How LA Investment Advisors Manage Social Media Accounts

Craig Pollack | May 04, 2015

How LA Investment Advisors Manage Social Media AccountsA recent survey of four-hundred financial advisors revealed that nearly half of them use social media outlets like Twitter, Facebook, and LinkedIn as an advertising too. And of that total, about 60 percent of them have client portfolios worth over $20 million.

Social media accounts are now an important part of doing business in the financial services industry. Forty percent of the advisors surveyed said they acquired new clients through Facebook, while twenty-five percent used LinkedIn, and twenty-one percent utilized Twitter.

Many financial advisors in Los Angeles shy away from social media accounts because they are concerned about compliance issues. While this discretion is understandable, they should also be aware that the current financial services rules are surprisingly flexible when it comes to effective use of social media.

Regulatory Bodies and Social Media

When it comes to social media accounts, FINRA, SIPC, and other regulatory bodies have not established new usage rules. What they have done instead is modify existing ones.

The SEC simply states that an advisor’s use of social media has to comply with the federal securities laws, namely recordkeeping, antifraud, and compliance requirements.

Business vs. Personal

As a rule, an advisor’s personal social media profiles do not have to be monitored and archived. But the situation changes if they openly discuss business matters. Then these accounts become business accounts by default and the rules apply.

There’s nothing to stop someone from being Facebook friends with their clients, but business discussions need to remain off-limits on the personal account.

Recommendations on Social Media

Under FINRA rule 2111, investment advisors need to have a reasonable basis to believe that an investment recommendation is suitable for a certain customer based on that customer’s investment profile.

It’s a required level of personalization that cannot be applied universally to an entire group of Facebook friends and Twitter followers, so using social media to make investment recommendations is not permitted. For added protection, advisors should post a disclaimer on their social media profiles saying that none of their posts should be construed as investment advice.

Recordkeeping Requirements

Financial advisory firms are obligated to keep records of social media communications if the contents constitute business communications. Fortunately, there are several technology-based tools that can help compliance officers meet this recordkeeping requirement.

Like Buttons and the Testimonials Rule

According to the SEC, if a third party uses the ‘like’ button on an advisor’s social media account, it could be construed as a testimonial if it reflects a client’s experience with the advisor.

In other words, if a follower or friend ‘likes’ an advisor’s biography, it could be viewed as an implicit testimonial. But if they ‘like’ a picture that’s been posted, the rule probably will not apply.

To play it safe, advisors should refrain from posting anything that could be called a testimonial if it is ‘liked’ and disable the endorsements section of their LinkedIn profile.

Bottom Line

Today’s tech-savvy investors are turning to social media outlets to make contacts and manage their portfolios. LA investment advisors can and should make use of LinkedIn, Twitter, and Facebook to attract and connect with clients, provided a few simple guidelines are observed along the way.


Does your investment advisor firm participate in social media? Let us know your thoughts in the Comments box below.


And to follow-through on the tips introduced in this short article, be sure to download your free guide, Investing in High Net Worth Clients: The LA Investment Advisor's Guide to Using Technology to Manage and Grow Your Firm.


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Craig Pollack

Craig Pollack

Craig is the Founder & CEO of FPA Technology Services, Inc. Craig provides the strategy and direction for FPA, ensuring its clients, business owners, and key decision makers leverage technology as efficiently and effectively as possible. With over 25 years of experience building the preeminent IT Service Provider in the Southern California area, Craig is one of the area’s leading authorities on how small to mid-sized businesses can best secure and leverage their technology to achieve their business objectives.