Despite its ubiquity in everyday life, texting is closely regulated for financial advisors—to the point that texting clients and prospects can feel almost too risky to be practical. Consider this statistic: Americans make five times as many texts as phone calls. Texting is immediate, it's convenient, and in the event you need to refer back to what was said, it's all right there. So why won’t your broker-dealer allow you to send a text when you need to get in touch with a client, and what can you do about it?
Playing by the rules
The reason many broker-dealers won't permit business communication via text is because doing so improperly could constitute a violation—and an expensive one at that—of Financial Industry Regulatory Authority (FINRA) regulations. These regulations are built on the principle that all electronic communications must be capable of being archived and stored in write once, read many (WORM) format.
Without the aid of proper archiving technology, texting alone does not permit compliance with these regulations, and it also doesn't allow for oversight to distinguish business communications from personal correspondence. While it would be a quick and easy way to get in touch, it's also a quick and easy way to get in trouble, and as a result, estimates show that close to 70 percent of firms have a policy against texting.
Despite FINRA, Securities and Exchange Commission (SEC), and firm-level guidance against texting, demands for access to this technology continue to accelerate. A 2017 survey from solutions provider company Smarsh reports that 42 percent of financial services employees have requested to use text/SMS messaging for business purposes and that SMS/text is the most requested channel for business use, up from 2016 when only 21 percent reported such requests.
Meanwhile, FINRA continues to accelerate the pace of its enforcement of noncompliant texting. According to Smarsh, FINRA reported 99 books and records cases in 2016, resulting in $22.5 million in fines. Compared to 2015, that represents a 423 percent increase in fines. Not all of these cases were related to texting, social media is another big area of concern, but texting is certainly a huge hot-button issue in the industry at the moment and advisors are caught between a rock and a hard place.
Help is available
There is good news in this scenario, however: The explosion of interest in adding texting as a means to communicate with clients is currently fueling a related explosion of new technology to aid advisors. Products such as Hearsay and Smarsh provide scalable, cost-efficient, integrated texting solutions that work for both unified and bring-your-own-device (BYOD) environments in providing functions, including automating consent to text clients, enabling corporate visibility into field activities, and mitigating against risky communications by monitoring communications in the background at all times. Hearsay boasts that it assists more than 150,000 advisors with their communications, while Smarsh claims upward of 6,500 customers worldwide in the financial services vertical.
In January, Securities America launched a new texting option to enable its financial advisors to communicate with their clients quickly and efficiently. Securities America advisors work in a BYOD environment, and the company's solution creates a separate number on the same device to and from which the advisor's client messages are texted, letting them keep their business and personal communications separate. This solution is proprietary and requires clients to download an app to their smartphones for communication.
A few weeks after Securities America launched their app, Merrill Lynch debuted a similar texting program; Edward Jones began experimenting with texting in 2015, but their program was based on allowing advisors to send text messages from their computers to clients' cellphones. Meanwhile, Morgan Stanley started working in this space six months earlier, joining forces with technology firm Twilio to develop a system that joins marketing automation with the convenience of text messaging.
Certainly, the convenience of text messaging is something the industry wants and needs, but like other technologies, it should complement the personal touch—not replace it. Even after you gain a compliant texting procedure, continue to make time for phone calls and face-to-face meetings with your clients. Incorporating that along with the bits and bytes, FINRA compliance, and maybe a few emojis along the way? That's the best of all possible worlds.
John T. Jones is the digital marketing and communication manager at USA Financial, a comprehensive financial services institution. Investment advisor representative of USA Financial Securities, Member FINRA/SIPC. A registered investment advisor located at 6020 E. Fulton St., Ada, MI 49301.