In the previous post of our twelve-part blog series on the Top 10 Technology Trends for advisors and their partners, we explored outsourcing, an increasingly mainstream way of getting more done for less. The eighth trend we will discuss in this post is social media.
Unless you've been living on a deserted island for the past few years, you know that social networking and social media is all the rage. It seems you can't turn on the evening news without hearing "Twitter this" or "Facebook that." With many technology trends, financial services firms have entered the market slowly, because of the unknown compliance and regulatory risks. Despite those risks, financial institutions and advisors are increasingly using social media including LinkedIn, Facebook, Twitter, Chatter and other services.
For those in the financial services industry, there are really two core uses for social media. The first is an obvious one, as a new medium for communication. The second is less obvious but just as powerful, and that is as an intelligence gathering tool.
Social Media and Client Expectations
Advisors are being asked to participate in social media as a communications medium —sometimes reluctantly—by clients. In years past, it might have been acceptable to communicate with clients once a quarter. With the advent of email, cell phones and online account access, clients expected more frequent investment and general account updates; maybe once a month or even weekly.
However, with the popularization of social media, more and more clients want instant access to an advisor. For example, if news comes out about a company in which a client owns stock, some clients may expect near instant communication from her advisor about what the news means to the client's portfolio. You probably don't have too many clients with this expectation today. Yet as more and more young people who have grown up on text messaging and Facebook start hiring financial professionals, you can be sure that these will be client expectations in the coming years. Obviously these are unrealistic. However, the social media/instant communication trend means that it is the advisor's responsibility to set client communication expectations.
Social Media and Internal Communications
Social media also plays a role in internal employee communications. As employees become more and more accustomed to viewing the daily lives of their friends and commenting on others' posts/information, private social media-like tools are replacing in-person meetings and email as a form of employee interaction in the business environment.
For example, software like Yammer and Chatter make it easy for employees to share what they're working on, and it allows others to communicate the statud of a project status, for instance, in real time, often integrated within a company's CRM system. Online collaboration tools like Tracky provide full project management capabilities using a private Twitter interface that is easy to use and is very collaborative in nature.
Social Media and Marketing
The most obvious role that the social media trend plays is with marketing. It is now easier than ever for advisors to cost-effectively communicate with clients and prospects. It's easy and free to link with clients and prospects on LinkedIn, follow others on Twitter, post messages on Facebook, etc. Because social media is so informal, the danger is that the advisor risks being 'friends' on social media where too much personal information can be shared, versus maintaining a professional relationship.
As a marketing vehicle, social media must be considered like any form of advertising and thus falls under the same compliance regulations and guidelines. If your firm says that a brochure needs to be approved, then your post on Twitter probably needs to be pre-approved. If your firm requires you to archive every marketing email you send, then you most likely need to have software that automatically and permanently archives every Facebook post.
Social Media and Its Dangers
In addition to maintaining legal compliance, anyone in business—and advisors in particular—needs to be very careful what they post online because of 'reputational compliance.' It's important to remember that anything in digital format is probably archived, and thus searchable, forever.
