This study aims to investigate how investment advisers and firms utilize marketing activities to advertise their service offerings to the public under the new SEC marketing rule.
We use the multivariate probit model and the SEC’s Investment Adviser Public Disclosure dataset to examine the connection between the SEC marketing rule and advisory services offered by investment advisers and firms. Additionally, we explore the potential connections between investment advisers' and firms' disciplinary misconduct records and their advertising practices.
Our findings show that factors such as employee size, assets under management (AUM), custody cash, custody securities, wrap fee, advisory services related to financial planning, portfolio management for investment companies, portfolio management for pooled investment vehicles, portfolio management for businesses, pension consulting and educational seminars or workshops have correlations with the utilization of various marketing activities. Moreover, firms affiliated with advisers who have incurred felony charges, SEC or Commodity Futures Trading Commission violations, or non-SEC violations in the past decade also show positive correlations with the use of various marketing activities.
This study helps financial services industry’s investment advisers and firms with insights into effective marketing strategies to better reach target clients while complying with the SEC marketing rule.
The study is the first one to use administrative data on investment advisers and firms’ marketing activities, service offerings and misconduct records to investigate how marketing activities signal investment advisers' and firms' service profiles to the public. The findings serve as empirical evidence on how investment advisers and firms advertise their businesses under the SEC marketing rule.
