Adapting advisers’ marketing to a new era

To those old enough to remember when communications concerning investments and personal finance were expected to be serious, the notion that enormous numbers of people would seek out humorous, fast-paced 60-second videos on the subjects seems implausible. Yet as InvestmentNews Nicole Casperson reported recently, TikTok videos tagged #personalfinance have attracted 3.5 billion views from the more than 1 billion active users of the site. More people are interested in TikToks personal finance content than its videos about cooking or health.

Given this enormous public demand from tech-savvy millennials and Gen Z, as well as boomers, it seems inevitable that advisers and their firms will want to use bite-sized videos to communicate as well as whatever new mobile apps appear in the future to capture the publics attention.

The Securities and Exchange Commissions new rules for registered investment advisers concerning advertising and the commissions shift to principles-based provisions can accommodate the continual evolution and interplay of technology and advice.

Still, the new regulations and the changing technological and media landscape raise many vexing and interrelated questions for advisers, their firms and the investing public, as well as for regulators and legislators. For example:

How to bridge the regulatory divide? The existence of two regulatory realms for those broadly defined as financial advisers creates confusion. While both sides continue to wage lobbying wars over whether its possible to bring advisers who sell products and advisers who dont under one regulatory umbrella, the RIA side is now freer to communicate, while the broker-dealer side isnt. If more reps drop their licenses, will the Financial Industry Regulatory Authority Inc. be pressured into changing its advertising and communication rules? That begs the next question.

Do broker-dealers want their registered reps to become media free agents? Whether their registered reps are employees or regulated independent contractors, broker-dealers are responsible for regulating their reps communications. They also bear the financial responsibility for their representatives actions. What if someone were to watch a reps TikTok video, open an account to trade on what seems to be a recommendation and then lose money? On the other hand, if firms prohibit their reps from communicating openly via social media, or control the communications so as to make them seem inauthentic, how will registered reps market themselves? 

Should investor protection change? Spawned by the stock market crash of 1929 and subsequent congressional hearings revealing how Wall Street contributed to the publics speculative frenzy, our current securities regulatory regime is intended to promote disclosure and prudence. How should the new medias spicy stew of financial information, advice and entertainment be regulated? Should it? The recent social-media-fueled frenzy involving GameStop trading underscores the regulatory challenge. A wrongful death lawsuit filed by the parents of a young Robinhood client who committed suicide because he thought he owed $730,000 due to options-trading losses shows the human cost.

Clearly, for everyone touched by the financial advice business, the brave new media world is uncharted territory.

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