The Future of Financial Services and Social Media

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There has been a debate for years on how financial firms can utilize social media to their advantage while following the guidelines laid down by the various financial regulatory bodies. The rules, as they were originally written, have been a tremendous hinderance on the adoption of social media marketing for financial service firms. They can ill afford to mess up for fear of the large bodies imposing harsh penalties against them. Many times, it would be a death sentence to that advisor. That is why many of the “little guys” haven’t done it yet. Some of the larger firms that can provide the necessary guidelines and expertise for their advisors are getting in the mix. Morgan Stanley recently allowed its advisors to get on and market themselves via social networks.

FINRA has acknowledged in recent months that social media is becoming an increasing important part in the lives of the people and recognized that financial advisors will need to get on to keep up with the times. After all, people are 67% more likely to buy the product of a brand they already “like” on Facebook. It would be ridiculous for financial advisors not to be allowed on these sites. These social sites also allow you to build both trust and expertise while showing a degree of transparency – something many people look for in an advisor.

So as the larger firms adopt social media policies and allow their advisors on, will it crowd out the smaller investment advisors? Maybe initially, but it shouldn’t. Smaller advising firms have an advantage. There are plenty of tools that allow you to maintain compliance with all of the regulations that FINRA requires. Most are even free! Some organizations can even help you set up the whole process so its fast and easy for you to review and monitor. There is no reason to be afraid of the environment. Early adoption relative to your competitors means there is more fruit ripe for the picking.

So what are the guidelines you need to follow if you are an investment advisor looking to get on social networks? Here are the top 10 points to follow that will make sure you stay within the regulations (courtesy of numerous FINRA and other agency releases):

  1. Keep a record of all tweets, posts, and online communication
  2. Apply the “Suitability Rule” when tweeting or posting
  3. Adopt policies and procedures for tweeting and posting (in regards to recommendations for specific investment products)
  4. Remember a blog is defined as an “interactive electronic forum” when posting and responding
  5. Have a principal approve profile design and information, avatar, and supervise communications/posts
  6. Supervise all social media communications
  7. Give financial advisors training for tweets/posts so as to not present undue risks to investors
  8. Respect both the entanglement and adoption theories regarding your posts/tweets and those of third parties (and others).
  9. A disclaimer avoids entanglement between customer and any third party content
  10. Having social media guidelines in place and screen all third party content

These guidelines, which we have been pushing since 2009, are enabling us to bring the activities and value of social media to the financial sector. We are intimately connected with this arena thanks to our well-connected CFO, Keegan Larson. You can find him on Twitter or on his blog.


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