Note: This content is intended for educational purposes only and does not constitute legal or regulatory advice. Advisors should consult their compliance partner or legal counsel regarding their specific business needs.
Compliance is more than just a checkbox; it’s part of building a resilient, high-value business.
For today’s Financial Advisors, growth isn’t just about what you build, it’s how you protect it. Whether you’re SEC-registered, supervised by a broker-dealer under FINRA, or operating under a state regulator, staying aligned with regulations is critical to avoiding penalties, strengthening client trust, and scaling responsibly.
In this blog, we’re highlighting five common Financial Advisor regulations and compliance mistakes (plus practical ways to avoid them), so you can keep momentum, reduce risk, and focus on what matters most: growing your business with confidence.
| Why Is Compliance Important in Financial Services? Non-compliance can damage your reputation, disrupt operations, and create costly legal risk. Often, it’s the everyday missteps (unarchived emails, outdated disclosures, unapproved social posts) that can create the most exposure. In 2023 alone, the SEC issued 780+ enforcement actions and over $5 billion in penalties, impacting many firms that never saw it coming. |
Financial Advisor Regulations: 5 Common Compliance Pitfalls
Even the most experienced Advisors can trip up when regulations evolve or processes aren’t revisited regularly. These common pitfalls aren’t just technical errors; they can impact your brand, your client relationships, and your ability to grow. Here’s where things often go sideways, plus quick tips designed to help you stay ahead.
Pitfall #1: Overlooking Marketing & Advertising Rules
What Goes Wrong
- Misusing testimonials or endorsements
- Failing to substantiate performance claims
- Cherry-picking data in case studies or social media posts
The SEC’s 2022 Marketing Rule introduced expanded guidelines that apply to social media, performance reporting, hypothetical projections, and more. And if you’ve ever shared a post that includes a third-party endorsement, that may fall under the “advertisement” definition and trigger additional requirements.
What To Do Instead
- Include clear, balanced disclosures
- Avoid promissory or absolute language (e.g., “guarantee,” “achieve”)
- Run all public-facing content through your compliance partner
Related: A Comprehensive Compliance Checklist for Financial Advisors
Pitfall #2: Inadequate Books & Records Management
What Goes Wrong
- Incomplete archiving of emails, social media, or client interactions
- Poor documentation of policy changes or Form ADV updates
- Lapses in cybersecurity controls
The Books and Records Rule require detailed and secure storage of communications, trading logs, client agreements, and more. Missteps here can be costly and easily uncovered during an audit.
What To Do Instead
- Use a compliant archiving system
- Review and update your Policies & Procedures annually
- Implement cybersecurity safeguards that protect both data and documentation (and offer regular training for your team on how to use them!)
Pitfall #3: Mismanaging Performance Reporting & Disclosures
What Goes Wrong
- Displaying gross performance without corresponding net numbers
- Using hypothetical performance inappropriately
- Omitting benchmarks or timeframes
The SEC requires any performance-related content to be fair, balanced, and substantiated, and to include 1-, 5-, and 10-year returns (or since inception), when applicable.
What To Do Instead
- Present net performance alongside gross
- Avoid sharing hypothetical performance unless it meets specific criteria
- Use consistent benchmarks and explain any custom ones
Pitfall #4: Ignoring Evolving Regulatory Priorities
What Goes Wrong
- Staying reactive instead of proactive
- Failing to adjust internal processes to align with new expectations
In 2025, the SEC’s Division of Examinations is watching key areas closely, including AI-generated client communications, cyber incident reporting frameworks, ESG data substantiation, and more.
What To Do Instead
- Track annual SEC priorities and rulemaking proposals
- Proactively assess risk across client segments and service models
- Lean on your compliance partner to interpret what’s coming next
Pitfall #5: Treating Compliance as a One-Time or Annual Event
What Goes Wrong
- Relying on outdated forms or processes
- Assuming “no news” always means “no problems”
- Failing to train team members
Annual reviews, including Form ADV updates, Policies and Procedures, and a risk assessment, are non-negotiables. But ongoing training and internal communication are just as vital to reducing blind spots.
What To Do Instead
- Conduct an internal compliance audit annually
- Revisit training protocols after any regulatory updates
- Establish a strong culture of compliance
Related: How to Choose a Compliance Partner That Powers Your Growth
Compliance Designed to Help You Build Something Bigger
The weight of Financial Advisor regulations can feel like a constant source of friction, especially when you’re trying to focus on growth.
Too often, Advisors are left guessing or second-guessing: What’s approved? What’s outdated? What could be flagged later? That uncertainty drains energy, slows momentum, and distracts from your clients.
Now imagine having a compliance partner that moves in step with you.
At RFG Advisory, we deliver compliance that’s clear, responsive, and aligned with your goals. Whether you’re launching a campaign, navigating regulation changes, or preparing for your annual review, you’re backed by a team that understands how to help reduce liability and drive enterprise value.
Want to build a business where compliance fuels growth, not frustration?