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Jun 8, 2009 11:10 pm

Thought I would get this conversation started if it hadn't been already. What is your experience/opinion of social networks like Facebook and LinkedIn as they relate to new relationships for FA's? How have you been able to use it, what is allowed and what is not allowed? What is your firms stance and what do you think of FINRA's stance so far?

Jun 9, 2009 9:16 am

I do NOT use Facebook.  In fact, I don't even have a profile out there.  I don't want some potential client Googling me and finding old drunken pictures of me, or some stupid comment from one of my high school buddies.

 
As far as Linked In, I DO use that.  But I have to be careful about HOW I use it.  I use it for two reasons:
one, to connect with old colleagues and stay in touch, and as a way of developing those relationships.  Case in point, I recently (last year) connected with an old boss of mine in the City (NYC).  At the time I was his Finance Director.  So we chatted, when I went to visit my brother there, we got together for drinks.  So the guy is now the Managing Partner for a new venture, and makes close to 700K (he has no problem telling me this stuff because I knew everything about everyone's comp back then).  Oddly enough, the guy has no advisor (probably because he is only in his mid-40's), so there you go.  Most of his stuff is wrapped up in options, stock, etc. but it was a great connection to make.
 
Second reason: I live in an area with a lot of technically oriented people (engineers, doctors, scientists, etc.).  They all like to use e-mail and the internet.  Since my firms' FA web profiles are terrible, I want to have a profile out there that people will hit if they try to Google me.  It has lots of good information about me and my background.  Now, I have to be careful, as we cannot use "recommendations"  like some people do on LinkedIn, and we have to make sure we are not giving advice, or prospecting, etc.
 
But used properly, I think LinkedIn can be very effective.  I am also able to see other people's activities, groups, connections, etc.
 
I think Facebook is a poor way to present yourself on the Internet, unless you ONLY maintain a professional Facebook profile (in other words, not one that you would link up with friends and talk about weekend plans, etc.).
Facebook may be well suited for an RIA that wants to run a Blog on investing or something.
Jun 9, 2009 11:20 am

I tend to agree on the seperation of the tools. I think the most powerful tool for prospecting is twitter. Right now as it is mostly populated by early adopters it is a bit hard to find people typing something like: "I need a financial advisor" but I think that will increase. What it is good at doing is giving access to some people that you wouldn't have access to before. I think most firms are going to disable twitter though as it is communication and the firms responsibility to monitor, archive, and regulate it.

Jun 9, 2009 11:39 am
fabeetle:

I tend to agree on the seperation of the tools. I think the most powerful tool for prospecting is twitter. Right now as it is mostly populated by early adopters it is a bit hard to find people typing something like: "I need a financial advisor" but I think that will increase. What it is good at doing is giving access to some people that you wouldn't have access to before. I think most firms are going to disable twitter though as it is communication and the firms responsibility to monitor, archive, and regulate it.





fabeetle. How are you using Twitter to prospect?

Jun 9, 2009 12:47 pm

In my former role I would follow the people that I would want to get introductions to and try and create a dailogue with them by commenting on something they posted. If they start following you, you can then DM them which is like email. The trick is you have to post relevant material yourself. In addition you can you Highrise CRM by 37 Signals, or Batchbook Blue CRM. These operate like traditional CRM's but allow you to import twitter feeds from specific people directly into their CRM record. If you have a prospect this is a great way to keep up with what is happening with them. It is like they are voluntarily populating your CRM for you.

Jun 9, 2009 2:03 pm

Hey Beetle, you do realize that what your website proposes to do violates FINRA rules for Registered Reps.  You can't direct people to reviews about you and your service.


You can twist it how you want, but I HIGHLY doubt any compliance department is going to allow their FA's to have any participation in this site.
 
Good luck, though.
Jun 9, 2009 2:21 pm

I can see lawsuits were frustrated clients post negatively about their FA on the web site.

Jun 9, 2009 3:31 pm
B24:

Hey Beetle, you do realize that what your website proposes to do violates FINRA rules for Registered Reps. You can't direct people to reviews about you and your service.

You can twist it how you want, but I HIGHLY doubt any compliance department is going to allow their FA's to have any participation in this site.



Good luck, though.





I agree. But I don't think it violates it for IARS. I'll have to check with my attorney though. We have a company Twitter account and just post random things form other news sources, and have a decent following, but we don't really try to utilize it that much.





Jun 9, 2009 3:35 pm

I believe it would violate the customer testimonials rule for IARs.

Jun 9, 2009 6:03 pm

We are taking all of that into consideration.

Jun 9, 2009 6:17 pm

I am curious where it says in the NYSE or FINRA manual you see "You can't direct people to reviews about you and your service." Could you be more specific as I haven't seen that specific language.

Jun 9, 2009 10:18 pm

Cool idea for a site.  How will it be monetized?  Advisors pay?  Investors Pay?  Ads?

As for the the legalize - just call a compliance attorney and see what they say.  I wouldn't chance it on reading a manual yourself.  At the same time, how is this different than when an advisor is awarded something from a magazine that then writes an article contains that contains a client testimonial - then the advisor hands out some reprints.  Horrible grammar; but maybe this isn't much different.

Jun 9, 2009 10:39 pm

I can't speak for RIA/IAR's, but, from FINRA'S website:

Part of rule 2210:



If any testimonial in a communication with the public concerns a technical aspect of investing, the

person making the testimonial must have the knowledge and experience to form a valid opinion.

(A) Advertisements or sales literature providing any testimonial concerning the investment advice or

investment performance of a member or its products must prominently disclose the following:

(i) The fact that the testimonial may not be representative of the experience of other clients.

(ii) The fact that the testimonial is no guarantee of future performance or success.

(iii) If more than a nominal sum is paid, the fact that it is a paid testimonial.



(6) Recommendations

(A) In making a recommendation in advertisements and sales literature, whether or not labeled as

such, a member must have a reasonable basis for the recommendation and must disclose any of the

following situations which are applicable:

(i) that at the time the advertisement or sales literature was published, the member was making a

market in the securities being recommended, or in the underlying security if the recommended security is an

option or security future, or that the member or associated persons will sell to or buy from customers on a

principal basis;

(ii) that the member and/or its officers or partners have a financial interest in any of the securities of

the issuer whose securities are recommended, and the nature of the financial interest (including, without

limitation, whether it consists of any option, right, warrant, future, long or short position), unless the extent of

the financial interest is nominal;

(iii) that the member was manager or co-manager of a public offering of any securities of the

recommended issuer within the past 12 months.

(B) The member shall also provide, or offer to furnish upon request, available investment information

supporting the recommendation. Recommendations on behalf of corporate equities must provide the price at

the time the recommendation is made.

(C) A member may use material referring to past recommendations if it sets forth all

recommendations as to the same type, kind, grade or classification of securities made by a member within

the last year. Longer periods of years may be covered if they are consecutive and include the most recent

year. Such material must also name each security recommended and give the date and nature of each

recommendation (e.g., whether to buy or sell), the price at the time of the recommendation, the price at

which or the price range within which the recommendation was to be acted upon, and indicate the general

market conditions during the period covered.



Bottom line, for RR's, (mind you that I have no more expertise than anyone on this subject - I am just looking at the rule) is that being a party to sponsoring recommendations is tricky business. You have to be very careful about what is being said specifically. For example, a recommendation that says "we have seen great returns since using his services" is probably not acceptable, unless you disclose those returns, what time period it covered, and what the funds were invested in (i.e. if you were invested in large cap growth stocks from 1995-1999, then that 10% return may not look so "great").



Jason, as far as your question regarding an "award", I think the whole thing is OK until the advisor starts handing them out (since the article is not predicated on anything the advisor asked for). You can advertise "awards" (i.e. "Best advisor in Michigan" or whatever), but not specific recommendations.



This is a tough one to get around. But again, I'm no expert. And the rules are different for RIA/IAR than FINRA member firms.

Jun 10, 2009 9:07 am
AdvisorControl.com:

Cool idea for a site.  How will it be monetized?  Advisors pay?  Investors Pay?  Ads?

As for the the legalize - just call a compliance attorney and see what they say.  I wouldn't chance it on reading a manual yourself.  At the same time, how is this different than when an advisor is awarded something from a magazine that then writes an article contains that contains a client testimonial - then the advisor hands out some reprints.  Horrible grammar; but maybe this isn't much different.

 
I think that is a good point, because technically these would be considered "Independently Prepared Reprint," in principle, since you wouldn't be reprinting anything.  However, the RR's profile/page would be considered an advertisement (unlike a public appearance in an electronic interactive forum, ex. rep.com).  Ultimately, discuss with compliance.
 
And here is the law for IARs:
 
Rule 206(4)-1 -- Advertisements by Investment Advisers





It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act for any investment adviser registered or required to be registered under section 203 of the Act, directly or indirectly, to publish, circulate, or distribute any advertisement:



Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by such investment adviser; or


Which refers, directly or indirectly, to past specific recommendations of such investment adviser which were or would have been profitable to any person: Provided, however, That this shall not prohibit an advertisement which sets out or offers to furnish a list of all recommendations made by such investment adviser within the immediately preceding period of not less than one year if such advertisement, and such list if it is furnished separately: (i) State the name of each such security recommended, the date and nature of each such recommendation (e.g., whether to buy, sell or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the market price of each such security as of the most recent practicable date, and (ii) contain the following cautionary legend on the first page thereof in print or type as large as the largest print or type used in the body or text thereof: "it should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list"; or


Which represents, directly or indirectly, that any graph, chart, formula or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents directly or indirectly, that any graph, chart, formula or other device being offered will assist any person in making his own decisions as to which securities to buy, sell, or when to buy or sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to its use; or


Which contains any statement to the effect that any report, analysis, or other service will be furnished free or without charge, unless such report, analysis or other service actually is or will be furnished entirely free and without any condition or obligation, directly or indirectly; or


Which contains any untrue statement of a material fact, or which is otherwise false or misleading.


For the purposes of this section the term advertisement shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities.

So in summary, I could see clients writing reviews on the website - but RRs and IARs being incredibly limited by what they can actually do with the site (no linking to reviews, no directing to website, etc.)

Jun 10, 2009 9:15 am

But I do have to say, very interesting concept for a website.

Jun 15, 2009 12:43 am
Wet_Blanket:

I believe it would violate the customer testimonials rule for IARs.



Not as long as the recommendation doesn't refer to securities investments. They can speak on issues of service, but not performance.

From Rule 206(4)-1:

"(b) For the purposes of
this rule the term "advertisement" shall include any notice, circular,
letter or other written communication addressed to more than one
person, or any notice or other announcement in any publication or by
radio or television, which offers (1) any analysis, report, or
publication concerning securities, or which is to be used in making any
determination as to when to buy or sell any security, or which security
to buy or sell, or (2) any graph, chart, formula or other device to be
used in making any determination as to when to buy or sell any
security, or which security to buy or sell, or (3) any other investment
advisory service with regard to securities."


Jun 17, 2009 9:51 am
san fran broker:
Wet_Blanket:

I believe it would violate the customer testimonials rule for IARs.



Not as long as the recommendation doesn't refer to securities investments. They can speak on issues of service, but not performance.

From Rule 206(4)-1:

"(b) For the purposes of this rule the term "advertisement" shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities."



 
The prohibition isn't limited to performance, testimonials can not be used.
 
The rule does not define the term 'testimonial', however the SEC has interpreted the term through a number of no-action letters. A testimonial generally includes statements of an experience with, or endorsement of an adviser made by any former, existing, or prospective client, and is not restricted to statements about the adviser's performance.
 
In the Gallagher and Associates, Ltd., SEC No-Action Letter (July 10, 1995), the SEC staff refused to grant a no-action position with respect to client endorsements that were restricted to the adviser's character (religious affiliation or moral character, community service, trustworthiness and ethical character, attention to details, ability to listen and be sensiteve to client needs, etc.)
 
The SEC characterizes advertisements with testimonials as innately misleading, since the adviser can choose which testimonials to provide.
Jun 17, 2009 9:04 pm

We are really anxious to lift the curtain on who is behind fabeetle we
can't do so just yet. This will make sense in a week or two. We are
also very anxious to share with you the outstanding individuals on our
board of advisors we are not ready to do so yet as we are finalizing
these relationships. Stay tuned as we think you will be impressed. Our
list includes attorney's, professors, and successful entrepreneurs.


This is a joke, right? Seriously, are you 14?

I followed you on Twitter for about a week and you tweet too much for anyone that has a real job.

I ended up blocking you.

Jun 23, 2009 7:26 pm
Wet Blanket:
 
Sadly, you're correct. I've reviewed a sufficient number of no-action letters to agree. Thanks for the info.
 
Is there a reason why you've got the KKK symbol as your gravitar?
Jun 23, 2009 10:47 pm

What's the difference between Twitter, Linkdin and Facebook?  They all seem the same to me.  I'm also worried about any of these sites being considered advertisement.  Screw it if I have to run this stuff through sales prevention.