While there are always early adopters who want to be on the bleeding edge of the "next big thing," most people and institutions typically take a wait-and-see approach.
This was absolutely the case in the mid- to late-1990s as broker/dealers were struggling with whether to give Internet access to their advisors. Would it be secure enough? Should we allow advisors to enter trades over the Internet or just access their client accounts? The fear of the unknown led many financial services firms to do nothing until the use of the Internet received greater acceptance.
While it's not of the same magnitude, many of you, and the financial institutions you work through, are taking a wait-and-see approach when it comes to social networking. The following are some aspects you should consider about utilizing social networking versus doing nothing:
- Be a thought leader - Many of you specialize in a specific area (i.e., college planning) or focus on serving specific constituencies or interest groups (i.e., construction business owners or fishermen). One of the basic benefits of social networking is that it provides an online community, offering the opportunity to share thoughts, views and opinions with others who have similar interests. For example, if you do specialize or focus on clients that are in the construction business, there are numerous communities within LinkedIn (www.linkedin.com) that are dedicated to the sharing of ideas and current events in this industry. And, if you don't see a group relevant to your niche or area of specialty, then you can start your own group. While the goal of social networking sites such as LinkedIn is to strengthen and extend your base of contacts, there are instances of new business won as a result of participation in these sites.
- Get closer to your customers - Social networking is no longer just the domain for Gen Y. For example, from mid-2008 to the beginning of 2009, Facebook's 35- to 54-year-old segment grew significantly. This is your target market. For this reason, many businesses have established Facebook accounts to invite their customers and/or business associates to stay tuned in to their latest initiatives. The rapid adoption of social networking is proving that this is a new, effective way for people to communicate, both professionally and personally. We've talked in past articles about the importance of being in touch with the next generation of investors; but given the changing demographics of people using social networking sites, it's becoming increasingly important to be in touch with the generation of investors you currently serve.
- Enter cautiously - I propose that you explore the different social networking venues and the advantages and disadvantages of each as they relate to your business. While some sites are more casual, others are geared toward furthering your business network.
Before you take the plunge, you'll need to think about potential consequences. A friend of mine owns a small business and sent a blast e-mail invitation to his clients and friends inviting them to be a "friend" with his business on Facebook. One of the recipients of the invitation simply responded "no thanks," but ended up copying everyone that received the original invitation on the response. In hindsight, my friend should have ensured that couldn't happen.
In full disclosure, it's also important to know regulations require that all written communications with the public involving business matters be subject to review and supervision by your broker/dealer and may require the pre-filing of certain written communications before they can be posted. The FINRA Web site includes information that is important to review and be knowledgeable of in advance before using or participating in any social networking sites. I would encourage you to check with your compliance officer or branch manager for more details.
Marc Butler is managing director with iNautix (USA) LLC, an affiliate of Pershing LLC in Jersey City, N.J. He can be reached at firstname.lastname@example.org.