Advisors say compliance fears and prospecting frustrations are some of the key reasons they are not embracing social media. But most industry consultants say those justifications are preventing them from growing their business.
Over a third of advisors (37 percent) say they’re only a minimal user of social media for business purposes, according to a recent WealthManagement.com study sponsored by NFP. Moreover, almost half of 450 advisors surveyed (48 percent) spend less than one hour per week on social media.
This is despite the seemingly endless exhortions to embrace the tools from coaches, consultants and, in some cases, broker/dealers and custodian firms. Half of advisors say the biggest reason they don't use social media is that it’s too much compliance and paperwork, followed by 43 percent who say its because of lack of regulatory clarity.
“It’s more of an excuse than a reality today,” says Michael Byrnes, president of Byrnes Consulting. Especially since good archiving and social media management firms exist to service advisors. And while there are still gray areas in the social media guidance offered by regulators, Byrnes says the SEC and FINRA have been working on this in recent months.
Stephanie Sammons, founder of Wired Advisor, agrees that these are just excuses. She lays out three rules to stay compliant: Read and understand the regulations. Read and understand your compliance policy. Conduct yourself as a professional, always. “I don't believe advisors are valuing social media as they should,” she says.
Advisors also can become easily frustrated by the lack of tangible results from their efforts. More than half (54 percent) of advisors reported they haven't landed any clients as a direct result of social media efforts, while 36 percent say they've landed between 1-5 clients. Only 1 percent say they've received 21-50 clients directly from social media.
“It’s like if they swing at a pitch and don’t hit a home run, they think it’s not worth their time,” Byrnes says. “But if they use social media networks, it can have a significant impact on their business.”
Prospective clients aren't going to convert directly from social media, Sammons says. According to the study, 41 percent of advisors say that of the clients they did acquire from social media, the connection was made as a follow-up to a more traditional first contact. Only 17 percent of advisors made contact via social media first.
These clients also tend to be younger, advisors say, with the typical new client acquired through social media has portfolio size averaging $215,000, compared to the $284,000 account average seen in clients gained through traditional means.
“Social media is part of the digital ecosystem. Ultimately you want to move your network connections to become prospects by encouraging them to opt-in to your email database where you can further cultivate the relationship,” according to Sammons.
For example, once someone is on your list, you can send an invite to an event, a free conference call, or even a 1-on-1 meeting, she says. “Social media is an important contributor but it's not typically the ‘last touch’ conversion in the process.”
Sammons says her firm coaches advisors to spend 40-60 minutes a day on social networks doing basic activities including discovering and curating relevant valuable content, networking and connecting with clients by and listening and responding. This is in addition to the 1 - 1.5 hours per week Sammons recommends advisors spend creating their own thought leadership content.
“Even if people get a referral, they’re going to do research and that includes social media,” Byrnes says. A person’s LinkedIn profile will usually show up before their website in search results, Byrnes says, making having a good profile essential in crafting a successful first impression.
For advisors who are on social media, LinkedIn is the most popular platform, with 83 percent of advisors saying they use it for business purposes, according to the study. Facebook comes in second (25 percent), followed by Twitter (19 percent). But Byrnes says the rates for Facebook and Twitter adoption are drastically low.
While most advisors use LinkedIn, Byrnes says many are not using it properly. Not only should advisors have an engaging profile (professional photo and pertinent employment information), they should look at it as a prospecting tool. Byrnes tells clients to spend 10 minutes before meeting with a client figuring out who they know.
“You can spend all day on social media and get nothing out of it. Or you can spend 15 minutes and get a couple new clients,” Byrnes says. It’s all in how effectively advisors can manage their engagement.