Navigating Compliance Oversight When Blogging As A Financial Advisor

Navigating Compliance Oversight When Blogging As A Financial Advisor

Executive Summary

As digital marketing for financial advisors slowly gains momentum, there is growing interest amongst financial advisors to launch their own blog as a means to showcase their expertise. Yet the challenge, for advisors at both broker-dealers and RIAs, is that any prospective advertising content to the public must first be reviewed by compliance, and the compliance oversight process can make financial advisor blogging difficult – especially for those in a large broker-dealer environment.

This week we discuss blogging as a financial advisor, the compliance rules that apply to financial advisor blogging, and the issues to consider when navigating compliance oversight, both for RIAs and those operating in the broker-dealer channel!

Because in practice blogging is more popular at this point amongst RIAs than broker-dealers, a common question is whether the compliance requirements are different between the two channels. However, the reality is that whether you’re an RIA or a broker-dealer, anything you do that advertises to prospective clients or solicits prospective clients for your business is deemed “advertising”, and is subject to compliance (pre-)review. Technically broker-dealers are covered by FINRA Rule 2210, and RIAs are covered by Rule 206(4)-1, but in the end, both have requirements that compliance should review blog content before it goes out to the public, ensure blog content isn’t misleading, and record and archive blog content for later review. Which means, the key difference between channels is not really the regulatory compliance requirements.

Instead, the key difference is actually firm size. Most RIAs are small (at least by broker-dealer standards), and operate as either solo advisors, or with just a dozen or few advisors as a large RIA. By contrast, mid-to-large-sized broker-dealers may have hundreds or even thousands or brokers. And it’s this size difference that drives major compliance differences for financial advisor blogging between channels. Because in a small (or even “large”) RIA, an advisor is either themselves the chief compliance officer, or likely knows the compliance officer very well. Which means it is easy to get buy-in from the compliance officer to take the time to review the content of a blog. By contrast, a compliance officer in a broker-dealer rarely knows the brokers who many want to blog, and the sheer magnitude of trying to oversee advertising for such a large number of brokers leads to compliance officers to adopt very strict and very limited rules that force brokers to stay inside a small box of activities!

Fortunately, there are some more progressive broker-dealers that have begun to find solutions to allow advisors to blog. But unfortunately, many of those programs have been slow to roll out. For advisors who do want to start a blog, regardless of what channel you are in, there are some things you can do to increase your odds of solving the compliance issues. First, try to work proactively with your compliance department. Explain to them what you want to write about, and, if it’s not related to products, investments, or performance, tell them, because that will make their job easier. Second, write some content well in advance, and send it to them for review. After they’ve seen your content for a while and realize it is not a compliance risk, you may find they ease up a bit.

In the end, the challenges of overseeing such a large number of advisors in the broker-dealer environment have unfortunately squelched the ability of a lot of brokers to engage in blogging, but it’s not because they can’t, or that FINRA won’t allow it. Rather, it’s because broker-dealer compliance departments are struggling to oversee a huge number of brokers that they don’t necessarily know, while the more limited span of oversight at RIAs makes it easier to expedite the process!

Financial Advisor Blogging Compliance In RIAs Vs Broker-Dealers

Now, the reality is that whether you’re at an RIA or a broker-dealer, anything you do that advertises to prospective clients or solicits prospective clients to your business is going to be deemed advertising and is subject to compliance review. In the case of broker-dealers, that’s driven by FINRA Rule 2210, which scrutinizes whether any form of advertising communication is fair and balanced, and not misleading.

In the case of RIAs, it’s slightly different. It’s Rule 206(4)-1, which limits investment advisors from engaging in deceptive or manipulative advertising, particularly with respect to how investment advisors present performance, their track record of recommendations, and any kind of testimonials about their client results. Now, both channels have requirements that firms have to oversee and supervise any advertising content to ensure it’s complying with those rules. And that advertising materials have to be retained for some period of time as well, under a books and records requirement.

While there are some nuanced differences in what’s focused on in those compliance reviews of RIA versus broker-dealer environments, substantively, the key points are actually the same:

  1. Compliance should review it before it goes out to the public.
  2. It can’t be misleading about what you do and the results you provide.
  3. And it needs to be captured, recorded, and archived for later review.

So, generally speaking, any and all blog posts of an advisory firm are going to need to go through this kind of compliance review regardless of whether you’re at an RIA or a broker-dealer.

There’s actually not a big difference in that regard. Now, that being said, there is a major difference in practice in how compliance works when reviewing potential advertising materials, including blog posts, between RIAs and broker-dealers. The difference is size. Most RIAs are small (at least by broker-dealer standards). Many are solo advisors that just have themselves or a handful of staff. Even large independent RIAs often just have a couple of advisors.

There are very few that even have more than a dozen advisors in one firm. Which means the compliance process is much more straightforward. In some cases, the advisor literally is their own chief compliance officer who needs to review their own blog post, which, not surprisingly, gets done pretty quickly when you’re reviewing your own material. Even in multi-advisor firms, the chief compliance officer is often a partner who is reviewing the work of other partners, who has an interest in expediting the compliance review process, especially for a partner who’s already known and trusted, and is trying to grow your joint business.

By contrast, in a broker-dealer, there aren’t just a handful of a dozen advisors. There may be hundreds or thousands. And for wirehouses, more than 10,000, which means compliance has a lot of advertising to review constantly. Even worse, compliance departments in most broker-dealers have very little direct connection to the advisor whose content is being reviewed. In a small RIA, every advisor is probably going to know that chief compliance officer personally, maybe for years or a decade or more. In a mid to large-sized broker-dealer, not so much.

That becomes a problem because it undermines trust between the compliance department and the broker seeking compliance approval. Think about it for a moment. Put yourself in the seat of a compliance officer at a broker-dealer. So your job, your backside, is on the line every time you review advertising for your brokers. You could potentially get fired if you slip up and fail to properly oversee whatever the one dumbest, most idiotic broker in your entire firm might do that brings the whole thing down.

So, not surprisingly, if you want to keep your job as a compliance officer, this is pretty simple. You write strict, limited rules that force advisors to stay in a small box of activities. That makes it easier to oversee and reduces your risk of getting fired. Unfortunately, though, as we see in a practice, it also kind of squelches the ability of a lot of brokers to engage in blogging. Not because they can’t or that FINRA doesn’t allow it. But because the broker-dealer’s compliance department is so struggling to oversee a huge number of brokers that they don’t even necessarily know or trust, that it leaves them to write very limiting compliance rules.

Some of the more progressive broker-dealers have come up with workarounds to this. Some have special teams that review blog content, recognizing the importance of timeliness. Others just grant greater flexibility to top producers or more experienced brokers. Recognizing that compliance doesn’t quite have to be so limiting and restrictive for a subset of brokers who have long since demonstrated that they’re trustworthy, able to follow the rules, and not engaging in risky advertising behaviors.

But unfortunately, these programs have been slow to roll out. we see a lot more of the blogging amongst RIAs than we do amongst broker-dealers. Whether or how it really is at the individual firm still depends on the broker-dealer, how they choose to write their compliance rules, and how they execute their oversight process. Again, there are more progressive broker-dealers that have been willing to grant more latitude to experienced brokers (or are otherwise running some kind of pilot test to make it easier to blog), but we’re getting there slowly.

Advisor Compliance And Allowing Blog Comments

Now, a similar theme around financial advisor compliance for blogging props up when it comes to allowing comments on the blog. This was another recent question we got from Matt, who asked:

“I’m starting to blog and I’m getting pushback from my BD on allowing comments on the blog, which we both know is extremely important to engage audience. So, is this a FINRA thing? Would it be easier if I was an RIA?”

Great question, Matt. Again, this isn’t really a FINRA versus RIA thing.

The primary concern here, from the compliance perspective, is whether the comments on the blog can potentially be construed as testimonials or otherwise misleading statements about your investment results, track record, or your recommendations. Now, as we know, unless you’re literally writing about your investment performance, most blog comments are probably going to have nothing to do with clients giving testimonials about your services. They’re probably comments about actual content of the article or some other investment theme, financial planning strategy, or whatever else it is that you’re writing about.

But nonetheless, compliance officers have an oversight obligation. There’s still an expectation that they’re overseeing your blog comments, even if it’s just to prove they’re not testimonials. Now, in a small firm environment, this can be solved pretty easily. Configure your website to automatically email new comments directly to the compliance officer to review. Most blog and content management systems can do this automatically. But again, in a larger broker-dealer context, that may not be feasible.

The firm may not be built to take all those incoming comments, or you may not be configured to give your broker-dealer compliance department access to manage your blog when those comments appear, so that they can take down the inappropriate ones. Nor does the compliance department necessarily want to do the work, because it’s potentially time-intensive and a resource drain for the broker-dealer compliance department. They may feel like they have bigger fish to fry.

So, the end result is that broker-dealer compliance departments often say, “No comments.” Not because comments are banned by regulators, but because there is something for them to oversee and it makes it more time-efficient for them to just say, “No comments,” and then they don’t have to oversee it. In theory, that can be a problem for a small RIA as well. But again, in a small RIA, I’m more likely to know my compliance officer and be able to say, “Hey, work with me. This will be good to grow our firm,” and get them to do it.

In a broker-dealer, especially when the majority of advisors don’t blog right now, asking a compliance officer to oversee your blog comments just feels like more work to them. So, unfortunately, they often just say, “No.”

Setting Up A Financial Advisor Blog Separate From Your Advisory Firm Website?

I know that for some advisors, this at least starts to raise the question, “Well, then should I just do my blogging separate from my advisory firm website, so I can avoid dealing with all this compliance hassle altogether?” To which I’d answer, “Maybe”, at best, because that will not automatically solve the compliance issue.

Because the reality is that if you’re employed in our financial services industry, whether it’s an RIA or under a broker-dealer, if you’re even going to engage in blogging as an outside business activity, that still needs to be disclosed to the firm. The compliance department still gets to decide whether that’s okay or not, and whether it’s something they need to oversee further. If the focus of your blog is to solicit clients, compliance is likely going to say it’s still part of your advisory firm or broker-dealer activity, and it’s still subject to oversight, even as a separate website.

Because it’s not ultimately about whether it’s on your business website or not. It’s about whether you are engaging in an effort to make recommendations, solicit clients, or otherwise advertise for your services. In other words, what makes compliance need to oversee the blogging is not what website it’s on. It’s how it relates to you providing services or trying to get clients. Now, that being said, I do know some advisors who have launched successful blogs that are separate from their advisory firm website and have separate compliance oversight.

The key points to this approach are, first, it’s still disclosed to compliance that it’s happening. They have to approve of this as an outside activity.

Second, if you want to go down this road, the content cannot pertain in any way to recommending specific products, providing individual investment advice, or talking about your performance or track record at all. Because that immediately scoops it back up in the normal regulation of your activities as an advisor.

Third, don’t talk about investment performance at all, in any way, because again, that has to be overseen as well.

And fourth, don’t solicit clients on that blog. Because if you lead with, “Jim is a financial advisor who’s now taking clients,” at the bottom of every article, you’re soliciting clients and you’re advertising for your services, and the firm is going to need to oversee your advertising efforts. Now, if it’s, “Jim provides this educational website for free. If you want to learn more about what he does, click here,” and the Click Here goes to your separate website with your advisory firm, with all of your advertising that is compliance overseen, that’s probably not an issue for most compliance officers.

Because they don’t need to oversee education, and they don’t need to oversee material that is outside of the scope of regular financial services and financial advising. In fact, some of the best blogs are so specific to a niche that you wouldn’t be talking at all about your advisory services. It’d be about all the non-investment issues of your niche and if the people are so interested in that, they want to talk to you, you can send them to your actual financial advisor website. However, this separate blog approach just isn’t feasible for a lot of advisors.

Because their blogging is so tied to their advisory services, their investment outlook, or their investment views, that they couldn’t separate it if they wanted to. The whole point of the blog is to actually solicit clients and advertise their services. But I thought it’s worth knowing there are at least some advisors that do this separation successfully. You just have to be very clear about drawing the line, and you still need compliance on board with the decision to maintain it separately. Now, of course, if you’re going to run the blog separate from your advisory firm, you do still need some way to get them to your advisory firm.

If you don’t, you’re just giving content away for free and you’re never actually going to capture any business, which isn’t good for business either. That’s actually why I tend to recommend that most advisors put their blogs directly on their advisory firm websites. Because if you’re really trying to get clients, at the end of the day, you want clients to see the firm and you want them to be reading the content on the firm’s website. That’s how you start building awareness of your company’s brand so that you can do business with these people in the future.

But the bottom line here is just to recognize that the obligations of compliance really aren’t that substantially different between RIAs and broker-dealers. The financial service industry as a whole has stringent rules about how advisors advertise to the public and that includes blogging, and it’s true on both sides of the channels. But it is true that RIAs tend to be much smaller than mid to large-sized broker-dealers, where most brokers work.

Which means, it is often easier to work proactively with a chief compliance officer in an RIA to come up with an oversight process that works. While at large BDs, a compliance officer often has no connection to the brokers and risks being fired for whatever the one biggest idiot in the firm might do, so the compliance policies tend to be more restrictive around a lot of things, including blogging. Not because FINRA requires it, but because that’s the dynamic of executing compliance in a very large firm.

Getting Started With A Financial Advisor Blog [Time – 12:03]

For those who do want to get started, here’s my suggestion on moving forward. First, try to work proactively with your compliance department. Contact them. Tell them what you’re trying to do. Be very clear about what you want to write about. Especially if it’s not related to products, investments, or performance, tell them. It doesn’t alleviate them of your compliance burden, but it does make it easier for them. It’s kind of a nice way of saying, “I’m not a threat to your compliance job.”

Second, plan out your expected editorial calendar of content and write your first couple of articles far in advance, and send it in for compliance to review. Yeah, it helps to produce timely blog content. But the reality is that a lot of what you should produce should be long-term, evergreen content anyways, that answers common questions of your clients and prospects, and doesn’t have to be timely. So start with that. Write your first two, four, or six articles that you’re going to put out over the next couple of months. Send them all into compliance at once. You’ll have a lot of lead time. You can start working out the process and the kinks with compliance.

I suspect what you’ll find… The pattern I’ve seen with a lot of brokers who have gone down this road, is that after the first couple of months, once compliance reads a bunch of your articles and realizes that you’re probably not talking that much about investments, performance, or product recommendations (all the stuff that they’re worried about), they may even ease up a bit. I’ve heard from a lot of brokers, in particular, and broker-dealers that say, “Compliance early on was really a pain about the blogging.” But it eased up after a few months of the process once compliance realized they weren’t a threat. And particularly if you can get a dedicated compliance officer that works with you and starts to really understand the nature of your content.

Now, if you’re going to be really focused on investment issues and you want to write an investment commentary, yeah, be prepared that you’re going to have to work much more proactively and push the process a little bit harder to get things to run in a timely manner. Because now, you truly are writing timely content. But most blog content doesn’t even actually need to be that timely, unless you’re specifically trying to promote investment content.

I hope that helps a little as some food for thought around blogging as an advisor, the differences or not between broker-dealers and RIAs, and why it’s less a difference of regulation in the channels and more just a difference of the size of firms, and the challenges that large firms have trying to oversee large numbers of advisors and brokers.

So what do you think? Are actively managed funds going to see a sudden increase in performance due to the changes in broker compensation? Will brokers start pointing to fund performance rather than account performance, since the former won’t include their fees? 


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s