Should Advisors Be Worried About Online Reviews? It Depends.

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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.  

Consumers Love Online Reviews

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.

If Reviews Are Coming, Should Advisors Be Worried?

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.  

Advisors Cannot Prevent Clients From Leaving Reviews

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.

Adopting a “Wait and See” Approach Carries Risks

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.”

Clients Are Overwhelmingly Satisfied, So Encourage Them to Share Their Experiences

Rather than relying on directory sites, advisors can proactively request feedback from all their clients within a closed-loop system. All collected reviews can then be shared on the advisor’s own website, offering several benefits.:

  1. Only verified clients can leave reviews: With an invitation-only approach, advisors can ensure that only their clients are able to leave testimonials.  
  2. Minimize the risk of a few loud voices: Advisors can wait to publish their reviews until they get a minimum number of responses. This could be as few as five to10 reviews, but it ensures that there’s not a single outlier review claiming to represent the typical client experience.  
  3. Compliance has a seat at the table: Because all the reviews can be evaluated by compliance before being published, it’s easy to ensure that anything that meets the definition of “advertising” is indeed compliant.  

Transparency Wins Trust

While advisors may come across reviews that are not fit for publication due to sensitive information, profanity, or unsubstantiated claims, as long as advisors are transparent about their review collection process and clearly communicate their publishing policy, consumers will trust the reviews, and regulators will be satisfied.

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Mind the Recent SEC Risk Alert

It is worth noting that the SEC recently issued a risk alert on the SEC Marketing Rule, suggesting that advisors are beginning to incorporate testimonials into their marketing efforts, and some have been observed doing so in a non-compliant manner. To mitigate compliance risks, advisors should seek partners who take a compliance-first approach to collecting and displaying client testimonials.

Conclusion: Worry Is a Waste of Time

Instead of 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. Online reviews improve advisors’ search engine optimization (SEO) and provide consumers with valuable information to influence their advisor selection process. Rather than worrying, it is time for advisors to take action and get started on leveraging the benefits of online reviews.

Whit Lanier is the founder and CEO of Amplify Reviews – a platform focused on helping financial advisors embrace online reviews on their own terms. His previous start-up was a leading healthcare technology vendor for enabling hospitals to publish verified patient ratings & reviews, which by 2021 had processed over 50 million patient reviews.

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