Tips to Get Compelling Client Testimonials Under the SEC Ad Rule

by Mark Stewart

Updated September 7, 2023, at 12:06 PM

Pop quiz: What percentage of consumers respect online testimonials as much as personal recommendations from their friends or family?

That answer is 88%.1

And what percentage of consumers act only after reading a positive review?

That would be a stunning 72%.2

While these percentages may be eye-catching, what should stop you in your tracks is when you think about the opportunities that may lie ahead for your business.

The new SEC advertising rule3 that went into effect in May 2021 allows for endorsements and testimonials (with some restrictions) for RIAs and other financial professionals subject to the ruling, updating an outdated law that can now help highlight a firm’s prowess and its relationships. Those subject to the changes have 18 months from the effective date to bring their marketing practices into compliance.

Let’s review some of the essential changes to the SEC ad rule related to client testimonials before we dive into the strategies and tactics to develop testimonials that bring in new business.

What’s in the Updated SEC Ad Rule?

The new rules from the SEC modernize and amend the Investment Advisers Act of 1940 to “create a merged rule that will replace both the current advertising and cash solicitation rules.”

The SEC has said that because of the continual evolution of technology, advertising, and advice, the old rules had to be replaced to “improve the quality of information available to investors,” according to former SEC Chairman Jay Clayton.

Combing through the SEC’s Investment Adviser Marketing final rule, there are four main areas to focus on when it comes to client testimonials and endorsements:

  1. The definition of an “advertisement.”
  2. General violations of the new rule.
  3. The conditions in which to use endorsements or testimonials.
  4. Disclosures to be presented, both clearly and in fine print.

What the SEC Defines as an Advertisement

Here are the two definitions the new SEC rule considers as an “advertisement” for investment advisers. Be aware that these descriptions may be more encompassing than what some may traditionally think of as an advertisement:

  1. Any direct or indirect communication an adviser makes to more than one person (or, if the communication includes hypothetical performance, one or more persons) that also offers the investment advisory services offered concerning securities to prospective new clients or that includes new investment advisory services with regards to securities with existing clients.
  2. Any endorsement or testimonial from a client or other person that directly recommends an investment adviser, while providing direct or indirect compensation.

Violations of the New SEC Ad Rule

This list probably isn’t fully encompassing, so it’s essential to do your due diligence with all marketing communications. Even better, have a compliance officer review each advertisement to ensure they comport with all necessary regulations. However, these seven violations are discussed in the new rule, and they’re ones you should avoid at all costs:

An investment adviser subject to SEC rules may not:

  1. Provide any false statements of material facts or omit to state a material fact required to make a statement in light of the circumstances under which the statement was made and may not be misleading.
  2. Include any material statements of fact that he or she doesn’t have a “reasonable basis” for believing it can validate upon demand from the SEC.
  3. Comprise and distribute information reasonably likely to cause an untrue or misleading implication or an inference to be drawn regarding a material fact that relates to the investment adviser.
  4. Display or discuss any potential benefits that clients or investors connected with or resulting from the investment adviser or their services without giving balanced and fair treatment of all material risks or limitations associated with those potential benefits.
  5. Refer to specific investment advice provided by the adviser which the advice itself isn’t presented in a fair and balanced manner.
  6. Include or exclude any performance results, or offer performance time periods in a manner that isn’t fair and balanced.
  7. Present anything else that’s materially misleading.

Circumstances to Know Before Using Testimonials & Endorsements

It’s everyone’s favorite part of compliance: the disclosures. All joking aside, five (yes, five) required disclosures will be needed to be fully compliant with the updated SEC ad rule. These disclosures can be broken down between two camps: three must be disclosed “clearly and prominently,” while the other two are additional “required” disclosures. Here’s what the disclosures are or what they must state:

Clear & Prominent Disclosures

  1. The first disclosure must state if a current client gave the testimonial or endorsement or if it was by a person other than a current client.
  2. Secondly, it must clearly state whether cash or non-cash compensation was provided for the testimonial or endorsement.
  3. The last disclosure that needs to be clear and prominent is a brief statement describing any material conflicts of interest on the part of the promoter due to their relationship with the adviser.

Other Required Disclosures

  1. You also must disclose the material terms of the compensation arrangement and include a description of the compensation provided or is to be provided (directly or indirectly) to the promoter for the endorsement or testimonial.
  2. You almost must provide a description of any and all material conflicts of interest of the promoter that results from their relationship with you and any compensation agreement that was made.

Related: The Era of Best Interest Standards

The Influence of Client Testimonials

72% of consumers3 say positive testimonials increase their trust in a business. And in this industry, trust is everything when you’re talking about handling finances. Not only that but it’s been estimated that using testimonials regularly can generate up to 62% more revenue4 for your firm.

If you’re keeping track, client testimonials account for more trust, more action, and more revenue for businesses. In a nutshell, that’s the why behind client testimonials. But let’s dive in further.

In a sense, client testimonials work like referrals for your business. You can talk up your firm until your face turns blue, but with cautious prospects, that doesn’t always hold a lot of power. People generally trust other people more than businesses. Including testimonials on your website, social pages, and brochures can do the heavy lifting that convinces someone to work with you.

Not only that, but a good testimonial also highlights the benefits of the services you offer and the value someone will get working with you. Unlike traditional advertising, testimonials can be effective because they can create deep, emotional connections between a brand and a person.

Think of it like this: At the end of the day, people want to know that you can address their needs and wants and that you can do so effectively. Emotions drive that—and testimonials offer cognitive assurance that you’ll meet their needs.

What Makes a Great Client Testimonial?

There’s no one-size-fits-all client testimonial. Plenty of traits can blend to build a compelling testimonial. However, we often can find testimonials out there that don’t sit right with us. We perceive them as too flashy. Non-convincing. Even fake.

But if we follow human psychology, we find three “core elements” of testimonials that can command attention from readers. That makes them stop and consider, and maybe even act right on the spot.

When you start implementing testimonials in your marketing strategy, consider including these elements for a hyper-effective client testimonial:

  1. Before: Have the client share their hesitations prior to working with you. These may include the doubts, difficulties, or negative emotions they felt before utilizing your services.
  2. After: Then, ask that they share the “after stage” that resulted in them coming on board with your firm. They might include how discovering your firm has eliminated the negative feelings they were experiencing before.
  3. The experience: Have your clients share what they felt after they have used your services for a while. For example, how it made them more confident in their finances, more educated about the ins and outs of building wealth, and even happier or more relaxed overall.

To push your testimonial’s effectiveness even further after using the “before-after-experience” strategy, here are a few more thoughts to keep in mind:

  • Make it natural, use conversational and everyday language that doesn’t sound overbearing or forced
  • Keep it short and punchy since most attention spans last only seconds online, so your testimonial needs to grab attention fast
  • Have a personal focus—whether it’s a video testimonial or a text-only one, including a photo or name (with written consent) to the testimonial will add credibility and increase the connection readers will feel with your testimonial
  • Lastly, make sure the testimonial is original and uses your client’s wording (or at least they agree to the wording)

Related: Section 7702 Changes: The Saga Continues

Quick Tips When Asking for Client Testimonials

So you have an understanding of the updated SEC rules and the ingredients needed for a testimonial that works…but how do you go about asking for one? In reality, there’s no best answer. It often will depend on you, your clients, and your firm’s relationships to develop the best way to navigate this new territory.

With that in mind, let’s explore a few possible ways you can ask your clients for testimonials:

  1. Ease the pressure by using a short form or questionnaire. Sometimes it can feel awkward or like you’re burdening a client when asking for a testimonial. Instead, you can create a short online form or questionnaire that they can fill out independently. Some question topics to consider could be what specific services they enjoy from you, how they’ve benefitted working with you, or what obstacles they’ve overcome since working with you. Always be sure to ask for permission to use the comments on your marketing materials, too.
  2. Utilize email or text messaging. Putting clients on the spot for a testimonial in-person can create anxiety for both you and the client. If it’s more comfortable, remember that it’s totally acceptable to reach out via email or text to ask for testimonials. Your clients might prefer it that way.
  3. Ask after you’ve improved service or went above and beyond. Clients are more likely to give a glowing testimonial after you’ve improved their lives in some way. If you recently found a new product that’s helped them reach a goal or worked overtime all week addressing a pressing issue, they’ll be more likely to lend you a helping hand as well.
  4. Compliment before the request. From the client’s perspective, it’s nice for them to know what led you to choose them for a testimonial. To get a better chance at them saying “yes,” give them a reason or two why you chose to ask them. For example, you might emphasize the pleasurable experience you’ve had working with them so far, and if they’re like most people, they’ll feel flattered and reciprocate the kind words back to you.

Going Forward with Testimonials and the SEC Ad Rule

Client testimonials can play an influential role in your overall marketing strategy.

Whether the testimonials are videos or text, you can place them on your website’s homepage. Or, you can create an entire testimonial page on your website if you prefer. You could also place them in a slider or pop-up on your website, or near any calls-to-action for added effectiveness. Sharing them across your firm’s social media pages or your personal LinkedIn profile is a great idea, too.

Just remember, this post only explains a general overview of the new rules and should only be taken as general education. The complete ad rule is lengthy and arduous, with many intricacies that can trip up your initial testimonial plans. Because of this, we urge you to consult with your compliance personnel to make sure you’ll be using and sharing the testimonials within the boundaries of the new SEC ad rule if you choose to implement this strategy.

It’s a whole new world, but one that you need to tread carefully in to make your client testimonials work well for your firm. Good luck out there!

Keep Reading: A Deep Dive into FILA Mechanics

call to action to express interest in Elevate advisor marketing program
financial independence group logo

For Internal or Financial Professional Use Only – Not for Customer Use

For more information on the new SEC advertising rule, please visit

Sources required by compliance:

You May Also Like