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Recordkeeping and Advertising

Two of the biggest challenges to get right are recordkeeping and advertising. It is no small feat to do so.

All advisors must keep records of their communications. In a way, social media makes that difficult because every communication by an investment advisor is an open record – whether a tweet, a post, a recommendation, a “like,” or some other form of agreement with someone else's recommendation.

Further, investment advisors need to make sure any content that might be construed as advertising has been pre-reviewed and complies with securities laws. Communications with prospective clients might contain information about performance or other advertising, including the effectiveness of past recommendations, and are governed by specific rules.

Twitter Backlash: Consumer Complaints Go Viral

FIGURE 4.1 Twitter Backlash: Consumer Complaints Go Viral

In order to make social media use compliant, the investment advisor and chief compliance officer must cover these bases. The advisor and firm will have to meet the recordkeeping requirements, which may even include the preservation of screen shots. Now, that's possible for an advisor or firm to do in any social media context, but it's not easy.

Another approach is to employ a third-party platform to channel their communications and keep proper records. The SEC has said that a third- party provider can be appointed by an advisor as the company's recordkeeping source. For example, if a site or service keeps records and preserves your screenshots for you, that could be quite handy.

Crisis Management Process

FIGURE 4.2 Crisis Management Process

Source: Financial Social Media

Students of Texas Tech's Personal Financial Planning Program

FIGURE 4.3 Students of Texas Tech's Personal Financial Planning Program

Source: TTU's PFP website

Social media can be a gift if the right tools are deployed – tools that make it possible and practical to track communications and even to pre-review postings for advertising content.

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