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Texting Goes Mainstream for Financial Services Firms

January 19, 2018

Everyone from Prudential and Morgan Stanley to New York Life and now Merrill Lynch are allowing advisors to text, adding to the momentum that texting is gaining as an indispensable client communication channel. (See previous coverage on how financial services companies are embracing the texting/SMS channel on the Hearsay blog, InvestmentNews and Financial Advisor.)

The reasons for this accelerated momentum within financial services are many.

Helping Advisors Be More Efficient

Above all else is the client expectation of advisors being responsive on multiple digital channels. A recent study found that 60 percent of millennials prefer mobile apps, texting and email over other communication channels when interacting with businesses. In another survey on the great wealth transfer, 66 percent of adult children leave their parents’ financial advisor because they can’t connect with them.

Merrill Lynch, Morgan Stanley and other wirehouses are not only recognizing this, but making enormous investments in opening texting as a channel as part of larger efforts to fully digitize their sales force.

“This is going to be an incredibly powerful sales productivity tool that is going to help people be more efficient and create deeper engagement earlier on in the process,” said Caroline Feeney, President, Prudential Advisors, during her keynote at our Hearsay Advisor Cloud Summit.

Heightened Scrutiny From Multiple Regulators

FINRA released compliance guidance for texting last April that requires firms to retain records of chat and text communication in the same manner that you would email or written communication. This means that regardless of your company policy, FINRA could request an audit of your advisors’ activities on this channel.

Regulatory agencies have started issuing fines for improper texting. In one case, FINRA found that an advisor who sent business text messages from his personal phone caused the member firm to violate its own recordkeeping policy. Similarly, the SEC found an investment advisor sent false and misleading text messages to induce a client to make a risky transaction. These types of cases appear to be part of a trend of increased scrutiny on text messaging by regulators.

In addition to regulatory fines, financial services companies are facing increased liability for improper texting. According to an August 2017 study by the Institute of Legal Reform, litigation of the Telephone Consumer Protection Act (TCPA), a law that regulates commercial text messaging, has increased by 46 percent since July of 2015; of that number, nearly 36 percent of all TCPA litigation target the financial services industry. The consequences of this can be severe: Liability under the TCPA ranges from $500 to $1,500 per text message, which can quickly add up given the volume of texts and the size of most advisory sales teams.

Compliance-Only Solution is Bare Minimum Approach

The initial approach by financial firms was similar to what they have done with any new communication channel: take an ultra conservative, compliance-control approach that ensures firms can monitor the new channel. There are three problems with this:

  • Compliance-only solutions are based more on compliance needs than advisors, resulting in poor adoption of the technology by the field.
  • Opening up a channel like texting, where expectations regarding response times are shorter versus other types of communication, overwhelms already burdened advisors who don’t have the time to respond to clients across multiple channels.
  • The end result is a frustrated advisor and an even more frustrated client.

The good news is that many companies see these market changes as a positive force. Instead of looking for compliance-only solutions that are built to monitor and control texting, more innovative companies – like Prudential – are seizing the opportunity to empower their advisors to engage on this channel, and capture client mindshare and wallet. For example, advisors can text all of the clients in their book to offer an annual review and financial plan, with one click.

Solutions like Hearsay Messages that are purpose-built for busy financial advisors not only enable compliant texting for them, but also capture the interactions in their customer relationship management (CRM) systems for driving sales insights. (See how Prudential leverages advisor text messaging with Hearsay Messages.)

The results so far are promising. More prospects and clients touched. More meetings confirmed. Fewer no-shows. Higher conversion and better relationships. Fully compliant.

Download our free report: Technology Landscape: 3 Approaches to Advisor-Client Texting Solutions for Financial Services

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

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Tom Westhoff

VP, Sales

Thomas Westhoff is responsible for leading Hearsay's sales, solutions consulting and sales operations teams, and also manages key executive and client relationships.

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