3 December 2020

SEC's Guidelines on Advisor or Adviser Title

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At the end of this month, only financial professionals registered as investment advisors or performing certain functions can call themselves advisors or advisers.  

The SEC says brokers who use the terms “advisor” or “adviser” in their titles without being registered as investment advisors will be in violation of Regulation Best Interest’s disclosure obligation. Reg BI’s compliance deadline remains June 30 despite disruptions caused by the coronavirus pandemic.

Brokers who are registered with the SEC or their states can use the advisor/adviser title, according to the regulator. Brokers may also use the advisor/adviser title when performing “a role specifically defined by federal statute that does not entail providing investment advisory services to retail customers, for example, as a municipal advisor, commodity trading advisor, or advisor to a special entity,” the SEC says.

Even brokers at broker-dealer firms with an affiliated RIA can’t use the terms unless the broker-dealer is also registered as an investment advisor, the SEC says.

For those who will be in violation of this aspect of Reg BI, the title needs to be changed in business cards and print and digital ads, as well as in written communication to clients, to name a few instances.

The costs that come with it

FA-IQ reached out to various broker-dealer firms to find out how much such a transition out of the advisor/adviser title would cost, but none could give meaningful estimates at this point.

Dennis Asselta, group director for financial advertising at Financial Times, FA-IQ’s parent company, notes that content produced by firms affected by the Reg BI requirement on the use of titles, “such as white papers, case studies, marketing materials, would all need an overhaul,” as would websites if they contain titles that violate Reg BI.

“A lot of financial firms have advisor written all over their sites, which would need to be scrapped [if they violate the Reg BI Rule], so there will definitely be a lot of work to do,” Asselta adds.

When it comes to simpler changes, a pack of 500 business cards costs between $20 to $22 retail, and a 25-pack of custom letterhead costs $25 to $99, according to a quick FA-IQ check of retail prices online.

On the other end of the spectrum, for RIA firms that may choose to highlight the advisor/adviser titles and their roles as fiduciaries, the costs would be part of their 6.5% average annual marketing and advertising budget, according to research firm Cerulli Associates.

“Brand campaigns are typically considered any campaigns that are not product or services driven, and most aim to increase the positive association or favorability of that brand.  Budgets for a brand campaign launch will range from the tens of thousands to millions of dollars in the B2B financial space,” FT’s Asselta says.

“When a financial firm rebrands, meaning they’re changing their brand name, or logo, or shifting their focus in a significant way, budgets tend to scale up into the hundreds of thousands or millions of dollars to support such significant changes,” he adds.

Prep work

Voya Financial Advisors and Waddell & Reed are both dually registered as broker-dealers and RIAs, so they say adherence to the advisor/adviser title guidance won’t hit them as hard as other firms registered solely as B-Ds.

Voya Financial Advisors is preparing internally for the anticipated changes, which includes “carefully reviewing our inventory of marketing and customer-facing materials to identify the necessary changes where appropriate, making the change from ‘financial adviser/advisor’ to ‘financial professional,’” says Tom Halloran, the firm’s president.

Halloran notes that Voya is “working closely with our network of financial professionals to ensure their websites and marketing materials are also complying with the rule.”

Waddell & Reed continually reviews all marketing support material “to ensure compliance with regulatory standards and to best articulate our range of products and services,” says Roger Hoadley, the firm’s spokesman.

“Marketing moment”

Despite the looming changes, April Rudin, founder and president of The Rudin Group, a marketer for wealth managers, says broker-dealers and RIAs “are not necessarily attuned to marketing or allocating marketing budgets for the purpose of meeting compliance requirements.”

But Rudin says she is glad to hear advisors are taking advantage of this "marketing moment — as Reg BI is coinciding with an opportune time to connect with clients.”

Rudin adds: “My advice is for these firms to gather their marketing dollars, especially from cancelled conferences, and use it to build brand awareness and visibility among clients, prospects and others who influence these decisions.”

Team Hewins, a Redwood City, Calif.-based RIA with $2 billion in assets under management, has made changes to client messaging in San Francisco, Miami and Boca Raton, Fla. since March, in preparation for Reg BI, according to Robert Freedman, the firm’s marketing director.

In the past, Team Hewins’ clients in south Florida have expressed confusion over the use of the term “advisor,” Freedman says.

“More of our Californian clients are aware of those differences and actually seek out fee-only advisors in their search,” says Freedman, who has been working on the firm’s search engine optimization, or SEO. “To this end, we have adjusted our advertising, website SEO tactics, and differentiated our collateral to align with our different target demographics.”

Freedman says Team Hewins partnered with an SEO marketing agency to better identify search terms clients are using when seeking financial advice. The firm also looked for ways to optimize the website and landing pages “to attract more of that traffic,” he adds.

He declined to share costs for the SEO work, but says, “I can tell you it has been time well spent.”

In redesigned brochures for the firm, some of which rolled out in May, Team Hewins included language to make clear they don’t sell products and that the advisors are “fee-only and are on the same side” as clients, Freedman says.

“I think our messaging will remain the same after the rule is in place. However, we are happy to be able to own the term ’advisor’ and present clear differences to our clients and future clients between the services we provide and how we are compensated for those services versus those working in traditional brokerages,” Freedman says.

Do you have a news tip you’d like to share with FA-IQ? Email us at editorial@financialadvisoriq.com.

Click here for the original article.

 

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