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Navigating Compliance as a Financial Advisor

Posted March 24, 2020 by EasyFinance.com to Financial Advice 1 0

In a world where phones, computers, and the internet are a core part of our daily lives, there is no questioning the power of digital marketing in engaging clients and prospects. But, as is with everything, this newly discovered space has its downsides. For financial advisors, the biggest damper is the prospect of violating the highly stringent compliance requirements.

The digital revolution seems to have hit financial advisors harder than anyone, as virtually every technological advancement comes with its set of compliance prerequisites. Compliance management is now work in itself with some advisors claiming to spend as much as an entire day in a week sorting out compliance issues.

Time consumption is not the only feature on the flipside of financial advisory. The issue of cybersecurity and ID theft is another major hurdle advisors face. Firms need to adopt the latest and most advanced security systems to keep cyber threats at bay, something that is bound to take a huge toll on their bottom line. Plausibly, startups are the biggest victims of this inevitable requirement, given they have to hire seasoned cybersecurity experts and pay for the digital systems required to keep client data safe. Nonetheless, regulatory compliance remains extremely important and has more positives than negatives in the long run.

Compliance Tips for Financial Advisors

The digital world is such a dynamic space, and keeping up with the changes can be extremely taxing. However, there are things that are considered basic compliance prerequisites that every financial advisor should have a nodding acquaintance with. Here are some of them:

  • Keep complete records: Every financial advisor is required to keep a record of all client communications for five years from the last day of the fiscal year when the post was published. If you keep the records from the actual dates of their publishing, that means you have to do it for more than five years.

The information, whether hard copy or soft copy, should be kept in an organized manner for easier retrieval when needed.

  • Avoid advising: While “advising” may seem like the job advisors are hired to do, there are rules to how one should go about it if they are to avoid compliance violations. For one, you should avoid giving the same piece of advice to several clients without regard to their financial goals, risk tolerance, etc. on an individual level. The specific situations of clients should be considered before preparing and dispensing advice.

  • Be careful on adoption: Passing on financial information to clients is what financial advisors do, but doing it recklessly can come with its compliance risks. Adoption is particularly one area every financial advisor needs to tread with care. Adoption is when you endorse information or advice in posts published by people other than you. It is easy to like, share, or comment on a social media post without evaluating it for compliance first. If a regulator finds the information non-compliant and there is no doubt you were endorsing it, your case will be treated as a violation of compliance.

  • Solicitation is a breach of compliance: In a bid to curb possible exploitation of clients by the significantly more knowledgeable advisors, compliance regulations forbid the use of calls-to-action such as “call us for more information” so the client is left to decide whether they need the “information” without any form of persuasion. This simply means that a post should be accompanied by the opinion of the advisor or nothing at all.

  • Avoid making definite statements: The wording of a social media post or newsletter can make a great difference from a compliance standpoint. For instance, you can put your opinion in a question instead of a statement when targeting mass audiences to avoid looking like you are endorsing a piece of information. The reason for this is that different clients have different needs and are in different financial situations, and chances are your advice won’t work the same way for all of them. By presenting your opinion in the form of a question such as “Company A looks great for a long-term investment, doesn’t it”, you are giving clients the choice to make their own decision while at the same time ensuring they understand what you think about the investment opportunity.

  • Do not dictate: The job of a financial advisor is to advise and not make financial decisions on behalf of their clients. Regardless of how obvious an action, solution, or opportunity looks, it is wise to explain why you consider it a recommendable move instead of endorsing it bluntly.


Financial advisors are bound by hundreds of rules that even the most prudent expert can violate. The most workable way to steering clear of trouble with the authorities is knowing and avoiding common actions that lead to infringement. The above tips can help you navigate financial advisor compliance requirements with ease and save your firm the disruptions that come with infraction-related disputes.

About EasyFinance.com: Jordan MacAvoy is the Vice President of Marketing at Reciprocity Labs and manages the company’s go-to-market strategy and execution. Prior to joining Reciprocity, Mr. MacAvoy served in executive roles at Fundbox, a Forbes Next Billion Dollar Company, and Intuit, via their acquisition of the SaaS marketing and communications solution, Demandforce.

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