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New SEC Rule Allows RIA Firms to Receive Client Testimonials and Reviews

Jennifer White is the Director of Client Engagement and Experience at BlueSky Wealth Advisors.

A much-needed update to the Investment Advisors Act grants RIA firms the right to receive testimonials for their work. This "New Marketing Rule," as dubbed by the SEC, allows for greater flexibility and a more expansive marketing reach for RIAs. With this newfound freedom, we expect to see empowered consumers and freshly incentivized advisors.

Intended to separate the "bona fide investment counselors" from the "unscrupulous tipsters and touts" selling investment schemes, the model of a Registered Investment Advisor was created by the Investment Advisers Act of 1940. In 1961, this effort became even more pronounced, as a formal advertising rule passed to dissuade false advertising of performance and prohibit the use of testimonials and referrals for RIAs.

The strict regulations prohibiting the use of testimonials and endorsements have long been a struggle for many RIAs.  In a world where the consumer can perform their due diligence before purchasing almost any product or service, not providing a testimonial or review from a current client sometimes created a reverse effect. When there is a lack of such ubiquitous reassurances consumers grow accustomed to, it can often lead to apprehension rather than the intended trust the absence it is meant to provide.

As of May 4th, 2021, however, the SEC announced the "New Marketing Rule" (Rule 206(4)-1). As this update stands as the first to the Investment Advisors Act in over 60 years, RIAs are delighted by the newly broadened ability to promote services. Now allowing financial advisors to use client testimonials, endorsements from other professionals, non-clients, and third-party rating and review sites, the SEC has provided both consumers and financial advisors with the initial transparency to have a more informed conversation.

As the breadth of financial advice continues to grow well beyond investment management alone, this new rule will help educate prospective clients on the numerous services offered in bringing a comprehensive approach to wealth management.

To learn more about the new SEC Advertising Rule, please click the infographic below:

New SEC Advertising Rules

New SEC Advertising Rule


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