In a world driven by a rational, fact-based process to investing, is it any wonder fund companies struggle with social media? After all, social media allows for conversation and comment by anyone; transparency, as such comments are out there for all to see; experimentation, as users frequently change their content; and improvisation. These are not qualities that go hand in hand with the world of ’40 Act funds.
Fund companies are being asked to evaluate how social media may help them connect with their employees, distributors, financial advisors and customers. In no particular order, I have listed some of the areas in which fund companies underestimate social media’s power. Gaining a better understanding of these areas can make a difference in whether a fund company can fully seize the opportunities that social media presents.
Underestimating the need for social media policies and strategies
Firms fail to understand that to be effective in social media, they need to have well-thought-out policies in place. Progressive companies are implementing electronic communications policies that establish strict guidelines for employee participation on blogs, chat rooms and other social media. They are also not bashful about imposing these same policies on employees providing opinion or advice, even if it is from their personal computers.
Firms that establish these rules early foster an environment that promotes social media as a way to connect to their clients, rather than through their products. These companies are also able to engage and solicit their employees’ opinions on social media, which will benefit how the companies develop such tools.
When it comes to strategy, companies already know how the success of any initiative starts with a well-articulated game plan that clearly establishes the firm’s objectives. The goals for your social media program should be no different than other programs your firm is running. For example, increasing brand awareness and establishing thought leadership will increase the number of FAs selling your product, resulting in increased assets under management. However, think in terms of continuity programs, not “one and done” campaigns.
Underestimating the risks to firms of not adopting social media
During a recent webinar focused on social media, a Prudential executive offered these examples of the risks for them of not adopting social media:
- They wouldn’t be taking full advantage of this important channel to get information about Prudential out there in a way that will give the firm credibility with different audiences.
- Social media better positions them to control the conversation about Prudential and not have others control it for them.
- They do not want to run the risk of not being forward-thinking with today’s generation of young talent. They want to be the employer of choice for today’s young people.
Ultimately, more fund companies need to develop an authentic voice that exhibits and embodies a firm’s core brand attributes and values. They need to adapt to each social media environment in which firms interact, as this is key to connecting with their diverse audiences.
Underestimating the use of social media by the financial advisors with whom they do business
A recent survey by financial marketing firm LederMark Communications found that most financial services professionals – 85% of those under age 50; 50% of those who are older — are using social media. And many of them — up to 40% — say it’s helping them build their business.
These advisors may be taking the right approach, as the Spectrem Consulting Group study “Social Media and the Investor” notes:
- Roughly 63% of Twitter users would pay attention to investment tweets.
- Precisely 46% of YouTube users and 41% of Facebook users would seek investment information from these forums.
- Social media networks are also popular sources for developing new investment strategies and seeking buy/sell advice.
Within that context, firms are doing their sales, marketing and wholesalers a disservice if they don’t arm them with the same communication tools their core audience and customers are becoming comfortable with.
Overestimating compliance risks
Leading firms are making the most of this opportunity by crafting strategies that comply with FINRA Rule 10-06 guidelines on social media. Of course firms should not take the compliance risks surrounding social media lightly. But firms that generalize social media as a compliance conundrum and thus don’t partake are missing out.
As advisors develop and leverage social media applications that reach hundreds of potential customers, fund companies need to identify and make sense of those networks that maximize their brand and the networking capabilities of their wholesalers.
In the new world of social media, the common theme prevalent throughout all industries is ABC — Always Be Connecting. For fund companies, it’s no different.
