NASAA Proposes New Marketing Guidelines

That sounds like a nice ad-dition.

The North American Securities Administrators Association proposed changing its advertising guidelines last week to align them more closely with SEC standards. The industry group — whose members are made up of state and provincial regulators — is looking to amend its rules to allow advisors to use testimonials, endorsements, third-party ratings and performance reports in marketing materials. Jurisdictions would still need to adopt the changes on an individual level, but the amendments could afford smaller, state-registered RIAs the same marketing opportunities that their larger counterparts have enjoyed for roughly the past five years.

“This is a welcome and necessary step toward regulatory harmonization,” said Kate Wulfken, director at Compliance Risk Concepts, adding that the current standards create unnecessary complexity for advisors and their compliance teams.

It Ads Up

The SEC updated its advertising rule at the end of 2020 in order to catch up with modern marketing practices, Wulfken told Advisor Upside. “The old rules really made it difficult for advisors, particularly internet-based advisors, to engage with their target audiences,” she said, adding that working with finfluencers was nearly impossible. However, only about half of the states have adopted similar regulations, according to data compiled by Wealthtender, a platform that connects people with advisors:

• In February, Texas became the latest state to adopt updated marketing rules.
• Holdouts include: California, Alabama, Maine, Pennsylvania, and others.

Critics say testimonials can be altered, or cherry-picked, and that can end up misleading investors. A code in California even called them potentially “fraudulent, deceptive, or manipulative.” But, Wealthtender CEO Brian Thorp said there’s no excuse for why states have not adopted the SEC’s rules. “To use the word fraudulent today when a California RIA invites clients to share how they feel about their experience online is anything but fraudulent,” he told Advisor Upside.

It Keeps Adding Up. Though SEC-registered advisors can use testimonials in ads, fewer than 10% actually are doing so, Thorp said, adding that those RIAs are winning new business as a result. “This is a once-in-a-generation opportunity for any advisor who does have the regulatory green light to collect online reviews,” Thorp said.