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Firms Not Warming To Testimonials Despite Ad Rule, IAA Survey Finds

Only a small fraction of firms have increased their use of client testimonials and endorsements in the wake of the SEC’s updated marketing rules, according to a recent Investment Adviser Association survey.

Only 5% of respondents in a recent Investment Adviser Association survey said they’d increased their use of testimonials after complying with the Securities and Exchange Commission’s marketing rule.

Overall, the survey indicates the much-touted rule’s impact on advisors has not been seismic. According to the survey, 41% of respondents said the new marketing rule had been “somewhat impactful” to the firm, while 23% did not find it impactful at all (32% of respondents considered the rule “significantly impactful”). 

The IAA found that the only change in marketing practices made by most firms was that 88% changed marketing materials to comply with the regulatory requirements mandated by the ad rule, which took effect in May 2021 (with a compliance date last year). The second most common change was firms decreasing their use of hypothetical performance data, at 13% of respondents.

Though the new rule offered some potential leeway for firms to use testimonials and endorsements, only 5% of firms in the survey increased their use of testimonials, while only 4% increased the use of endorsements, solicitors and marketers. 

The new rule dictated when and how advisors could use testimonials and endorsements in advertising, allowing them under certain conditions with requirements to disclose whether endorsers were clients and if they were compensated. While some compliance experts expected a dramatic increase in their use, the IAA’s data hasn’t borne that out at this point.

In an interview with, William Nelson, an associate general counsel at IAA, said that worries about the ad rule’s disruption of the industry may be ebbing, and recalled that when the marketing rule was first unveiled, the IAA was holding weekly calls with members to sort through its ramifications.

“The marketing rule was just coming into effect, and at that point, you didn’t know what it was going to look like,” he said. “Maybe, it wasn’t as impactful as we may have been thinking at the time.”

The IAA’s Investment Management Compliance Testing Survey (which is in its 18th year) surveyed compliance professionals at 581 advisory firms, with assets managed ranging from below $1 billion (at 26%) to more than $10 billion (at 34% of respondents). 

Nearly half of the respondents had between 11 and 50 employees, with clients ranging from retail investors with $1 million or less, as well as high-net-worth individuals, private funds, pensions and institutional clients. The survey was conducted in May, according to the IAA.

When updating marketing policies and procedures, 47% of respondents said they’d removed their prior policy and adopted an entirely new one to comply with the rule, while 37% reported they’d merely had to amend their existing policies (one in ten respondents revealed they hadn’t made any “material changes” in their policies because of the marketing rule).

Advertising and marketing once again took the top spot of compliance officers’ “hot topics,” retaining the crown from the prior year (though it dipped from 78% to 70%). Cybersecurity was in second place, though it also dropped from 67% to 52%. 

Electronic communications surveillance was in third, but saw a significant uptick from 2022, doubling its interest from respondents from 17% to 35% in one year (Nelson speculated this was partially driven by the SEC fines against large firms targeting outside business communications on communication platforms like WhatsApp).

ESG and sustainability was in fourth place—in fact, concern over compliance of ESG investments dropped by half, from 50% to 25%, between 2022 and 2023. Additionally, compliance testing around ESG had increased “substantially” since last year, and Nelson noted there’d been more regulatory scrutiny and state actions (though survey results indicated that many firms didn’t take any specific action due to state actions).

But Nelson wondered whether clarifications in definitions and standards about ESG may have led firms to have a clearer understanding of their own views on the investment strategy. 

“I think people feel more comfortable saying ‘yes, we want to integrate ESG factors.’ There are a lot more definitions around those,’’ he said. “And it allows people who maybe previously thought ‘maybe we are incorporating ESG factors, but now that we have more of those definitions, maybe we actually don’t.’” 

Additionally, the survey found that nearly half of firms had done some kind of mock exam (with a further 17% planning to); the SEC’s also been busy, with 58% of respondents saying they were in the process of an exam, or had been examined within the past five years. 

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