How to Avoid 5 Mistakes With Client Testimonials

Over the past year, I’ve spoken to dozens of firms and hundreds of chief marketing officers, chief compliance officers and financial advisors about their practices related to client testimonials. I’ve also interviewed current and former regulators, compliance attorneys and marketing leaders to understand which elements have resulted in the most scrutiny during examinations by the Securities and Exchange Commission.

Testimonials make it easier for prospects to discover and trust a firm. Given the relatively limited adoption across the wealth management industry, they also represent a cost-efficient opportunity to stand out from the competition.

Here are the five most common mistakes that firms make when it comes to testimonials.

1. Not building a process first.

The SEC Marketing Rule may have opened the door for advisers to incorporate testimonials, but it isn’t a free-for-all. Effective and compliant testimonials require coordination between advisors, marketers and compliance officers. 

Before you start sharing client testimonials, make sure you:

• Update your Form ADV Part 1 to reflect that your firm is using testimonials.
• Map out the roles and responsibilities when it comes to testimonials. Be sure you can answer the following questions:
  1. Who will request the client feedback, what will the timing of the request be and how will you ensure that the process isn’t biased? 
  2.  How will you obtain and store clients’ permission to use their testimonials in marketing? 
  3.  Once testimonials have been received, how will you determine which ones to display and which ones might be inappropriate? 
  4.  How will that content ultimately be approved? 
  5. And finally, how will you document the entire process to demonstrate compliance in the event of an examination?
• Update your policies and procedures to codify the elements above and ensure that your team has been trained on them.

2. Not making feedback part of the regular client experience.

Given the high cost of client acquisition and the even higher potential lifetime value, it’s always surprising to see how few firms have implemented tools to systematically measure client sentiment. 

Even if you don’t plan to incorporate testimonials in marketing, a culture of feedback helps firms identify referral opportunities and spot potential churn before it’s too late.

If you are already engaging with clients about their authentic experience with your firm, it will be a much more natural conversation when you ask them for a testimonial.

3. Not using them effectively.

I had a conversation with an advisor late last year who asserted that, despite having a measurable effect on website traffic and revenue in every other industry, “testimonials don’t work in wealth management.” When I asked why he felt this way, he said it’s because he placed testimonials on his website six months ago (he had two sitting at the very bottom of his site) and had yet to see an increase in new clients.