Advisers must use care in hyping bull market returns
Feb 13 Financial advisers have good reason to celebrate the coming five-year anniversary of Wall Street's stock market low during the financial crisis: Their returns will soon look spectacular.
Since the U.S. stock market's financial crisis bottom on March 9, 2009, money invested in the Standard & Poor's 500 Index has nearly tripled in value, and some advisers have done even better for their clients. But tempted as those advisers may be to advertise their performance figures, they need to know they could get into trouble if they don't do it the right way.
Regulators will demand context and more detail so that performance claims don't mislead. Advisers need to plod through a maze of performance advertising regulations and guidance before getting too giddy about pitching their success, compliance professionals say.
When the U.S. stock market closed on March 9, 2009, the Dow Jones industrial average stood at 6,547.05, and had dropped by more than 50 percent from its peak in October 2007. Five years later, returns reflect happier times on Wall Street. The Dow closed at a record high of 16,576.66 on the last day of 2013.
"It's not too hard to look like a genius when the market is going up from a huge crash," said Amy Lynch, president of FrontLine Compliance, LLC in Rockville, Maryland. That is exactly why the U.S. Securities and Exchange Commission, states and industry regulators require advisers to put their success into perspective, Lynch said.
