Social media has become ubiquitous.

The exposure can be positive for advisors and their firms; it helps promote industry conversation, elevates the firm’s presence and differentiates the company from competitors.

Read: Overcoming social media barriers

But, social media is littered with professionals who use it improperly and destroy their hard-earned credibility. Advisors need to understand how to properly craft their online images.

To help with this, the securities commissions dictate every firm must have a well-developed social media policy to make sure advisors’ messages are consistent with the firm’s views.

Read: How to measure social media ROI

To comply, first get employees to tell the compliance department which social media resources they’re using. Firms should clearly outline what’s acceptable in the compliance manual.

And, advisors should seek approval before anything is posted online, but that can be difficult with rapid messaging services such as Twitter and Facebook. Detailed training will limit the risk of advisors going off-message.

Here’s what to tell advisors in training.

  • Avoid posting false or misleading information, such as guaranteeing returns or discussing products you’re not approved to sell.
  • All claims should be supported by adequate proof.
  • Don’t discuss your professional qualifications or designations unless the communication has been approved.
  • All material connections to the sponsoring firm must be clearly disclosed if the post is discussing a product related to the firm. A material connection could influence the credibility a prospective client would give to the communication, and regulators place a high priority on minimizing client confusion.
  • If you do post a personal opinion, it should be clearly stated that it does not necessarily reflect the views of the firm. That would include views on the economy or the markets in general.
  • Don’t make recommendations about specific products. General promotion is acceptable; this may include broad discussion of a generic product’s features, as well as related product facts (for example, speaking about ETFs or critical illness insurance would be fine, but touting a particular fixed-income ETF or a specific manufacturer’s policy). The wider your audience, the less specific you should be.
  • If a new product has been approved for sale, advisors may inform clients, but it’s best to link the message to specific marketing material that the CCO has already approved. This limits the potential for you to stray from the firm’s message.

Advisors should submit copies of social media exchanges to compliance weekly using links, screenshots or another method that would show unaltered communications, since it’s impossible for firms to monitor real-time exchanges on certain sites. (If an advisor thinks an exchange might be contentious, he can report it as it happens.)

Read: Should you outsource social media tasks?

Also, compliance should have a social media file for each advisor and review it frequently.

Advisors should report any new use of online mediums as they’re adopted, and on a yearly basis, compliance should do a full review of rep activity. This would include making the NRD is up to date, having advisors sign the annual code of ethics and conduct, and searching the advisor’s name online.

Jonathan Heymann is President of Wychcrest Compliance Services Inc., a consulting firm specializing in securities compliance and registration.
Originally published on

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