Texting with clients: How to remain in regulatory compliance

Posted by James Capps, Vice President, TCA Technology on February 20, 2018

Thanks to technology, the way people communicate with each other has changed drastically over the past decade. Of particular note has been the rise in the use of text messaging as a communication medium.

Most people now have text capabilities on their mobile phones and data plans with unlimited texting for a flat rate. When you also consider the immediacy and ease of sending a text message, it’s not surprising that so many people prefer texting to sending emails or placing voice calls.

The benefits of texting with clients

Many independent financial advisors would like to use texting to communicate with their clients — especially younger clients like Millennials for whom texting comes so naturally. Indeed, there are many potential benefits to communicating with clients via text.

For example, some clients’ email inboxes have gotten so cluttered that important messages from their advisors sometimes get lost. Other clients don’t check their email nearly as frequently as they do text messages, which can result in delays in accessing important information from their advisors.

Unfortunately, concerns about industry regulations have made many advisory firms hesitant to allow texting with clients as an official form of communication. This includes the FINRA regulatory notice announced last year (Regulatory Notice 17-18) that all text communications between advisors and clients be secure, recorded and archived for future reference.

New compliance-friendly texting tools becoming available

There’s finally some good news on the client texting front. New tools are being developed that will allow text communications between advisors and clients that meet regulatory requirements — in particular, the archiving of text messages.

For example, Merrill Lynch recently announced that it will be rolling out a new suite of digital client collaboration tools from mobile communications software firm CellTrust that allow compliance-friendly client texting. Advisors who use these tools will be able to access and respond to client texts via an app on their Apple or Android devices or by using their office PCs.

Importantly, all text messages sent and received using the CellTrust suite of collaboration tools will be tracked, logged and archived, as well as time- and date-stamped. This is critical in helping ensure that advisors aren’t out of step with FINRA and other regulations when sending and receiving text messages from clients.

Redtail introduces Speak

A real-time digital communication tool has also now been rolled out by Redtail Technology, which specializes in providing CRM solutions for financial advisors. This tool, which is embedded directly into the Redtail CRM platform, also allows secure text communication between advisors and clients that complies with FINRA and other federal regulations.

In a press release, Redtail Technology’s CEO noted that many advisors today are either texting their clients out of compliance or missing out on the many benefits offered by text communication with clients. Most people today have come to expect real-time communication, he said, including with their financial advisor.

The integration of this multi-user platform — which is called Redtail Speak — with an advisor’s CRM system is one thing that makes it unique. All text messages are automatically archived in the CRM client contact records so they be easily searched for and located. The tool has built-in customizable preferences for things like notifications, messages, invitations and out-of-office replies.

Advisors send text messages through Redtail Speak to their clients’ mobile phones. Clients’ replies then appear in the Speak CRM platform, which contains the entire text conversation.

Limitations of client texting

Keep in mind that texting isn’t an appropriate form of communication for all client interactions. For example, you should not execute any trades on behalf of a client based on instructions sent via a text message — just like you wouldn’t make trades based on instructions sent via email or left in a voice message.

Nor should you use texting to take the place of a face-to-face meeting when a substantive conversation with clients needs to occur. Instead, texting often works best for things like appointment confirmations, reminders that statements or notices are available, and answering simple questions that only require a short reply.

Also be clear with clients about expectations regarding text responses, since many people expect a reply to their text messages within a few minutes. For example, let them know that replies will be slower during non-business hours, or that you won’t be replying to after-hours texts until the next business day.

Start planning now

With FINRA guidance now in place and new technology tools becoming available to permit compliance-approved texting, the time may finally be arriving when independent financial advisors can start using text messages to communicate with clients without fear of regulatory reprisals.

Therefore, you may want to start thinking and planning now for how to incorporate text messages into your communication repertoire.


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