Now, on to some of the common questions surrounding testimonial use and our firm’s answers:
When and why did testimonials get approved for use in the financial services industry?
In November of 2022, the SEC issued a New Marketing Rule that brought together several old filings and notices from throughout the years and modernized them to make it easier to search and understand marketing rules from the SEC. It benefits advisors as they look to protect consumers and market their practices ethically.
One of the updates within the Rule was allowing the use of testimonials and endorsements in marketing materials for financial advisors for the first time. Now that 39% of consumers read reviews regularly it has been deemed a growing consumer preference to see other people’s experiences. That, paired with new technology that makes it easier to determine the authenticity of a testimonial (in some cases), were two reasons this was part of the new Rule.
What's the difference between testimonials & endorsements?
A testimonial is from a client that currently works with you or has in the past (when they wrote the testimonial). An endorsement comes from someone that hasn’t worked with you as a client, like a business partner or non-client family or friend.
Testimonials and endorsements are likely treated by your compliance team the same way other than possible disclosures when and where they are displayed (we require testimonials to clearly and prominently include if they are a client).
Who am I allowed to ask for testimonials or endorsements?
While you can ask anyone, our team restricts advisors from displaying or marketing with testimonials that are from individuals who have an obviously biased relationship with you, such as direct family members or firm employees. Your compliance team may have a different stance on this (or perhaps additional disclosure requirements), but this was our determination. Our marketing team agrees this would probably be in poor taste anyway. As with all SEC rules, Registered Investment Advisors must interpret the Rule for their firm and create their own policies to fit inside their compliance culture.
Can I offer any incentives to clients for submitting testimonials?
No. Cash or non-cash, whether directly or indirectly provided, is not allowed to be offered to individuals when asking for testimonials (in reward for providing them).
Can I provide prompts to consumers before asking for a testimonial?
While you cannot pre-write answers or guide their words, you are allowed to ask questions to get them thinking about their experience in advance of sharing their testimonial. We even have marketing support resources that include example questions we’ve pre-approved you to ask. You can also tell them to not include specific account information, personal information, promises or guarantees, or investment performance metrics.
Do I need client permission to use their testimonials?
Yes. We require a consumer’s written blessing in order to use their words in your marketing materials, including a website. If you are directly asking for a testimonial in written form, their form submission, email response, video submission, etc. is them giving you permission to use their words in your marketing materials, but if it is a “thank you” email or publicly listed response, you will need to ask directly before using any quotes elsewhere.
Do I need my firm's permission to use client testimonials?
Yes. You will need to ask your compliance department what they require of you before displaying these comments. Since the SEC has certain screening requirements for RIAs, your firm should have a policy on this. Here at USA Financial, we updated our compliance-submission technology to include a submission type for pre-review of testimonials and endorsements. This is how we’ve chosen to record that we’ve completed our screening of the reviewer and archive the comments we approved.
What are the rules around publicly listed reviews?
Publicly listed reviews, testimonials, or endorsements cannot be removed or rearranged as this shows preferential bias. To use testimonials or endorsements posted publicly in places other than where they were posted, we require our representatives to get written permission from the client or reviewer (an email is appropriate for this) and follow the other standardized processes (submission through our advertising review platform). Ask your compliance team for their thoughts on this before assuming it would be appropriate for use elsewhere.
The reason we require this is that people posting publicly are not inherently giving you permission to use it elsewhere, so we want to honor their privacy and protect you from any possible negative repercussions. In most cases, if a review is positive, you can likely get their permission to use elsewhere with a simple email asking and explaining this rule.
Can I re-word testimonial responses once submitted to me?
You cannot reword what they said or alter their responses is any way, otherwise they are no longer considered authentic testimonials/endorsements. If the client says something unrelated or not permitted by compliance (e.g. PII or account returns), you may edit that out, re-send to the client with an explanatory note to get their permission for your edits, and then submit (or resubmit) to compliance.
Final thoughts:
Using testimonials in your marketing materials and branded collateral can provide a better experience for prospects or new clients. Displaying testimonials will also help set you apart in the financial services industry because not all advisors have RIAs that allow it, and many advisors choose not to for various reasons. These comments from others can bring social proof and third-party validation to your practice, which aids in building trust and credibility. They allow you to share client experiences with prospects considering whether they should onboard with you or not. Should you choose to use testimonials in your marketing is up to you and your firm. We encourage our affiliated advisors to showcase them for the many benefits they can bring – as long as they are following compliance guidelines!
Is your firm behind the ball on testimonial use policies or use? Reach out to us today to learn more about how we support our advisors as they make possible predicable.
