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5 Social Media Rules to Keep Advisors Safe

SALT LAKE CITY -- Social media is a fun, efficient way to keep in touch with people from your personal and professional life -- but for advisors, it can also be a great way to get into regulatory trouble.

That was the warning from Barbara Mallon, an attorney at Chicago-based Mallon & Johnson who helps investment advisors, broker-dealers and investment companies maintain regulatory compliance, at the 2014 NAPFA conference in Salt Lake City.

As part of a presentation called "Fifty Ways to Lose Your License," Mallon listed five things that a well-meaning financial planner might do on social media -- or encourage clients to do -- but definitely shouldn't. Here's her list of social media dos and don'ts:

1. Don't encourage clients to click "like" on your firm's Facebook page. Instead, she suggested, offer "follow" as an option. Clicking "like" could constitute an endorsement of your firm, Mallon says, and those "likes" will get noticed if your firm is audited.

2. Don't connect on LinkedIn with clients. The actual connection isn't a problem, Mallon says, but client recommendations are endorsements, which aren't allowed. Another option is to connect with clients on LinkedIn but disallow endorsements from those connections.

3. If you have employees, monitor their LinkedIn use. Either implement a company-wide policy that prohibits LinkedIn posts or ask workers for their user names and passwords for LinkedIn and other professional social media sites. As an employer, you have a legal right to this information for professional sites (although not for personal social media accounts).

4. Ask employees not to post about their jobs on any social media. They can mention their title and place of employment, but that should be it. You don't want workers trashing your firm, of course -- but the bigger problem is that they may make technically inaccurate statements on subjects where compliance matters. An employee could also accidentally post information about a client that your firm is duty-bound to keep confidential.

5. Be current and absolutely accurate in what you say. If your firm has reached $997,983 in assets under management, don't post that you have cleared the $1 million mark. Likewise, maintain your clients' privacy.

It's not easy to apply the older rules and regulations that govern this area to newer social media tools, but planners who take the trouble will have fewer things to worry about.

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