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IBDs in slow-footed race to let advisors text clients

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Independent broker-dealers are slowly but surely resolving a longtime gripe among financial advisors and their clients: sending text messages.

Firms largely ban texting, even for logistical purposes, amid guidance from FINRA that all business communications must be “retained, retrievable and supervised.” Securities America this week became the first of the top 10 largest IBDs to announce a program allowing its advisors to text clients.

The launch of the firm’s app arrives shortly after Merrill Lynch recently unveiled its software allowing for texts. Morgan Stanley and Edward Jones have also added the capability.

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More than 75% of Americans own smartphones and 97% of smartphone owners send texts, according to the Pew Research Center, so firms are playing catch-up.

Cambridge Investment Research and Commonwealth Financial Network are working on texting tools of their own, but vendors say the messages pose difficult compliance and technology issues. Securities America developed its texting app over the past two years with CellTrust, the same firm as Merrill.

“The reason it took us a couple of years is just to be able to be compliant with those regulations,” says Greg Smith, Securities America’s senior vice president for supervision. “There just wasn’t a solution out there for the independent channel.”

The firm has told its 2,200 advisors that they still can’t discuss securities trades via text since “safety and security of data is paramount,” Smith adds. Advisors can download the app, CellTrust SL2, on any device and set up automated messages in addition to the everyday chatting and meeting arrangements.

Telling clients to “take it to email” when they try to send a simple text about the next visit to the office usually doesn’t sit well with them, says Joe Heider, a Royal Alliance Associates advisor and the president of Cleveland-based Cirrus Wealth Management.

The difficulty displays “how far regulations are falling behind technology,” he says, noting that phone calls involving such discussions aren’t recorded and archived.

Allowing texting with clients would make advisors’ jobs easier, adds Sarah Carlson, an LPL Financial advisor and the founder of Fulcrum Financial Group in Spokane, Washington.

“Texting is how moms talk to their kids and colleagues update each other,” she said in a text message. “It’s communication of convenience without any big login.”

Firms have “increasingly raised new questions” with FINRA about text messages and social media, according to April 2017 guidance from the regulator. Earlier regulatory notices dating as far back as 2010 warned members that FINRA’s recordkeeping requirements apply to texts about “business as such.”

Member firms must also train advisors and other staff on what constitutes business communication. As a result of the complexity involved with the undertaking, Securities America only found four or five vendors who could even offer client texting software, Smith says.

CellTrust counts 78 financial services companies worldwide as its texting clients. Another firm, Redtail Technology, launched a text program in its client relationship management system in October and has dozens of offices in the “early adoption phase,” according to David Mehlhorn, its director of sales.

Most IBDs appear to be way behind that stage, however. Out of the nine other top 10 IBDs by revenue, only AXA Advisors, Cambridge and Commonwealth provided responses to inquiries Thursday about whether the firms have client texting software in operation.

“We have an advisor-client texting program in development that will be available from within the existing Commonwealth mobile app alongside our current WhatsApp-style secured messaging functionality,” Commonwealth spokeswoman Jacquelyn Marchand said in an email.

The software, she adds, will integrate into the firm’s CRM “so advisors can see all communications with a client in one location.”

AXA is always looking at new tools to make connecting with clients easier, according to a spokeswoman. Cambridge executives, alongside the firm’s New Century Council for advisors, are considering several options around text messages and other digital communication, says spokeswoman Cindy Schaus.

“We recognize the rapid pace of innovation and integration across digital communications and providers, and our intent over the short term is to be mindful of future needs while selecting the best solution and tools for independent advisors to use with their clients,” Schaus said in an email.

Firms’ inability to put texting software in place stems from the technical difficulties of providing it, according to CellTrust CEO Sean Moshir.

“It requires a lot of telecommunication infrastructure,” he said in an email, noting “highly scalable enterprise back-end services,” regulatory expertise and archiving capabilities as among the necessary components. “Many organizations are not even aware such technology exists.”

Another difficulty involves advisors “recognizing and accepting that, at this time, texting on the advisor end cannot be carried out from their native texting app,” says Mehlhorn. The firm therefore designed its texting software with an eye toward making it as easy as normal texting, he wrote in an email.

Robo advisors who have begun offering text-only advisors present a potential new direction for IBDs, once they do set up client texting for their advisors. The firms could use such technology to court less affluent and younger clients, Mehlhorn says, noting Redtail’s product allows for text-only advice.

“The applications for texting clients and prospects are massive,” he says. “Text messaging is not only more effective in getting the quickest responses, but it is also far less disruptive than trying to get a client on the phone.”

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