Get in the social media game

Social media represents an unparalleled opportunity for the financial industry and it also represents an unheralded responsibility, she said. LinkedIn, Facebook and Twitter are leading the social media revolution with a force the financial industry may not be able to withstand. The sooner firms, advisors and regulators realize that, the better.

“LinkedIn is really considered to be the top site for business contact purposes,” said Langley. The site provides “opportunities for referrals (and) the ability to share articles and news posts.”

Although perceived to be a parallel universe for teenagers and social activists, Facebook has a sizeable corporate following. “Many companies are on Facebook sharing news, posting updates, making announcements about new products and services,” said Langley.

For advisors, it offers the ability to make a personal connection with clients. “You get to know your clients, you attend events, you attend functions, you take pictures and photos, and suddenly everyone’s learning much more about you on Facebook than perhaps they did previously.”

Microblogging utility Twitter allows users to send a 140-character message to all of the listed followers. “This is a fantastic way to share a news update, or perhaps information about an event,” said Langley. “If you had all your clients following you on Twitter, and you wanted to make sure that they had a reminder that you were having an event at a local community centre, or you were doing a charitable activity or fundraiser, you could send them a tweet (a post on Twitter), and it’ll be out there quick and everyone will have it.”

It’s a public platform where clients can say wonderful things about their advisor. “In a very short period of time you have 17,000 other people that know you’re a fantastic advisor and you’re somebody that they can count on.”

On the other had, if there’s a misunderstanding or if a client is trying to malign an advisor, the advisor must be aware of it and set things straight. “Everything can get very quickly put out of context, because 140 characters is not a lot of words, so the whole story is not getting out there.”

Often they are high-impact statements, but the medium could be used to one’s advantage and adequate training could help advisors leverage its true potential. “What’s very important is that within your branches, with your assistants, within your firms, training needs to be made available, so that everyone is using these services appropriately.”

Advisors can use social media tools that take advantage of technology in sending videos, voice and image clips, whether live or static.

And therein lies the Gordian knot of compliance and regulations. “Firms feel that if they don’t allow it then in some way they’re controlling the risk associated,” said Langley, who has 25 years of experience in investment products, brokerage and compliance. By adopting a zero-use policy these firms hope to prevent staff from posting anything that is not sanctioned by the firm.

“But the reality is the advisors are using this anyhow,” said Langley. “So it’s not fair for your firm to not address this; they’re responsible from a compliance perspective to have a policy that addresses it.”

Firms need to be aware of what is being said about them, their brand, or the advisor or their services. Langley said advisors are using social media even within firms that do not have a formal policy for social media use “because they have to; because they want to be competitive.”

The firms should be finding ways to manage the flow rather than trying to plug the leak. “It’s really quite achievable,” she said, proposing some approaches firms could adopt. “Have approved statements that you can post; as long as you’re following the rules of business conduct, where you are not guaranteeing performance, you’re not understating risks, you’re not omitting material information, and you’re not saying anything knowingly that is false, then you’re fine.”

As a former vice-president of member services at IIROC, Langley knows why firms balk at the idea of social media. It’s the jackboot of regulations. “All they need to do is follow the standard rules around communication and record keeping that firms already follow on a regular basis.”

“If you’re sending out a message to clients, if you’re sending out a 140-character tweet about a new managed debt product, you’d better be following all the standard guidelines that you would use if you were sending out a letter, and you were putting it in the mail to everyone,” said Langley. “You have to have all client correspondence on site, easily accessible, in your office for two years, and you have to be able to retrieve any record in the past five.”

Using a vehicle that can go out faster to thousands of people doesn’t make it any different. She asserted it could still be guided and guarded by policies around archiving and retention, supervision and suitability.

Suitability of recommendations, she said, is the biggest contention and one of the biggest dangers in social media use. A good hedge against that is a strong adherence to the business conduct as enshrined in the firm’s code of ethics. “It’s your professionalism; it’s not saying anything that’s a material omission of fact (and) it’s not going light on the risk factors associated with a product that you may mention.”

“It’s not impossible to use social media in a safe way; what’s important is that you recognize you still have to have policies and procedures in order to do so.”

Social media is game changing. “You can’t be an innocent bystander, you have to get on the train.”

Read the Advisor.ca mini-package, Surviving the digital age.

(11/25/10)