Marketing in the wealth industry is a crucial aspect of promoting financial services and products. However, due to the industry’s highly regulated nature, marketing efforts must adhere to strict compliance standards to ensure that all communications with the public are within legal and ethical boundaries. Recently, the Digital Wealth News team interviewed Teresa Leno, CEO and Founder of Fresh Finance, about five marketing compliance best practices firms must implement now.
Wealth industry professionals, including financial advisors, asset managers, and investment firms, operate within a regulatory framework that governs marketing and communications practices. These regulations protect consumers, maintain market integrity, and prevent fraudulent or deceptive marketing tactics. By adhering to these rules, professionals can ensure that their marketing efforts are ethical and beneficial to their clients and the industry.
One of the primary regulations that govern marketing in the wealth industry is the Securities and Exchange Commission’s (SEC) rules on advertising and marketing communications. These rules require that all marketing materials, including advertisements, presentations, and client communications, be truthful, accurate, and not misleading. Furthermore, the use of testimonials and recommendations is heavily regulated.
Additionally, the Financial Industry Regulatory Authority (FINRA) imposes strict guidelines on marketing communications within the securities industry. FINRA rules mandate that all promotional materials be fair and balanced, provide a sound basis for any investment claims, and disclose any risks associated with the investment.
In the wealth industry, compliance with regulations is a legal requirement and essential to maintaining client trust. Failure to comply with marketing regulations can result in severe consequences, including regulatory sanctions, legal actions, reputational damage, and loss of client trust.
Leno says organizations and professionals can navigate the complex marketing and communications compliance landscape in five ways.
- Adhere to regulatory guidelines.
Wealth industry marketing professionals must stay updated on the latest regulatory guidelines and ensure all marketing materials and communications comply with the applicable regulations, including SEC and FINRA rules.
“Generally, wealth industry marketing professionals are in tune with the latest guidelines. However, I encourage them to reach out occasionally to the compliance professionals who oversee and monitor advisor marketing,” comments Leno.
- Implement robust compliance review processes.
Firms must implement robust review processes to evaluate marketing materials before dissemination. These reviews include thorough reviews for accuracy, clarity, and compliance with regulatory standards.
“If firms do not have marketing professionals or their advisors upload content into compliance review software, they cannot track the review and approval process. I encourage them to invest in this software so that if FINRA or the SEC questions a specific piece of content found on an advisor’s blog, they can track when it was reviewed and by whom before it was posted to the website,” says Leno.
- Provide ongoing education and training.
Wealth firms must provide comprehensive training on compliance requirements and ethical practices for marketing to the public. Regular education sessions reinforce the importance of compliance and keep all stakeholders informed about regulatory updates.
“Wealth organizations should include marketing communications education sessions as part of advisor continuing education. Given the industry’s unique requirements, advisors need to understand how social media, websites, newsletters, testimonials, etc., content can contribute to misleading clients and result in substantial fines if used without approval from compliance.
FINRA may issue marketing communications fines even if the content shared with the public is not misleading but hasn’t been reviewed and approved,” says Leno.
- Use clear and transparent disclosures.
Ensure all marketing materials provide clear and transparent disclosures regarding investment risks and are free of performance claims and potential conflicts of interest. Transparency is crucial in building and maintaining client trust.
Leno adds, “Financial education articles may require disclosures depending on the topic. For example, an article that mentions an annuity as part of a retirement savings portfolio. The disclosure may appear at the end of the article or as part of the paragraph containing the word ‘annuity.’ Advisors must understand disclosure requirements as it can impact their website’s blog, social media post, or other client communications.”
- Monitoring and surveillance.
Implement monitoring and surveillance software and mechanisms to oversee marketing activities and detect potential compliance breaches. This monitoring may involve regular marketing content and communications reviews to identify and address non-compliant practices or monitoring advisor websites and social media accounts.
Leno comments, “Numerous software monitors digital channels for compliance with guidelines that firms can license. While firms may feel the cost is unjustified, it will cost less than a fine.”
By committing to robust marketing communications compliance measures and ethical marketing practices, wealth industry firms and professionals can demonstrate their commitment to protecting investors’ interests and upholding the industry’s professionalism and integrity.
Click to Learn More About FreshFinance
Teresa Leno worked as a financial advisor and experienced firsthand the importance of financial education to help clients make more informed decisions before a crisis. Through her experience, Fresh Finance was started as a financial content marketing solution to help advisors validate their expertise through sharing content.
