A recent interview on a popular podcast for advisors has sparked a debate over the use of Google reviews in light of the new Securities Exchange Commission rules allowing client testimonials.
The most recent episode of Michael Kitces’ “Financial Advisor Success” podcast featured Tim Goodwin, an advisor and founder of Goodwin Investment Advisory in Woodstock, Ga. The firm has around $275 million in AUM and over 370 client households, according to its Form ADV.
Goodwin discussed how the firm has been improving its rank in online search results and using Google reviews to reach new prospects.
He said the firm proactively asks clients to write Google reviews for his practice. About half have done so, resulting in over 150 testimonials, all five-star reviews, which are touted on the firm’s website.
He said over the past year, the firm had signed 13 new clients who said they found the firm on Google—each brought in just under $1 million in assets on average.
“Google reviews is all you need to convert business,” Goodwin said on the podcast. “You don’t even need the website. You should have the website. But if somebody didn’t have a website, but they claim their Google listing and clients leave Google reviews for them, you’d convert business.”
To comply with the 2021 SEC marketing rule, Goodwin said they ask every client to leave a review.
“We try to be able to show an SEC examiner that we ask everybody,” he said. “We don’t cherry-pick who we ask. We can’t control what reviews are displayed or not. We always try to reply to all those reviews, as well.”
The firm has focused more on Google reviews than referrals. “That’s how folks are making decisions,” he said.
Not everyone agrees the marketing strategy would pass muster with regulators. Brian Thorp, CEO of Wealthtender, a digital compliance firm for RIAs, posted his take on LinkedIn.
“This isn’t a reflection on the caliber of advisory services delivered by this advisor or firm, as clearly, they are serving clients well based on their reviews,” he wrote. But “I can’t fathom how their approach to soliciting and promoting Google reviews will satisfy any SEC examiner evaluating the firm’s compliance with the SEC marketing rule.”
Thorp said the provisions in the SEC’s marketing rules related to “adoption and entanglement” would be violated by these Google reviews and would “trigger requirements for disclosures not found with the reviews published on Google.”
“By linking to their Google Business Profile from the advisory firm homepage and promoting their 5-Star Google Rating, the conversation with an SEC examiner to claim the firm hasn’t adopted or entangled itself with third-party content on Google will fall on deaf ears,” wrote Thorp. “If the advisory firm … maintains their current approach to collecting and promoting reviews and makes it through the end of this year without facing an SEC enforcement action or penalty related to their use of Google reviews, Wealthtender will donate $5,000 to the charity of your choice.”
Goodwin did not respond to a request for comment before publication. A Kitces representative responded that the outspoken financial planning expert was unavailable for comment.
Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services, agreed with Thorp’s hesitancy regarding these reviews.
“I’m not saying it’s impossible, but I haven’t heard any scenario yet that I would feel comfortable ... as being compliant,” he said.
Ressler said one problem with soliciting Google reviews was that once a firm started, there was no way to stop or update the online feedback.
“Let’s say, for example, you’ve got somebody out there who doesn’t like you or is your competition or is just some internet troll,” he said. “And they put something out there that’s a 1-star. … What are you going to do? You’re not allowed to delete the bad ones and keep the good ones. Who wants to take that risk? What happens if that person dies? What if that person goes to another firm? What happens if that person changes and that Google review is no longer accurate? You can’t have something out there that’s obsolete and stale.”
Max Schatzow, co-founder of RIA Lawyers, also agreed with Thorp, especially regarding the SEC’s “adoption and entanglement” clauses in the rules.
“They said, ‘We’re not going to hold you responsible for information on a third-party independent platform. If you do things like share a hyperlink or a testimonial or endorsement through social media, you have either adopted it or become entangled with it,’” he said. “There isn’t clear guidance on where an advisor crosses that line. It’s going to be largely just a facts and circumstances analysis by the SEC staff. If they think he crossed the line, they’re going to tell you. There are potential penalties if you do.”
Schatzow also agreed with Thorp on the lack of acceptable disclosures in the responses to these Google reviews.
“Advisors just aren’t in a position to do that in real time because of the platform,” he said. Regardless, online testimonials do not seem to be an SEC enforcement priority, he wrote in his LinkedIn response, and even if they began a review of this advisor’s practice, it could be more than a year before a conclusion is drawn.
Yet by seeming to sanction the practice, Kitces was potentially luring more advisors into the crosshairs of the SEC, Thorp said. “Success shouldn’t be defined in our industry as firms operating in a manner that’s not compliant, on the premise that the SEC is stretched thin and probably won’t get around to examining them,” Thorp wrote. “This podcast is called the ‘Financial Advisor Success’ podcast, and Michael is among the most prominent financial advisor ‘influencers.’ So many advisory firms could listen to this episode and believe they have carte blanche to do as this firm is doing.”
