A surprising twist we recently uncovered in research about social media usage: Among financial advisors, insurance advisors are most likely to use social media for business purposes and most likely to have landed clients through social media. These results were among the findings of a recent survey by Registered Rep/WealthManagement.com.
Industry sources explain that this is because when insurance advisors prospect, they are less likely to pitch a particular product or make a specific investment recommendation to clients, an activity that is highly regulated. Instead, they tend to have conversations with prospects that address that person’s insurance needs, and this is easy to do using social media.
“Having a general conversation, having a soft conversation about general client need is completely acceptable and falls within that sort of interactive scope,” says Stephen Selby, director of regulatory services at LIMRA. “What happens though if we start talking about products or services of the firm, that’s when the advertising rules, more or less, at the FINRA level kick in.”
About 65 percent of insurance brokers use social media for business purposes, according to the the Rep/WealthManagement.com. survey of 1,597 advisors. That compares with 62 percent of RIAs, 51.5 percent of IBD advisors, 43.8 percent of wirehouse advisors, 45 percent of regional FAs, and about 31 percent of bank brokerage advisors. Seventy six percent of insurance brokers, meanwhile, said their firm had a written social media policy. Also, 62 percent said they had landed at least one client as a result of their social media efforts. This compares to 37 percent of wirehouse and regional reps, 34 percent of RIAs, 33 percent of IBD reps, and 32 percent of bank brokerage advisors.
Insurance advisors who are FINRA-registered are subject to the same rules and regulations on social media as other registered reps. But they’re also subject to the regulations of their insurance commissioners in states where they operate. The National Association of Insurance Commissioners published a draft whitepaper in July, informing the insurance industry as to issues on social media and providing some guidelines as to how it can be used. The whitepaper references FINRA guidance, but NAIC hasn’t come out with formal guidance, says Keith Nyhan, chair of the NAIC Social Media Working Group.
Within the insurance industry, there is not much guidance about how existing regulations apply to social media, such as unfair trade practices laws, advertising and marketing rules, and record retention regulations, Nyhan says. Once the whitepaper is formalized, however, Nyhan expects the Working Group to make a recommendation that the parent committee consider developing a model bulletin or model law on social media.
Blane Warrene, CEO of BMRW & Associates, developers of Arkovi, says insurance advisors are more likely to talk about the intimate details of a client’s life, such as what insurance means in the client’s life, and this type of conversation doesn’t require major regulatory review. Because it’s typically not a conversation about a specific securities product, it makes it easier for insurance advisors to use social media from a regulatory standpoint.
Selby says when you get into this needs-based selling, especially given the broad spectrum of products insurers sell, it’s easier to navigate your way out of FINRA’s filing requirements in good faith.
“They need to know insurance, they need to know securities sales, but to have that holistic conversation, they’re talking about general client need first,” Selby says. “So for a company which is more transaction-focused, it’s easier to jump back into that FINRA requirement for advertising filing than it would be for a company that’s in a relationship mode.”
Nyhan referred to a recent presentation by Kip Gregory of the Gregory Group, who said that social media is conducive for insurance producers to get information about people’s life events. It’s not necessarily being used as a marketing tool to sell a product. “It’s about relationship building as opposed to a traditional marketing approach,” Nyhan said.
According to Sarah Carter, vice president of marketing at Actiance, some 4,100 insurance brokers have a profile on LinkedIn. But she believes that the way insurance firms are using social media is different from other financial services firms. They’re taking a more proactive approach, using the personality of the organization to promote the brand and engage consumers.
Insurance companies also tend to have large marketing budgets, and they may be realizing that social media is a powerful marketing tool. “They’re really marketing machines,” says Michael Byrnes Jr., president of Boston-based Byrnes Consulting, who used to work in the insurance industry.
“Before social media, companies who were facing a public relations crisis often hurried to spend a large amount of money on an ad campaign,” NAIC said, in its draft whitepaper. “While companies had some evidence this helped, many insurance consumers already distrusted insurance companies and were skeptical of marketing efforts. Social media, on the other hand, provides companies an ability to share information in much smaller pieces that can speak directly to consumer’s needs and in a language that is much more applicable to average consumers.”