Top RIA Compliance News Articles for the Week of November 26th, 2021

    1. The Do’s and Don’ts of Using Client Testimonials (Author – Jane Wollman Rusoff, Think Advisor) 

Since the Securities and Exchange Commission (“SEC”) announced the updated Marketing Rule earlier this year, advisors have been working to integrate new marketing strategies while remaining compliant. The use of client testimonials is at the top of that list now that there is a better understanding of what is allowed under the rule. To discuss this further, Jane Wollman Rusoff sat down with Larry Sprung of Mitlin Financial, who has been integrating client testimonials into their marketing since August. Sprung believes that testimonials  “add one more touch point for that potential client to feel comfortable to give us a call.”  To read the full interview, click the link above.

    2. Keeping on Top of Compliance Amid Remote Work (Author – Robert Cruz, Investment News)

Robert Cruz discusses the expedited evolution of telecommunications since the pandemic began, and how firms are working to remain compliant in an ever-changing tech landscape. Even though archiving firm communications has always been a regulatory requirement, the fact that Zoom and Slack have almost completely replaced email as the preferred form of communication is complicating the process. Cruz lists his suggestions to help tackle the tedious process within the article and states that “by taking a more proactive stance – and looking at these obligations as an opportunity – it’s possible for firms to protect themselves and their employees, gain valuable insights and propel their businesses forward.”

    3. SEC Warns RIAs That Faulty Fees Calculations Could Be Fraud (Author – Jenny Lea Reed, Financial Advisor)

After completing an examination of 130 registered investment advisors, the SEC issued a warning that advisors may be violating their fiduciary duties and securities laws because of errors in fee calculations. Jenny Lea Reed reports on this risk alert, discussing the deficiencies and steps to take to ensure compliance. The two most common deficiencies were advisory fee calculation errors and not crediting fees due to clients. According to the alert, the inaccuracies in billed fees were due to a variety of errors, including inaccurate percentages used in the calculations, fees being double-billed, breakpoint or tiered billing rates not being applied correctly or at all, and the incorrect use of client account valuations. In addition, advisors were inconsistently refunding unearned fees or requiring clients to provide written requests for refunds of those unearned fees.

The alert recognized in its conclusion “that there is no such thing as a ‘one-size-fits-all’ approach” to fixing these deficiencies. It is recommended advisors take the following steps to ensure compliance: 1) Adopt and implement written policies and procedures addressing advisory fee billing processes and validating fee calculations, 2) Centralize the fee billing process and validate that the fees charged to clients are consistent with compliance procedures, advisory contracts, and disclosures, 3) Ensure resources and tools established for reviewing fee calculations are utilized, 4) Properly record all advisory expenses and fees assessed to and received from clients, including those paid directly to advisory personnel.

    4. Google Reviews Are the New Client Referrals: Samantha Russell (Author – Jeff Berman, Think Advisor)

This article recaps Samantha Russel’s recent LinkedIn post, suggesting advisors should focus more on Google Reviews and try the Google Screened marketing tool to get more website traffic via its search engine and attract more prospects and clients. The new SEC Marketing Rule “allows advisors to use testimonials and reviews in their marketing and, furthermore, the rule makes it clear that you can proactively solicit/ask clients for these reviews and use those reviews in your marketing,” she said. The new rule does make it clear, however, that “you cannot cherry-pick which clients you solicit reviews from; you must have evidence/document that you have requested reviews from all clients.” She suggests three steps to encourage clients to write reviews: 1) Set up and optimize your Google My Business page, 2) Add a link in your email signature, 3) Email your clients to ask them to leave a business review. In marketing efforts, additionally using Google Screened can be impactful by providing social proof, enabling users to rank higher in local search results, and obtaining a green check mark next to listings. For advisors to get Google Screened, follow these steps which can take up to a few weeks to accomplish; 1) Sign up for Google Local Service Ads, 2) Get three stars or higher in Google Reviews, 3) Pass license and background checks.

    5. SEC Chief Says Crypto Exchanges Need Regulatory Oversight (Author – Ben Bain, Financial Advisor) 

In a recent article by Ben Bain, “SEC Chair Gary Gensler doubled down on his calls for more oversight of cryptocurrency trading platforms on Wednesday, offering new insight into his priorities as he seeks to crack down on the digital coin industry.” Stay tuned. 

Don’t forget to check out last week’s top RIA compliance news articles that focus on SEC enforcement cases, regulatory focus on cybersecurity, the enforcement of the Department of Labor’s (DOL) Fiduciary Rule, and the proposed policy change for proxy advisory firms.