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Regulation and Compliance > State Regulation

Client Testimonials: Get the Benefits Without Breaking the Rules

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No doubt within the first ten minutes of becoming a financial advisor, you received a list of taboos: those things you are never allowed to do because they are either ethically or legally forbidden. At the top of that list: using client testimonials.

Compliance officers often see the Investment Advisers Act of 1940 (206(4)-1(a)(1)) as a way to reject any marketing featuring the words of existing clients. To paraphrase, the law prevents any advertisement that refers to a testimonial concerning the investment advisor or concerning any advice, analysis, report or other service rendered by an investment advisor.

Unlike a lot of regulations, this one has merit. Referrals are almost always hand-picked in a way to ensure a positive response and consumers do respond favorably to them.  

However, there is a difference between a testimonial where someone talks about the advisor and investment advice they received and a testimonial specifically about their experience and the sharing of a personal story that never mentions the advisor at all. Real-life stories create a connection far more powerful than any sales pitch. In addition, psychological studies show that buying decisions are more likely to be made for emotional rather than logical reasons. Testimonials help create that emotional connection.

So, if we can’t use them outright, are there other ways we can generate the benefits testimonials offer?  

There are other ways of minimizing customer skepticism and developing an emotional connection by showing the types of people with whom we work. Strategies that can have just as much of a positive effect (if not more) than a straight-out testimonial. Here are a few strategies that offer the benefits of testimonials without running afoul of regulations:

1. Publish a Lifestyle Magazine

For about $1 a copy, you can create a four-page magazine featuring the amazing lives of your clients. In their own words, the clients describe their beautiful dream house, their trip to Barcelona, or their work with charities. Be sure to include plenty of photos. Other than your company logo, no other reference to your company should be used (or is even needed).

Naturally, you’ll need to first identify clients willing to share their story. To write the copy, if necessary, you can hire a freelance writer/editor through websites like Upwork or Fiverr.

Include in the publication any materials you would normally give to a prospective client. It can be far more effective than the standard brochure your competitors distribute. (Be sure to get approval from your compliance department before distributing.)

2. Write a Book

While your clients are not permitted to provide testimonials about you, they can certainly offer opinions about your book. Writing a book today is not nearly as difficult as it might seem. There are even many online services to help you with the process. 

Best of all, self-publishing no longer requires you to purchase hundreds of copies in advance. Services like and let you self-publish and order as few copies as you wish. 

Before publication, ask your clients to provide a brief opinion of the book that can be included on the back cover.

Having a book is one thing. Getting it in the hands of interested readers is another. Giving the book to prospective clients can impress. You can also promote it through social media and your website. And you can sell the book through Amazon, which allows readers to post reviews. In April, FINRA issued Regulatory Notice 17-18, on social media and digital communications, sharing more insight in this realm. In short, they do not consider these unsolicited opinions to be communications of the firm or testimonials.

3. Cover Your Walls

If you host client events (and if you don’t, then you should), take photos at the event and then hang them up in photo collages in your office showing the attendees enjoying themselves. Make sure they are visible to visitors, and take time to point them out. Similarly, photo books from your events should be placed in your waiting area.

4. Invite Prospects to Client Events

The most powerful strategy that can give you the benefit of testimonials without violating the law is to blend your prospects with your clients. Fun events like murder mysteries, wine tastings and summer picnics allow for beneficial interaction. Of course, such an approach can also backfire if your clients don’t fully appreciate what you offer. Also, be mindful of gifting and business entertainment limations set by FINRA as well as state regulators.

Effective marketers understand what they can and can’t do within the regulations and that the benefits of testimonials can be achieved in other ways. It does require effort and a willingness to work with your compliance departments to review any applicable standards to play within the rules, but advisors willing to make it can reap huge benefits.

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