Financial Institutions Clients Demand “Honest Communication” and “Transparency”


Share on LinkedIn

In the world of financial services, social media is certainly an enigma. Rare is the day we don’t see an article on the benefits social media can provide us both personally and professionally. Yet we haven’t seen wide spread adoption by asset managers and advisors. Why, and what opportunities are being missed?

First, social media is very young. So young in fact, that a recent Altimeter study estimates that most companies outside of the financial services world have only had social media programs in place for 2.5 years.

Therefore, if you are one of a handful of financial services firms that has headcount, a budget, have put a social media policy in place and have launched a formalized social media strategy you are considered a pioneer. Not to mention you are also one of the firms that has an archiving solution in place to satisfy the compliance demands that accompany social media programs in a highly regulated industry.

Just as the Internet and email have become ubiquitous over the past 15 years, social media will be the same, only faster. It will weave its way into the fabric of the asset management business and influence heavily how asset managers communicate with advisors and clients. Why? Customers will demand it.

Investment markets and the widespread adoption of social media have radically changed asset managers’ customer behavior forever. An understanding of these changing market forces would serve asset managers well, they include:

  • A decline in the trust of financial services firms. In a world where the words ethical, trustworthy and consistent are the attributes advisors list as most important when selecting and conducting business with an asset manager it would serve asset managers well to practice transparency and candor in all of their communications.

January’s First Command Financial Behaviors Index states there is a deep distrust of the financial services industry, although 90% of clients say they trust their own advisor. Driving those positive feelings were “personal relationship” and “good service” from their advisor.

These warm feelings towards their advisor contrasted sharply with distrust of the financial services industry, which sync with an annual Edelman Trust in US Financial Services survey, which found that 46% of respondents said their trust in financial services companies had fallen in 2010. In fact, only 15% of the individual investors stated they would trust portfolio managers for investment advice.

  • Social Networking provides, and will play a more prominent role in the future as advisors and their customers leverage their ability to instantly tap into large sources of data and crowd source advice from absolute strangers.
  • Engagement or that ability to engage colleagues, peers and complete strangers is becoming easier more accepted and will allow advisors and their customers to maintain and engage with a much larger peer group in the future.

So, given these market-changing forces, how will social media influence advisor and client investment decisions in the future? The Millennial generation may provide a few insights. This group will inherit an estimated $40 trillion from their boomer parents, will eventually comprise approximately 29% of the U.S. population and are affectionately referred too as “digital natives”.

You don’t place a phone call to this generation if you want to connect, you text. They will give up a lot, as long as its not their laptop, cell phone, MP3 player or broadband Internet connection. Google is their main source of answers to their questions and everything is fair game to be posted on Facebook or YouTube.

Asset managers and advisors can capitalize on these millennial preferences by being straightforward, transparent and consistent with their communications. They need to become comfortable delivering their messages through what they might consider non-traditional communication channels – Facebook, Twitter, LinkedIn and leveraging their firms website.

Asset management firms who’s website assist the advisor and investor in understanding their investment process have an advantage. Asset management firms delivering their message across the spectrum of social networking sites have a competitive advantage. Advisors and clients now go anywhere and everywhere to gather the information they need to make an informed investment decision. Asset managers that make sure their messages can be found in the places advisors and their clients are looking for that message will win in the long run.

The emerging world of the Millennia’s is one where they place a significant amount of emphasis on trustworthiness and honesty. They seek advice from parents and peers, put a premium on professional feedback and word-of-mouth referrals and prefer face-to-face meetings. The world of the advisor is one of fine-tuning and reducing the number of asset managers they work with.

Asset management firms that grasp the nuances of this newly emerging target audience and design communication strategies that include their preferences will capture their share of this estimated $40 trillion market. Those that don’t will compete for a shrinking piece of the pie as the top 10 firms continue to fine tune their communication strategies and take a larger piece of the investable dollar pool.

Republished with author's permission from original post.

Bruce Johnston
Over the course of 25 years serving as Chief Executive Officer and President of such firms as Gartmore Global Investments, Sentinel Funds and Old Mutual Investment Partners, D. Bruce Johnston is bringing his sales and marketing expertise to a wide range of companies both inside and outside of his financial industry roots. Named Fund Marketer of the year by Institutional Investor, Bruce has built some of the country's most successful marketing programs and sales teams.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here