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Understanding Regulatory Guidance and the Real Risks Around Initiating Client Texting

In a highly regulated space like financial services, it makes sense that there’s still confusion surrounding the legal obligations for firms engaging in one-to-one client texting. Many firms err on the side of caution, choosing an unnecessary opt-in policy. But when it comes to texting with clients, it’s imperative to make it easy for advisors and agents to adopt your compliant texting solution. Anything that stands in the way of that actually puts your firm at risk.

One-to-one advisor-client texting: No opt-in required

Compliance officers, we want to put your minds at ease: One-to-one text messages sent individually to a client by an advisor do not require prior client consent. The only legal obligation firms have is to monitor, supervise, and retain a record of the conversation.
Why is it important for you to know this? We’ve seen clients implement onerous opt-in policies to ‘play it safe’ with the undesired effect of lower texting technology/program adoption and lower customer opt-in rates than are necessary. Many advisors find it awkward to ask for consent to communicate with a client they’ve had a relationship with for many years. Since advisors are also set on using the channel their customers want to use – texting – they’ll use their personal mobile devices built-in texting features with no guardrails (i.e., no compliance oversight), putting themselves and their firms at risk.
The fact is, one-to-one communications for relationship management are different from mass sales and advertising messages. Since the main purpose of these types of communications is not advertising or solicitation but the facilitation of meetings and sharing information – just like an advisor would do from their built-in smartphone texting capability – they don’t carry the same compliance risks.
For lead follow-up and conversion it is absolutely acceptable for an advisor to reach out with a first unsolicited message to try to setup an initial client meeting. The texting technology you choose and your texting program, however, should include best practices such as providing clients an easy method to opt-out of further communications or the ability to proactively block and flag messages that don’t align with company policy around advertising, solicitation or brand representation.
So the real risk involved with initiating compliant texting program is not ensuring that prior consent is provided but that the necessary compliance and archiving controls are in place and that advisors feel comfortable using the tools to engage in conversations with clients.
That said, we’ve found that many enterprise clients still want prior consent controls in place so we’ve developed methods that improve the consumer and advisor experience while reducing common perceived risks.

Methods to Initiate Compliant Texting

Hearsay has designed a variety of ways to initiate compliant texting to suit the specific requirements of different organizations. Some of the options below do require explicit consent from the consumer prior to initiating a conversation even though this is not a legal requirement for one-to-one messaging.

Consent Notice A one-time text message triggered by the Hearsay Relate user to notify the contact about who the sender is, who they work for, and how to get more information or opt-out of the conversation.  Once this initial text is sent, the Relate User is free to start the conversation and does not need to wait for a response.
Whitelist A list of phone numbers that a Relate user will not need to ask for permission from. For example, if text message communication consent is part of the standard client agreement.
Advisor Confirmation In-app dialog box that prompts the Relate user to confirm that they have permission to text a client. No action is required by the client.
Opt-in (via Text) Text message requesting consent that is sent out by a Relate user prior to initiating the first conversation with a client. The conversation is only unlocked once the client texts back YES. This opt-in message can be sent out multiple times.
NEW: Personalized Opt-in – now advisors and agents can initiate new conversations with custom messages that deliver increased client opt-in rates.
Email Email sent out by a Relate user to a client’s email address that prompts a client to give permission for communication via text message.
Webform A webform is sent to the client asking them to give permission for receiving communication via text message. This can be completed as part of the new client on-boarding process.

At Hearsay, we understand that every compliance team’s needs vary. It is our job as a financial services technology leader to interpret the regulatory landscape into highly usable products that ultimately drive results across the organization. We will continue to partner with clients to find the right balance to empower their advisors and agents with digital tools that build lasting client relationships while safeguarding them and the firms they work for from compliance risk.
If you have questions about any of this or would like to reconfigure your current program, please contact your Hearsay customer service manager.

Christopher Fernandes

Christopher Fernandes joined Hearsay in 2015 and is responsible for the company’s legal affairs including commercial, compliance, regulatory and privacy matters. Chris earned his J.D. from Santa Clara University and B.A. from the University of Chicago.

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