These cases may have involved details that prospective clients could miss. For example, in September of 2024, the SEC announced a $88 million fine against 12 companies for recordkeeping violations. To those with less financial literacy, recordkeeping failures could sound like cooking the books.
Bernie Madoff may have faded from memory but that doesn't mean prospective clients aren't worried about what they hear on the news. News about improper acts by financial advisors may have some potential clients wary. Advisors may want to consider how to respond to these hits to the industry's reputation when planning marketing strategies. Here are three ideas.
First, know the problem: Many public relations specialists suggest monitoring the news for potential bad press: either your own or of the industry.[1] In 2024, In 2024, the cases before the SEC and concerned internal systems and recordkeeping mistakes. These cases may have involved details that prospective clients could miss. For example, in September of 2024, the SEC announced a $88 million fine against 12 companies for recordkeeping violations. To those with less financial literacy, recordkeeping failures could sound like cooking the books. Instead, the failures, as alleged by the SEC involved “widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications in violation of recordkeeping provisions of the federal securities laws.”[2]
FINRA fines may also be worth an advisor’s attention. That includes the fine levied against Pershing LLC for activities related to unreported fractional share trades over nearly 30 years. FINRA’s report on their activities stated: “The findings stated that during a sample period of 11 years, the firm failed to report over five million fractional share trades with customers to the FNTRF or ORF. As a result, the firm did not pay the regulatory transaction fees associated with these trades.”[3] At issue, as with many FINRA actions, was a lack of internal supervisory controls.
Other fines include Morgan Stanley Smith Barney LLC, where FINRA found that firm had provided “non-institutional customers with confirmations that either inaccurately disclosed or did not disclose required mark-up or mark-down information for transactions involving municipal securities or corporate debt securities.” [4] Even though Morgan Stanley self-reported the issue, FINRA found that its internal controls failed or were absent.
Second, consider a response: In some circumstances, a company can benefit from providing a response to bad public relations. “The good news about this bad news is you have a chance to address it head-on.”[5] Some PR experts suggest, when possible, to respond quickly to clarify confusing elements or correct false information and stick to the facts. Those experts also suggest using that response to share positive aspects of your brand. Any response should stay positive and transparent.[6]
Third, audit your assets like an alien: Your marketing materials may seem warm and friendly with a clear theme of competence to your team. But that doesn’t mean they read that way to your prospective clients. The best way to evaluate your marketing materials so that they don’t accidentally seem similar to a swindle or a recent foul by another player in the industry is to consider them objectively. Using the view of an outsider to the financial industry to audit your assets can help identify potential pitfalls. An editing or copywriting service outside of your firm could help as well. An internal process can also be used. For example, you might has “how could this be misunderstood?” when reviewing a marketing newsletter. Any potential areas can be corrected before it is distributed.
Lastly, scams specific to seniors are still in abundance. Unfortunately, they still financial abuse by family members. Family members are responsible for almost 90% of elder financial crimes. Advisors may want to assess their internal systems to track potential elder financial abuse.
[1] https://aventigroup.com/blog/10-tips-for-handling-bad-press-on-social-media
[2] https://www.sec.gov/newsroom/press-releases/2024-144
[3] https://www.finra.org/sites/default/files/2024-10/Oct_2024_Disciplinary_Actions.pdf
[4] https://www.finra.org/sites/default/files/2024-10/Oct_2024_Disciplinary_Actions.pdf
[5] https://www.newswire.com/blog/how-to-handle-negative-publicity-in-a-positive-manner
[6] https://redbanyan.com/how-to-handle-negative-press-or-negative-public-relations
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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