content and communications.

Social media use by advisers triggers the requirement to retain records of all communications, written and oral recordings, posts, media, comments, and all content, as it is updated on the adviser’s social media pages. Record-keeping has always been an important task for RIA firms. After all, you and your firm are responsible for maintaining true, accurate, and current records according to SEC Rule 204-2 and similar state rules.

Rule 204-2 states that firms must maintain copies of all advertisements, written and oral materials, all disclosures provided, and supporting documentation to back up the integrity and facts relied upon to create the advertising. RIA’s must retain versions of website content and social media profile(s). If emails are used to disseminate advertising, an archival system for emails can be used to retain these communications. Moreover, the RIA must keep evidence of reviewing such advertisements as part of its book and records for at least five years from the end of the calendar year in which the advertisement was published or distributed.

What Needs to be Archived?

According to the guidance on social media and other business communications, RIAs should archive all customer queries, advertisements, and posts associated with your social media accounts. (All this material would be covered according to SEC Rule 204-2 and similar state rules mentioned above).

While social media can be a valuable resource for firms to communicate with the public in many ways, it can be a tough road to navigate in terms of properly archiving material. It is advisable to employ archiving technology that takes the burden off your RIA and ensures compliance is maintained. RIA firms can use an automated archiving system to remain compliant and be well-prepared for audits, discovery, and any other information requests.

Read more about archiving requirements, and how to select the right type of archiving solution for your firm.

A Few Substantive Compliance Issues to Keep in Mind

Making sure you have a solid archiving plan in place is the first step to take before amplifying your social media presence, but there are many other compliance concerns to keep in mind. In 2020, the SEC updated its stance on advertising for the first time since 1961, with the finalization of the Marketing Rule. The rule reflects the massive evolution in technology, communication, content consumption, and general buyer behavior the world has seen over the past several decades. We address a few of the more prominent issues below.

  1. Testimonials and Endorsements: We touched on this point above, but let’s dive a little deeper. The SEC’s new allowance of testimonials opens up the traditional RIA referral marketing play from a one-to-one, difficult-to-measure strategy to a scalable, one-to-many opportunity. However, it’s important for advisers to understand and adhere to the SEC’s guidelines, such as clear and prominent disclosures, and maintain records of written agreements with their promoters and endorsers as applicable.
  2. Performance: The SEC prohibits the publication of performance results without having a basis for the data and following several guidelines when disseminating performance advertising to any audience. In fact, it’s probably best for advisers to avoid sharing performance information on social media, since the potential for unintentionally stepping out of line with compliance is significant. The SEC’s guidance regarding performance information includes specific conditions on the presentation, including using net versus gross of fees results, specific time periods for comparison, proper disclosures, and consideration of the intended audience.
  3. Predictions: Avoid using social media channels to make predictions or to give blanket financial advice. Not only is this a red flag for compliance, but it could also be seriously detrimental to your firm’s reputation.