Advisors skeptical of U.S. social media site

Social media savvy advisors in Canada are not rushing to sign up just yet.

“Initially I thought it was a good idea, but once I visited the site, I clicked around in areas most people may not have an interest in, namely the privacy area. What is written there absolutely had me concerned,” says D. Tony Mahabir, CFP and CEO of Canfin Financial Group of Companies.

His main concerns are the amount of discretion linkedFA has and the degree of control it allows. “I don’t like the automatic signing in to other linkedFA sites or products, especially even when we choose not to opt in. I feel as if I am giving up too much control with people I don’t even know,” says Mahabir. “I don’t even think they understand our industry and how we are regulated.”

Similar concerns were expressed by some early movers who registered with linkedFA and set up their profile. It didn’t take long for Edwin Wong, CFP, Canfin Financial Group, to realise linkedFA is not for him.

“I’m not totally convinced that this particular social network site will work for my business,” says Wong. “It would appear that it’s simply another tool to communicate with clients; and if that’s the only benefit then I don’t see this as something I’ll be relying on.”

Wong decided to go with “more established sites such as Facebook and LinkedIn instead” where, potentially, he could “reach and market to a larger audience.”

Brian Byrne, CEO, linkedFA anticipated and addressed concerns over compliance. “Until now, the financial world was largely prohibited from using it due to compliance issues. linkedFA is focused on improving the financial advisor’s ability to grow relationships with investors without the concern of security, privacy and reputation risks of other social media sites,” says Byrne.

The creators of the website are using its “unique built in compliance feature” as the biggest marketing tool. (The feature) stores all documentation including emails, documents, instant messages, blogs, video and wall posts. All correspondence is saved for up to 6 years and they are fully exportable and reportable at any time, claim the makers of the website.

But advisors are still not biting.

“To me giving financial advice over the internet is a no-no. I’d never do that electronically,” says Wong. “I’d never rely on a third party to store data for me. They are a new company. I don’t know their business model and I don’t even know if the are going to be around next year.”

Advisors, both independent and those with large firms, are regarding the site with a degree of suspicion saying it is new and unreliable.

“Our organization has not approved, and won’t approve this site in its current state. This is not a Wild West business. We must do things properly. The service providers must understand this. It is not a one size fit all industry unfortunately,” says Mahabir.

Anything that makes a client nervous is bad, says Vikram Rajan, a U.S.-based marketing advisor for financial advisors.

“The ‘social networking’ aspect linkedFA purports is akin to the live feed and message board networking of Facebook,” says Rajan. “Many older, wealthy investors are weary of it when it comes to privacy, security, let alone, relevancy and necessity to their lives.”

Although a global website, the fact that it claims to be “FINRA compliant” doesn’t impress potential subscribers north of the border.

“linkedFA is an American site, not a Canadian site. It provides information on American compliance from a U.S. regulatory perspective, and therefore does not represent the Canadian financial advisor work force,” says Judy Farlow, assistant vice-president, individual marketing, Sun Life Financial Canada.

Connie Craddock, vice-president, public affairs at IIROC, says “The same principals would apply to social media as other areas of marketing or communications.” She says it would simply be up to member firms to review sites like linkedFA to determine what’s appropriate and that it conforms to regulations.

Some advisors feel better systems are in place in Canada. “The key reason for not using the product is the existence of established and increasingly robust contact management systems,” says Keith Pangretitsch, director, national sales, Russell Investments. “They incorporate client data, performance reporting and marketing functionality. Firms have invested substantial dollars into these systems for the benefit of their advisors.”

The linkedFA system, he says, would be more viable at small firms or with smaller independent advisors. There are others who see the website’s future potential. Although sceptical in their current approach, they feel if done correctly the concept can work.

“Their key people must go beyond webmasters and marketers and have people who are aware of the detailed rules and regulations of our industry as they will be different geographically, and, in Canada, provincially,” says Mahabir.

“linkedFA creates opportunity for advisors to connect with clients and other advisors,” says Farlow. “It could potentially be expanded to address Canadian regulatory/compliance challenges, in which case it would have a more promising future in Canadian social networking for financial advisors.”

The creators of the website are listening. Their latest tweak includes the introduction of its new compliance feature for brokerage firms and wirehouses which provides compliance officers with automatic daily reports on financial advisor’s activity. This feature fully integrates into firm’s internal email capturing and monitoring software.

(04/08/10)