Financial Advisors’ Use of Social Media

Social media is game-changing…it is an intelligence source that

allows you to track unobserved, and for free, the movements of

people in your network:

Who’s switched jobs?

Who’s experienced a change in household composition?

Who’s received a lump-sum inheritance?

Who’s started a new company?

− Kip Gregory

Consultant and author of

“Winning Clients in a Wired World”

2

Predictions that didn’t end well...

“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” — Western Union memo, 1878.

“[Television] won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.” — Darryl Zanuck, movie producer, 20th Century Fox, 1946.

“There is no reason anyone would want a computer in their home.” — Ken Olson, founder of Digital Equipment Corp. (DEC), in 1977.

3

Business processes change...

Remember…

The ticker tape?

Stock certificates?

Cold calling?

Prohibition against email for client communications?

5-day trade settlement?

4

Study of social media use

LederMark’s 2010 social media survey

– On Wall Street/LederMark Communications

– Brokerage, RIA, marketing professionals

– 175 responded

Objective: Use of social media for business

– Interests/goals

– Level of use

– Impediments

Source: LederMark social media survey March 2010. N = 175

5

FINRA guidance on social media

Supervision of interactive electronic communications sent through social media sites under NASD Rule 3010.

Archival and retention. A broker-dealer must retain electronic communications that relate to its “business as such” for three years under SEC and FINRA rules.

Suitability– A broker-dealer is required to determine that a recommendation is

suitable for every investor to whom it is made under NASD Rule 2310.

– Firms must adopt policies and procedures designed to address communications that recommend specific investment products and include additional disclosure.

Static vs. real-time– FINRA considers static postings as “advertisements” under Rule

2210 and requires prior principal approval. – Real-time interactive communications are not required to have

prior principal approval but still must be supervised by the firm. Third-party content – is not treated as the firm’s communication with

the public under Rule 2210 unless the firm has involved itself in the preparation of the content or explicitly or implicitly endorsed or approved the content.

Source: FINRA Regulatory Notice 10-06

6

What survey found…

Financial services professionals are using social media for personal and business use, trying to adhere to the rules.

Younger professionals are leading the charge. They are building relationships that lead to new business.

LinkedIn is viewed as “best for business.”

Facebook is leading to renewed relationships, referrals and introductions that lead to business.

Compliance guidance is mixed.

– No-use policy

– Unclear parameters

– Daunting approval processes

7

Goals of social media use

1. Network with colleagues and clients

2. Post my name, title and company information

3. Prospect for business

4. Share industry knowledge and best practices

5. All of the above

Source: LederMark social media survey March 2010. All users top five answers to “What are the goals you hope to achieve by utilizing social media now or in the future?” N = 156

8

A closer look

National firms vs. others

Brokers vs. others

Under 50 vs. over 50

User comments

9

Use by national firms

Rank Current use Desired use

1Create a profile with the name of employer identified

Ask for profile recommendations

2Invite friends/ colleagues/others to join your network

Utilize applications (e.g.,Tweets, blogs, slides)

3 Join groups Engage in discussions

4 Link profile to your business web site Link profile to business web site

5 Engage in discussionsJoin groups

Create a profile without employer identified

Source: LederMark social media survey, March 2010. All professionals at national firms, N = 50

Key discovery: Complete use of LinkedIn tools is restricted.

10

Use by brokers

Rank Current use Desired use

1Create a profile with the name of employer identified

Ask clients and friends to recommend you on your profile

Utilize applications (e.g., Tweets, blogs, slides)

2Invite friends/colleagues/others to join your network

Engage in discussions

3 Join groups Link profile to your business web site

4 Link profile to your business web site Join groups

5 Engage in discussionsInvite friends/colleagues/others to join your network

Source: LederMark social media survey, March 2010. All brokers, N = 69

Key discovery: Complete use of LinkedIn tools is restricted.

11

Under 50 vs. over 50 social media users

Under 50

Over 50

Are using social media 85% 50%

Users of social media which presence led to doing business

41% 19%

Agree that social media networking will be an important business development tool within five years

86% 53%

Source: LederMark social media survey, March 2010. All users, N = 144

Key discovery: Generation gap in social media networking will impact sales practices in the years ahead.

12

Impediments to social media use

Compliance concerns and restrictive company policies

Users would like being allowed to:

– Ask clients and friends to recommend them

– Utilize applications like SlideShare and WordPress (for blogging)

– Engage in discussions and link profile to their business web site

Source: LederMark social media survey March 2010. All users, N = 169

Key discovery: There is frustration among those who want to utilize social media for their practice and do it by the book.

13

Verbatims: compliance barriers to social media use

“Still working on it. Biggest hurdles so far are from senior executives who do not use social media and are trying to understand how it fits into the firm’s objectives…”

“Definitely a work in progress largely due to unclear guidance from regulators.”

“Social media is simply prohibited with my firm.”

“Complete barrier to doing it effectively at firm.”

“Very restrictive on what we can say.”

“Compliance is still reviewing rules and has yet to develop a policy or procedure.”

Source: Verbatim comments, LederMark social media survey March 2010. All users, N = 92

Key discovery: Many see social media use as unsettled policy.

14

Despite regulatory impediments, financial services professionals are using Social Media to network and gain business.

15

How they generated business

“Reconnected with old friends who were looking for my type of expertise.”

“Referral of a client to another friend who looked me up through Facebook.”

“Discussion and referrals for speaking engagements.”

“Introduce from one client to a prospect through Facebook.”

“Social media has lead to greater awareness about me/my capabilities.”

“I feel that any time a client can see what you have done, who you know and what you are doing. They can build a better relationship with you.”

Source: Verbatim comments, LederMark social media survey March 2010. All users, N = 28

Key discovery: Advisors and others can keep in touch with large numbers through social media – leading to business.

16

17

The insurance industry has eclipsed securities in adopting social media as a powerful prospecting tool.

Next steps for financial services firms

Social media is an unstoppable communications vehicle and the securities industry lags others in harnessing social media.

Sales management/marketing will have to lead this charge.

Form a work group of marketing/sales management and compliance executives to formulate best practices, remove hurdles and be ready for the next generation of advisor and client!

18

19

(text)

Social media networks

How LederMark can help…

We work with broker-dealers, RIAs and mutual fund companies in the following areas:

Marketing consulting services Marketing Strategy – practice management and positioning firms and advisors

Qualitative research – exploring market needs, from research design through facilitation and analysis

Marketing project management – examples include:

• Product introductions for advisors and investors

• Outsourcing renew/refresh business units marketing approaches

• marketing campaign development

Marketing communications Integrated marketing communications campaigns/projects

Creative services and production

Content development

• Financial writing for advisors and investors

• “repurposing” institutional content for other audiences: e.g., financial advisors or retail investors

20