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Don’t Fake It

Full-service brokerage firms need to take a lesson from their fast-growing online peers when it comes to communicating with clients via technology, says MFEA panelists.

It’s no surprise that many wealth management firms and advisors have struggled with how to use the tools of the internet – websites, social media, mobile platforms, to name just a few. A plethora of studies and whitepapers have been published on the subject and it’s a perennial topic on the conference circuit. Clearly, the industry is struggling to figure it out.

A panel at the MFEA eCommerce Summit Wednesday in New York however, moved the ball forward. The trouble is full-service firms think of advisors as the primary delivery mechanism for their communications and online strategies. As communication increasingly moves on to the internet, these players need to take a lesson from the online brokerages, said Alois Pirker, research director with Aite Group.

“That integration of the full-service channel with online is now where the secret sauce lies,” Pirker said.

Online brokerages have captured a tremendous amount of assets in a relatively quick period of time; assets in the online channel grew from $1.6 trillion to $2.5 trillion in the online space in the last two years alone, Pirker said. During last week’s Tiburon CEO Summit, Chip Roame, managing principal of Tiburon Strategic Advisors, predicted the growth of the self-service channel will continue. In ten years, he believes, there will be more physical branches of online brokerages than there will be traditional banks.

“The advantage those firms had is that those new technologies that have come in—be it mobile, be it social media—they have been, with that direct-to-consumer model, much better suited to take advantage of those and communicate much better with them.”

But wealth management firms can differentiate themselves by learning from direct-to-consumer firms that have been out there experimenting with social media, and finding a balance between their full-service capabilities and online offerings, Pirker said.

Case in point: Ric Edelman, a financial advisor in Fairfax, Va., is going to start offering financial advice online and take on smaller client accounts, said Michael Sakraida, founder of the Financial Advisor Network, a LinkedIn group, during the conference. Edelman’s website says the new service will be called “Edelman Online.”

Having a Strategy
There’s no cookie-cutter method for how firms should implement a social media and online strategy, as every firm and client base is different, Pirker said. But firms need a strategy. “It’s not just like, ‘Well, you’re on there now. Now what?’”

For instance, beyond simply opening up Twitter and LinkedIn accounts, it may make sense to have pre-approved and curated content available for advisors to push out. “A lot of advisors are not necessarily writers; a lot of advisors are not very creative. They’re finance people.”

Firms also need to stop thinking about social media as simply a channel to blast out marketing messages. The channels have to be targeted and specific with the content they create for their advisors, Pirker added. It ultimately needs to be helpful to consumers. Firms should help advisors bridge the gap between the content and the where/when/how to send it out.

Not a Home Run
It’s not going to translate to new clients overnight. The lack of an immediate return on the investment may be why some think the bloom is coming off the rose on social media, according to Pirker.

An Aite Group survey found that advisor use of Facebook and Twitter declined from 2009. In 2011, 19 percent of advisors mentioned reaching new prospects, down from 36 percent in 2009. Only 9 percent said it was differentiating their practice from competitors, down from 21 percent in 2009. Of course, as more advisors use the online tools, it will naturally stop being a differentiating factor – everyone will do it, or claim they are.

“I don’t think it’s quite something that should be written off, but it’s something that we need to learn how to do,” Pirker said.

Seth Brewer, director of social media at The Harford, has heard from advisors claiming they are getting 10 to 12 new customers over six-months through social media. Others claim it’s just not working for them. The vast majority – 82 percent – feel that too few companies provide help with the tools or don’t know it if help exists.

In the end, it’s about sharing interests and having a conversation, and that’s not something that can be faked. “There are people there that are really good at posting stuff that’s interesting,” said Seth Brewer, “and other people who don’t.”

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