State regulators are weighing whether to bring their rules for investment advisor marketing into alignment with federal standards. The North American Securities Administrators Association (NASAA) has floated a proposal that would allow advisors registered at the state level to use client testimonials, third-party ratings, and endorsements in their promotional materials. For wealth managers and RIAs, the implications of this move are significant: greater marketing flexibility, reduced compliance friction, and a more level playing field across jurisdictions. Yet, as with most regulatory proposals, the outcome will hinge on how state governments choose to respond.
Why This Matters for Advisors
Marketing rules have long been a thorny issue for investment advisors. Federally registered advisors gained new freedoms when the Securities and Exchange Commission (SEC) implemented its updated Marketing Rule in December 2020. That rule modernized decades-old restrictions, allowing advisors to use testimonials and endorsements, provided they comply with certain disclosure and oversight requirements.
For advisors who fall under state oversight—typically smaller RIAs with less than $100 million in assets under management—state rules often remained far more restrictive. In many jurisdictions, the use of client testimonials or ratings has been strictly prohibited, limiting the tools available to these firms to build credibility and differentiate themselves in a competitive marketplace.
The NASAA proposal represents an attempt to close that gap. By harmonizing state rules with the SEC’s framework, the initiative would extend the same marketing opportunities to state-registered advisors that larger federally registered firms already enjoy.
The Proposal at a Glance
NASAA’s amendments are designed to bring consistency to how advisors may market their services. Specifically, the proposed model rule would:
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Permit the use of client testimonials, endorsements, and third-party ratings.
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Establish guardrails to ensure compliance, including clear disclosure requirements.
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Reduce discrepancies between state and federal regulations, helping firms that operate in multiple jurisdictions avoid conflicting obligations.
NASAA opened the proposal to public comment through August 28. While it received only six responses, most supported the initiative. That limited but positive feedback suggests that many industry stakeholders see harmonization as a win for both advisors and investors.
Support from Key Industry Groups
Several influential organizations in the advisory profession weighed in. The National Association of Personal Financial Advisors (NAPFA), the CFP Board, and the Financial Planning Association (FPA) submitted a joint letter endorsing NASAA’s direction.
Their message was clear: “The adoption of the SEC’s modernized framework for marketing and advertising by the states will simplify and harmonize compliance requirements for investment advisors, ease regulatory burdens, create business opportunities, and minimize confusion for firms and investors.”
The groups highlighted a particular pain point for smaller advisory firms. State-registered advisors often operate with lean compliance budgets and fewer resources than larger firms. By aligning state rules with federal ones, these firms could benefit from a streamlined compliance framework, freeing up resources to focus on client service and growth.
They also raised concerns about competitive fairness. States that maintain outdated restrictions leave their advisors at a disadvantage compared to peers in other states or federally registered firms. For example, a small RIA in one state may be prohibited from displaying client reviews on its website, while a larger SEC-registered competitor—or even a neighboring state-registered advisor—can fully leverage those same testimonials to attract prospects.
The Path Ahead: A Model Rule, Not a Mandate
It’s important to note that NASAA’s proposal is a model rule, not a binding regulation. Even if NASAA adopts the revisions, each state would need to decide whether to implement the changes through legislation or regulation.
A NASAA spokesperson clarified the process: a committee will now review the submitted comment letters and may revise the proposal. However, it is too early to predict when—or if—a final model rule will emerge. And even then, adoption will depend on decisions made state by state.
For advisors, that means uncertainty remains. Depending on where they are registered, firms may or may not gain the new marketing freedoms anytime soon. The prospect of patchwork implementation raises the possibility that some advisors will continue to face stricter limitations than others, at least in the near term.
Voices from the Marketplace
One enthusiastic supporter of the proposal is Wealthtender, a firm that operates an SEC-compliant directory of financial advisors and provides marketing tools, including advisor reviews. Wealthtender argues that testimonials and ratings are not only valuable marketing tools but also a way to enhance transparency for consumers seeking an advisor.
From their perspective, the inconsistency between state and federal rules creates unnecessary obstacles. According to Wealthtender, the lack of harmonization undermines the ability of advisors—particularly smaller firms—to compete on equal footing.
The firm recently surveyed several states that still prohibit advisors from posting client reviews. Most declined to comment on the NASAA proposal, instead noting they would review it once finalized. One state, Tennessee, indicated it had no objection to the amendments but did not plan to adopt them, highlighting the uncertain path to broad implementation.
Strategic Considerations for Advisors
For wealth managers and RIAs, the potential alignment of state and federal rules raises several important strategic questions.
1. Marketing Opportunity
The ability to use testimonials and ratings is not just about marketing—it’s about building trust. Clients increasingly rely on peer reviews and third-party validation in making decisions about financial services. If states adopt the proposal, advisors will have more tools to showcase the value they deliver, whether through online directories, Google reviews, or curated testimonials on their own websites.
2. Compliance Readiness
Even if states move toward harmonization, advisors must recognize that the SEC’s Marketing Rule comes with detailed compliance requirements. Disclosures must be clear and prominent, compensation for endorsements must be disclosed, and firms must have policies and procedures in place to oversee these activities. Advisors that want to leverage testimonials should be proactive in building or updating compliance frameworks now, rather than waiting for their state to act.
3. Competitive Positioning
For smaller firms especially, the ability to use testimonials could level the marketing playing field. Larger firms often have brand recognition and marketing budgets that small RIAs can’t match. Client endorsements, however, can provide powerful social proof that helps boutique firms compete effectively.
4. State-by-State Fragmentation
Advisors registered in multiple states—or those considering expansion—must be mindful of ongoing regulatory differences. Until harmonization is widespread, firms may face a situation where they can use testimonials in one jurisdiction but not another. This patchwork reality requires careful planning to avoid compliance missteps.
Broader Implications for the Industry
The NASAA proposal underscores a broader trend: the gradual modernization of advisor regulation to reflect changing investor expectations and digital marketing realities. Investors today expect transparency, accessibility, and third-party validation. Outdated prohibitions on testimonials and endorsements run counter to these expectations.
For the advisory profession, harmonization has the potential to reduce friction and allow advisors to focus more on delivering value. Yet, as always in financial services, the details matter. Advisors must balance opportunity with responsibility, ensuring that marketing remains accurate, transparent, and in the client’s best interest.
What to Watch Next
As NASAA reviews the comment letters and considers revisions, advisors should track the following developments:
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Timeline for a final model rule: How quickly NASAA moves could signal how urgent the association sees harmonization.
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State adoption patterns: Early adopters may create pressure on other states to follow suit, but resistance from states like Tennessee could slow momentum.
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Industry guidance: Organizations like NAPFA, FPA, and the CFP Board will likely continue to push for alignment, providing resources and advocacy for advisors.
Preparing for Change
Even amid uncertainty, advisors can take steps now to prepare. Firms might consider:
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Reviewing the SEC Marketing Rule in detail to understand disclosure and oversight obligations.
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Developing compliance policies for testimonials, including recordkeeping, disclosure templates, and monitoring procedures.
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Thinking strategically about how to integrate testimonials into broader marketing plans, such as websites, social media, or third-party platforms.
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Educating clients about the opportunity to share their experiences in a compliant way once state rules permit it.
Conclusion
The NASAA proposal to align state rules with the SEC’s Marketing Rule could mark a pivotal shift for state-registered advisors. By opening the door to testimonials, endorsements, and ratings, the initiative would expand marketing opportunities, reduce compliance burdens, and address competitive imbalances.
Yet the outcome remains uncertain. States retain the authority to adopt—or reject—the model rule, leaving advisors to navigate a potentially fragmented regulatory environment. For wealth advisors and RIAs, the key takeaway is clear: prepare now for the possibility of expanded marketing flexibility, but remain vigilant in monitoring state-level developments.
In a profession built on trust, testimonials and endorsements can serve as powerful tools to demonstrate credibility. If harmonization becomes reality, advisors who embrace these tools thoughtfully and compliantly may find themselves better positioned to connect with clients, grow their practices, and thrive in an increasingly competitive marketplace.
