How are Advisors using Social Media

Financial Advisors Using Social Media Social media creates a huge opportunity for independent financial advisors to develop, connect and improve relationships with prospects and clients. But, it can also create compliance issues and additional costs if you don’t follow your firm’s policies and procedures.

According to a recent study by Sysomos, a social media software provider, and Marketwired, a business news data channel, 60% to 70% of all investors surveyed say they use “traditional” sources of information (like newspapers and Wall Street analyst reports); but 40% say they use social media as a key investment information source. The survey also shows that those under age 40 rely on social media to influence investment decisions.

With a business that is fueled primarily by networking and referrals, it makes sense that financial advisors integrate social media giants LinkedIn, Facebook and Twitter as a core element of their marketing program. But advisor beware: while the SEC has put in place regulations with plenty of flexibility, it is ultimately the guidelines and regulations of your firm that you must adhere to, along with the SEC.

Your social media profile pages will, most likely, need to be pre-approved by the firm or independent broker-dealer with whom you are affiliated. Social media activity – tweets, blogging, Facebook wall updates, sharing on LinkedIn – is considered to be “interactive” and typically does not require pre-approval, but many firms are requiring review for compliance.

Rule 17a-4(b) under the Securities Exchange Act of 1934 (SEA) requires broker-dealers to preserve business related records for a period not less than three years. There are a number of third-party service providers offering software solutions for compliance archiving, including Arkovi, Erado, Iron Mountain, Global Relay, Globanet, Socialware, Actiance and Hearsay Social. These firms automatically capture and track your interactive content, like blogs, status updates and tweets, directly from your Facebook, Twitter, LinkedIn and blog accounts. Be sure to check with your firm to see if it requires you to register with a specific service provider. Financial advisors associated with Summit Brokerage Services, for example, are required to enroll with Erado.

When using social networking for business purposes, include only business information in your profile, including branch name or DBA, contact information, disclosures and website address. Keep all interactions focused on business and remember to present a professional image at all times. Remember, you can’t treat business social media like you do personal social media.

It’s also important that you know and understand the privacy settings of these social media platforms. A good rule of thumb would be to turn off the settings for chat, recommendations, favorites, etc. Unlike personal use, when using social media for business, client testimonials are not allowed. Plus, you are not allowed to recommend or endorse any product or service. Be sure to provide the audience with a sound basis when evaluating the facts of any security, type of security, industry or service. Examples would include a detailed report of market performance, an Asset Class Comparison among securities or a listing of awards and/or recognition received for services.

Some firms consider the Facebook “Like” button to be an implied testimonial and prohibit you from “liking” or posting a response on comments by third parties. If you allow third-party comments and posts on any of your social media sites, consider using a disclaimer statement on the site. Think twice about links, images or videos you post, “like” or tweet. They could be interpreted as a recommendation, endorsement or implied endorsement of a financial company, products, investments or services. In instances like this, it’s always best to get approval before posting.

Also, be sure to check the firm’s policy on communicating within social network messaging, chat and email systems. For example, Summit Brokerage Services allows private messages, but not interactive chats.

Under FINRA Rule 2210, appropriate communication is based upon principles of fair dealing and good faith; it must be fair and balanced (any benefits mentioned includes the risks or limitations associated); provide a sound basis for evaluating the facts; disclose all material differences when making comparisons between investments or services; use current data and information; and define terms that are not well-known to the general public.

Inappropriate communication includes omitting material facts that would cause the communication to be misleading; using false or misleading statements; making exaggerated or unwanted statements; predicting, projecting or implying that performance will reoccur; and not referencing pertinent material information.

Social media offers new opportunity to reach clients and prospects. Advisors that want to make social media a part of their business model need to educate themselves on the rules of the SEC and their firms so that they don’t make mistakes that can harm their reputation or cross the line with the compliance department.

For more information on Summit Brokerage Services, visit or contact us at (800) 354-5528.


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