Financial services firms may be using social media, but they’re not doing a very good job of it, said Lauren Boyman, director of social media at Morgan Stanley Smith Barney during a webcast Wednesday on the subject of, yes, social media, which was sponsored by FierceFinance. According to a Forrester Research report released last year, nearly 80 percent of financial services firms have presence on at least one major social media site, Boyman said. But when she first heard that number, she thought it was wrong. That’s because even those firms that are using social media are not talking about their products or engaging their customer base, while some questions that come in from customers are left unanswered, which is even worse, she said.
In the last three months, the momentum for financial services firms to catch up has grown, said Boyman, with many firms in the industry adopting new policies. She pointed out that social media is basically a more efficient way for financial advisors to do what they already do well: manage relationships. “Social media is all about people and relationships and financial advisors are all about building, maintaining and managing relationships,” she said. “The intent is not for them to have online conversations. That’s the starting point; these will lead to offline interactions like an in person lunch or meeting.”
The strongest argument for social media is that it can help a financial advisor to minimize the time spent marketing oneself and maximize the frequency with which he or she communicates with clients and prospects. Customer satisfaction is almost directly correlated with the number of “touch points” between an advisor and his or her client, said Boyman, and social media is one touch point with broad reach.
Further, the users of social media are an attractive group for financial advisors. It is a myth that social media is just for a younger or mass affluent crowd, said Boyman. Of LinkedIn’s 100 million users, some 43 percent are over 35, the average age is 46, 40 percent have income over $100,000 and 60 percent have a college education. Of Twitter’s 106 million users, some 38 percent are over 35, another 30 percent have household income over $100,000 and 51 percent have a college education.
Morgan Stanley Smith Barney is currently in the midst of a pilot with 600 financial advisors, announced earlier this year, using software from SocialWare to push out pre-approved content and archive all posting on social media websites. The firm currently gives these 600 advisors full access to LinkedIn’s features: sending messages, sending and accepting invitations, posting preapproved content. On Twitter, these advisors are also allowed to post preapproved content.
Financial services firms simply can’t ignore social media, said Chad Bockius, CEO of Socialware, on the webcast. Use of social networking has surpassed the use of email as a method to stay in touch with others, according to research put out a few months ago by Morgan Stanley’s Mary Meeker, said Bockius.
“It’s not just firms recognizing that this is a very effective way to build relationship,” he said. “It’s really consumers that are driving the activity, saying this is how I want to communicate and I want you to communicate on my terms. That’s why FAs are pushing into social media. It’s not about a message, it’s about building relationships,” he said. “Firms can’t wait; those that get into it [early] will have an advantage.”
Results from research conducted by Socialware, which works with over 100 FINRA regulated firms and studied social media use among financial advisors, not including those from wirehouses (over 90 percent of respondents came from firms with fewer than 500 financial advisors), indicated that 60 percent of advisors feel social media has made a positive impact on their business, some 34 percent used it to generate new client prospects and 17 percent have used social media to generate new clients. LinkedIn is used most widely, by 84 percent of financial advisors, followed by Facebook (60 percent) then Twitter (28 percent). In the future, having strong social media policy will be key to retaining financial advisors and recruiting new ones, said Bockius.
Registered Rep./ WealthManagement.com has conducted its own comprehensive research  on how financial advisors use social media, receiving over 1,500 responses to a survey fielded in August. That research revealed that advisors at independent firms and insurance companies have taken the lead in use of social media, among numerous other findings.
Asked how financial advisors should social media to get new business, Bockius suggested using social media websites as fact-finding devices. “If you are going to have a conversation with a prospect you should learn everything you can on Facebook and Twitter and LinkedIn” about them before you speak. “Regardless of your views on whether people share too much or too little, you would be crazy not to take advantage of that information to grow your business,” he said.
As for why Morgan Stanley is not allowing financial advisors to post messages that have not been pre-approved, Boyman said the firm is still getting a handle on how to use social media and how it will be regulated. But she said Morgan Stanley has also learned from other firms that do give advisors the option of posting unique, unapproved content that many of these advisors turn to preapproved content anyway. Finding things to say with enough frequency to be active and engaging “is a pretty big task,” she said. “So providing our own thought leadership is a competitive advantage for our financial advisors.”