Marketing Rule: Statements Made by RIAs and Advisors

I hope everyone is having a great summer so far! It may not be technically summer yet, but these 105+ degree temperatures here in the Phoenix area sure make it feel that way.

The SEC Marketing rule has been in effect since late 2022, and we’re starting to hear feedback from RIAs and advisors about what is considered right and wrong regarding advisor communications. One common issue is the lack of substantiation for statements made by advisors. Whenever you make an objective, factual statement, it should be true. For example, saying, “I’ve been in the financial services industry for 25 years,” when it has only been 13 years, would be flagged every time, just as it would have been in the past.

However, we’re now seeing more subjective statements being flagged for lacking substantiation. For example, saying, “We only use top money managers…” requires substantiation for the term “top.” Since it is subjective and undefined, it would be a violation unless explicitly defined within the text. Similarly, a statement like, “We have expertise in financial planning…” needs substantiation. Merely having a CFP license may not be sufficient, according to examples we’ve encountered.

Even saying something like, “We provide our clients great service…” would be considered a violation if you cannot substantiate or define ‘great’ in that context. The bottom line is that when you use an adjective in a statement, you must be able to back it up.

So, what can you say?

It is safer to stick with objective facts and clearly defined accomplishments instead of using adjectives like skilled, best-in-class, expertise, etc. Let’s go through the examples above:

“We have expertise in financial planning…”

If you have a CFP license, you could say something like, “[Name] earned their CFP, Certified Financial Planner, License in 20XX. The CFP Board website states that ‘CFP® professionals have met extensive training and experience requirements, and commit to CFP Board’s ethical standards that require them to put their clients’ interests first.’” (Include a link to the CFP board criteria: CFP Board)

“We provide our clients great service…”

This could be changed to, “The clients we work with receive a free consultation upfront, a financial plan, a goals-based investment approach, and regular follow-up calls.”

“We only use top money managers…”

The word “top” in this example is subjective and would require substantiation. This could be changed to, “We review several money managers and select the one that best aligns with a client’s specific goals and complements our firm ideals.”

Hopefully, this helps clarify things. I know it is frustrating to change something that was previously approved, but we must evolve as industry expectations change. This is another example of a significant shift over the past year. We will be creating an FAQ of marketing terms to avoid in marketing materials and what to replace them with over the coming months.

Heather Schumacher

Compliance Advisory Principal

Ben Tiller

Director of Advisory Services