Financial advisors 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 advisors have done even better for their clients. But tempted as those advisors 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. Advisors 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.

No Cherry-Picking

Industry rules do not require advisers to advertise performance. Nonetheless, many advisers want to show off their skills to prospective clients, especially if they generated solid returns in volatile times, or want to capitalize on larger-than-life return figures that portfolios are already starting to reflect.

Advisors use different methods to calculate performance figures. Some risk calculating their own returns by trying to measure overall performance by taking the average of all of their clients' portfolios. That could spell trouble since advisers build portfolios around a range of products, say compliance professionals.

Regulators typically expect advisers who advertise returns to follow the Global Investment Performance Standards (GIPS), the Cadillac of performance guidelines. The standards, among other things, require an independent firm to verify an advisers' performance figures.

Advisors who want to advertise their five-year returns should be cautious. Performance advertising is a tricky compliance area. Money managers must wade through about 25 years of guidance from regulators that covers everything from subtracting fees from advertised results to making disclosures about risk.

But there's an even broader concern for advisors: Regulators have catch-all rules that generally prohibit advisors from engaging in fraudulent activity, such as misleading the public, among other misconduct.

The SEC, for example, typically falls back on those rules to discipline advisors whose performance advertising is less than complete, said Nancy Lininger, head of The Consortium, a compliance consultancy in Camarillo, California. It's fairly simple for regulators to look backwards at performance ads and pick out what they think is wrong, Lininger said.

Advisors who cherry-pick results from the past five years and leave out the rest of their performance history could find themselves in trouble, said Francois Cooke, a managing director with ACA Compliance Group, a Washington-area firm that provides compliance consulting services to securities industry firms.

"You should give as long a horizon as possible," Cooke said.

That typically includes following an SEC rule intended for mutual fund advisors, which requires showing performance figures for one, five and 10-year windows, compliance professionals say. Advisors who have not been in business for 10 years should show returns since their inception, they say.

Those parameters generally apply, regardless of whether advisors or their firms are registered with the SEC or the Financial Industry Regulatory Authority (FINRA), Wall Street's industry-funded watchdog. FINRA guidance has also long cautioned advisers against "overemphasizing recent high performance figures" or implying that those returns will happen again.

Comparisons between returns and the performance of benchmarks for those periods, such as the Dow or S&P 500, also help to complete advisors' performance picture for investors, compliance professionals say.

But that's not all. The laundry list of other performance advertising basics includes making numerous disclosures, such as informing investors that they are taking on risk and could lose their principal. This year, advisors should consider disclosing to investors that a portion of their five-year returns are due to market conditions since 2009, said Lynch, the Maryland-based compliance consultant.

And there's always the hackneyed but essential "past performance does not guarantee future results" tag line that the SEC requires funds to include in their return-touting ads.

A Different Spin

One way for advisors to avoid the quagmire of performance advertising worries is to focus on a different message about their five-year returns.

That is what David Edwards, president of Heron Financial Group LLC in New York, did last year to mark the four-year anniversary of the low point of the financial crisis.

Edwards congratulated his top 25 clients for making it through the crisis by sending each a bottle of vintage champagne and two champagne flutes.

"We're not touting the fact that we made 150 percent. We're touting that when times were really grim, they stuck with the plan," Edwards said. "From a marketing perspective, it's a much gentler, wiser way of addressing the issue."