SEC marketing rule is “challenging” to navigate, say advisors

investmentnews.com:

Compliance and marketing are just two branches of a firm’s tree but they are both critical to a firm’s operational success.

Advisors are constantly seeking for ways to refine their approach and increase their appeal to clients, but the SEC’s Marketing Rule remains a significant compliance focus.

As we near the two-year anniversary since it went into effect, how are advisors complying with the rule? It turns out that, according to a recent report from the CFA Institute/IAA, advisors are still being cautious.

“The challenge is the fact all communications with clients or prospects fall under the Marketing Rule. We routinely need to impress this fact on advisors and representatives of the firm,” says one respondent in the report.

“[I’m] trying to decipher what the SEC is really looking for in certain situations without any guidance from them,” says another advisor.

One key takeaway from the report highlighted that roughly 39 percent of firms don’t present hypothetical performance. Of those that do, most do so only on a one-on-one basis or in response to unsolicited requests.

Kaitlyn Gibbs, director of regulatory research and regulatory change management at Compliance Risk Concepts, says while the Rule is supposed to be more permissive, there’s still some opacity around what makes performance advertising permissible.

“How do you get there? How do you feel comfortable as an enterprise? Marketing that type of information when it was such a taboo subject and performance marketing was such a difficult thing to achieve and essentially embargoed altogether,” she says.

“It’s an area where firms do struggle, and it’s definitely an area where we are sought-after for advice, oftentimes, particularly where it comes to hypothetical