The Power of Online Reviews for Financial Advisors: Building Trust and Attracting Clients

The Power of Online Reviews in the Financial Advisory Industry

The Impact of the New SEC Marketing Rule

The "new" SEC marketing rule has been in effect since November 2022. The updated regulation provides clear guidelines around permissible use of testimonials and endorsements for financial advisors. While the regulation isn't exclusively about online ratings and reviews, to anyone paying attention the opportunity is clear.

The Rise of Online Reviews:

Consumer Preference for Online Reviews across Industries

Testimonials in the form of star ratings accompanied by brief reviews have become the norm for consumers in most industries. From shopping on Amazon to booking accommodations on Airbnb, and even choosing healthcare professionals on hospital websites, online reviews have become indispensable in the decision-making process. In fact, a 2022 BrightLocal survey revealed that 98% of consumers read online reviews about local businesses, and 81% considered reviews important when it came to financial and legal services.

Concerns and Early Adoption Trends for Financial Advisors

Given the rise of reviews in other sectors, financial advisors may have concerns about their potential impact. A parallel can be drawn between the current landscape for financial advisors and the physician landscape in 2014. Initially, few online ratings for physicians existed, and many doctors preferred it that way. But predictably a few patients were self-motivated to share about their experiences with their doctors. Despite seeing hundreds of patients a month, a handful of “loud voices” initially had a disproportionate impact on the online reputation of those physicians. This scenario often led to an inaccurate representation of the overall patient experience, which displeased physicians. As we are now in the early days of reviews for financial advisors, we can expect to see a similar early adoption trend for some advisors, and this uncertainty can cause some concern.

Challenges for Advisors:

Inability to Prevent Client Reviews on External Platforms

Regardless of advisors' plans for testimonials, clients have the freedom to write reviews online. Google Business Profiles and various online directories for financial advisors already exist, actively collecting reviews about advisors. These sites recognize the influence reviews hold over search engines and consumers. If any of these sites can gather a critical mass of advisor reviews, they are likely to be rewarded with significant increases in website traffic. Unfortunately, many of these sites lack mechanisms to ensure that reviewers are genuine clients of the advisors being reviewed.

Risks of a Passive "Wait and See" Approach

Given the landscape described above, there are three primary risks associated with adopting a passive “wait and see” approach towards online reviews:

1. A lone negative review could initially color or define an advisor’s online reputation. If advisors have a concern that a client or former client might have an axe to grind, there is always the remote chance that he or she could air dirty laundry in the form of an online review.
2. Directory sites begin to amass influence. If a directory site is successful at collecting a meaningful number of reviews about a specific advisor (or that advisor’s competitors), that directory site begins to have significant bargaining power with the impacted advisors.
3. Competitors could get a significant head start. Many advisors are getting started with reviews, and in six to 12 months passive advisors may find themselves at a significant disadvantage in the world of online reputation. Imagine a prospect receives referrals for both an advisor and that advisor’s chief competitor. If a prospect sees dozens of positive reviews for the competitor but finds nothing when they look for reviews for the advisor, the "wait and see" advisor will be fighting an uphill battle to win that business. A 2021 Financial Planning Magazine study reiterated this concept, reporting, "nearly half [of respondents] removed advisors from consideration based on what they saw or couldn't find in their digital footprints."

   
   

   Encouraging Proactive Engagement:
   

   Leveraging Closed-Loop Systems for Verified Client Reviews

   Rather than relying on external directory sites, advisors can proactively request feedback from all their clients within a closed-loop system. This approach ensures that only verified clients can leave testimonials, enhancing the credibility and authenticity of the reviews.

   Minimizing Outlier Reviews and Ensuring Compliance

   Advisors can wait to publish their reviews until they have gathered a minimum number of responses. This strategy minimizes the risk of a single outlier review having a disproportionate impact on the overall reputation of the advisor. Additionally, by evaluating all reviews for compliance before publishing, advisors can ensure adherence to regulatory guidelines and maintain the integrity of their marketing efforts.

   Transparency and Trust:

   Navigating Review Publication Challenges

   While advisors may come across reviews that are not fit for publication due to sensitive information, profanity, or unsubstantiated claims, they can establish transparency by clearly communicating their review collection process and publishing policy. By being transparent about the criteria for review publication, advisors can instill trust among consumers and regulators.

   Addressing Compliance Standards and SEC Risk Alerts

   It is important to remain mindful of recent SEC risk alerts, which highlight the need for compliance in incorporating testimonials into marketing efforts. Advisors should seek partners who prioritize compliance in collecting and displaying client testimonials, mitigating compliance risks and ensuring regulatory adherence.

   Taking Action:

   Capturing Positive Client Feedback on Advisor Websites

   Rather than worrying about when online reviews will show up and what sentiments they might contain, advisors can take steps today to ensure that the voices of their happy and satisfied clients are captured and displayed on their own websites in a compliant way. This approach not only mitigates the risk of negative reviews having an outsized impact on advisors' online presence but also delivers a powerful marketing asset.

   Unlocking the Benefits of Online Reviews for Advisors

   Online reviews improve advisors' search engine optimization (SEO) and provide consumers with valuable information to influence their advisor selection process. By actively leveraging the benefits of online reviews, advisors can enhance their online visibility, credibility, and ultimately attract more prospective clients.

   
   

   Embracing the Potential of Online Reviews with Advisor-Registry.org

   Instead of worrying about the arrival and content of online reviews, advisors should take proactive steps to capture and display positive client feedback on their own websites. By embracing the potential of online reviews and leveraging the resources offered by Advisor-Registry.org, financial advisors can enhance their online presence, build trust with prospective clients, and stay ahead in an increasingly digital world.