More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
Boston University’s Professor Zvi Bodie is a very big name in academic finance. He literally wrote the book on investments. Generations of MBAs were raised on his seminal textbook Investments, now in its eighth edition, and it’s not for nothing that his Financial Economics textbook has been translated into nine languages.
So when he drew my attention to a financial service company’s video explaining annuities to consumers, I paid heed. Annuities are complex financial instruments, notoriously hard to explain. Bodie (left) has written textbooks trying to do just that. What’s more, in my own experience, financial services companies are often very poor marketers. What they lack in literacy they often more than make up for in overly exuberant salesmanship.
So I was delighted to receive the tip about Securian Financial’s video introducing their Encore Lifetime Income Benefit. “I think the video is a very effective piece of marketing,” Bodie told me in an email, making it clear that he does not endorse the product or the specific content of the video.
Video is a powerful medium, one that financial services companies are harnessing with increasing frequency, so it makes sense that Securian would use this tool to tell its story. Kerry Geurkink, director of annuity marketing for Securian, was targeting consumers as the ultimate audience in creating the video for the firm’s wholesalers. “We want to present our offerings to advisors in a fresh way and at the same time show what sets Securian apart,” she is quoted as saying in an internal company communication Securian provided to AdvisorOne.
I asked veteran financial services marketer Jay Nagdeman, president of Suasion Resources and author of The Professional’s Guide to Financial Services Marketing, for his professional opinion of the 11-minute video. “Much too long,” he said, adding the video was “a very good idea” that could have been executed better.
The speaker’s slow pace, which might help the audience comprehend a financially complex subject, may have been too slow. “They’ve got somebody speaking like she’s trying to get across to foreigners,” Nagdeman says, adding: “They could have had the advisor talking.”
“There should be two or three things [the audience] remembers,” Nagdeman continued. “They used the word ‘guaranteed’ multiple times. But they really
Bodie, for his part, praised the “the believability of the woman and her predicament.” He also thought the video succeeded to the extent that the language was “clear and free of jargon and hype.” That said, he hastened to say that the presentation “ignores inflation risk,” which has been a main focus of Bodie’s research and writing since the early 1970s and a central focus of his latest book, Risk Less and Prosper, which Wiley is releasing in late December.
Nagdeman, viewing the video as a professional marketer, acknowledged the video had a message–that retirees can sleep better knowing their income was guaranteed–but he felt it could have been presented in a more exciting way. “People used to watching professionally produced TV programs” are looking for a little more “orchestration,” he said.
Granted, Securian and other financial services marketers have a profound challenge in creating communications on complex subjects that will appeal to consumers while avoiding legal compliance snags. Explaining “income enhancements” is hard enough while avoiding any legally unacceptable inferences in a strict regulatory environment.
Memo to Securian: Get Bodie, Nagdeman and your sharpest compliance officer in the same room next time and you might just break through the many hurdles that keep consumers so distant from the goal of an income they can’t outlive and that inflation, and cynicism, won’t erode.