Ever since the SEC came out with a risk alert on social media earlier this year, one section, about testimonials, has gotten many advisors fired up. It reads, "Depending on the facts and circumstances, the use of 'social plug-ins' such as the 'like' button could be a testimonial under the Advisers Act."
According to Dan Bernstein, director of professional services at MarketCounsel, "This is a direct attack on likes. You are on notice of what the SEC's opinion is." The alert is not clear on how broad the SEC's stance on social media testimonials is, exactly. For example, it addresses liking, which impacts Facebook, but also could impact, say, retweeting on Twitter, using the +1 button offered by Google, sharing on Google+, liking and sharing on YouTube, pinning on Pinterest, to name a few.
It seems the SEC doesn't understand what the action of liking means in social media. As Stephanie Sammons, founder and CEO of Wired Advisor points out, if the verb were "join" or "follow" instead, would there be any discussion, really?
"Liking a page on a social media site such as Facebook typically means the person likes the content on the page - not necessarily the individual account holder or their company," says Marie Swift, CEO of Impact Communications, which advises many companies that work with planners. Liking some social media pages is usually the only way that the person will be able to receive new posts or "news feeds" from that person or entity - it is like subscribing to a newsletter, according to Swift.
"The risk alert stands on its own and the SEC has no further comment at this time," according to a spokesman for the regulator.
The SEC's stance on social media likes is based on testimonial rules written decades before the Internet revolutionized the way we communicate. In the Internet age, information on almost everything imaginable is available nearly instantly and on multiple platforms. This is the new normal.
On the whole, the web is a hugely positive force - we research online, discover what others think and become more educated consumers. Why should this be different for interactions between financial advisors and their clients or potential clients? Consumers should be able to get advice from an advisor's social networks, and advisors should not be fearful of sharing what they know. In some ways, by trying to protect investors, the SEC is hurting them.
Like it or not, social media is now a part of life across the globe. This summer, one-seventh of the world's population will be on Facebook when the social network is expected to reach 1 billion users. Regulators should acknowledge that there's been a revolution, then take a fresh look at industry regulations and make appropriate revisions. Like it or not, the SEC should catch up with the times and reverse its stance on likes.
Mike Byrnes is the founder of Byrnes Consulting in Boston.