From the November 2010 issue of Investment Advisor • Subscribe!

Advisors, Go Beyond Mere Tweets

Wealth advisors may benefit from social media, but the collaboration potential may be even more useful

As some advisors have embraced social media, others have stood still wondering what all the techno-fuss is about. Even some advisors who are enthusiastic about other forms of technology that can streamline the processes used in their practices, such as CRM and account reporting, can be cool to Facebook, Twitter and LinkedIn.

Advisors with affluent clients want to know if social media will help them with their particular practice needs.

Different social media platforms are better for certain kinds of communication. The other important point is the variety of individuals or groups with which advisors communicate on a daily basis:  clients, staff, broker-dealers or custodians and outside professionals working on a specific client issue, among others.

While many advisors have decided to engage with social media for professional use—and others stand behind the gates of compliance at their firms—almost all have been focused on communication with clients and prospecting for new ones. For advisors who form advanced planning teams to develop financial plans for clients, social media offers options for collaboration that offers more sustained communication than what can be achieved by a series of e-mails, conference calls, or in-person meetings

Identify goals first
Initially, forget about the technology itself. Many advisors think they need a blog, wiki, forum, or a LinkedIn page, without fully understanding the implications. According to Forester Research, the right way to approach social media for internal or external use is to list your goals.
• Document Sharing—A database to share documents and perhaps let others make updates
• Brainstorming or “Ideation”—A discussion area to test new concepts with colleagues (“ideation” is a term many in social media use)
• Project Management—If you don’t use a project management system, you can manage, update and sign off on project tasks for individual clients or for general firm endeavors. If you have a system, social media platforms can support and chronicle ongoing discussions especially for long-term projects
Connecting to External Professionals—Each new client initiative that uses a team can have a devoted discussion forum that’s available on an invitation-only basis. These forums also serve as an efficient place for follow-up to in-person meetings and conference calls.
Connecting to Geographically-Dispersed Staff and External Professionals—Given the number of advisors who spend more time visiting high-net-worth clients than conducting meetings in their own offices, the advantages of new communications channels are clear. Many advisors also have licenses in multiple states to follow the needs of their wealthy clients. When your Chicago client sells investment property in Texas, holding ongoing online conversations with the local real estate agent and lawyer may help the deal go smoother.
Learning Groups/Training—Advisor study groups and staff training can use collaboration communities to supplement in-person meetings and create a repository for advice and documents to share.

Large financial firms have also learned something about the relationship among social media and recruiting and brand, especially in the perception of younger hires. As college students go through school and enter the work force, most are using social media to communicate not only with friends but with their professors. Whether coming from college or having worked for a few years at another company with open access to social media, they have expectations about how they can communicate with coworkers and friends. When some potential recruits discovered they wouldn’t have access to their social media accounts during office hours as a part of regular business (not just personal) communications, their brand impression of the generations-old firm changed to something considerably less favorable and contemporary.  

Advisor’s use of social media today
While collaboration may hold great promise, advisors have experimented with other forms of social media from the earlier days. Advisors are now connecting more with peers and clients via social media, according to a new study from the research firm kasina, What Advisors Do Online 2010:
• More than 75% of all advisor types use social media, rising 7% in the last year.
• Advisors at independent and regional broker-dealers have the largest usage.
• Independent RIAs spend more time using social media daily (33%) compared to the average (22%).
• Fifty-six percent of advisors use YouTube for professional purposes (up from 48% in 2009).
• LinkedIn also proved very popular with 55% of advisors using the professional networking site, with 54% having access from work. They join groups, too—47% joined at least one.
• Advisors use Twitter and Facebook comparatively less often.

Advisors’ social media future
While many advisors view social media as not producing tangible results today, they see significant future potential, according to a study by American Century Investments. When asked about future business use of social media, the 303 financial planners, brokers and RIAs identified the ones they expected to use most often:
• Monitoring industry and market news
• Reading expert commentary and insights
• Researching people (e.g., prospects, contacts, current clients)
• Sharing news or content relevant to clients
• Business promotion and brand building
• Competitive intelligence
• Posting  commentary
• Sharing best practices with peers and colleagues
• Customer feedback and engagement
• Maintaining a professional blog

For some, ROI is here
While many of the most promising uses of social media for advisors may not be easy to measure, some anecdotal evidence and research indicates an actual ROI for some. In a 2010 study by Pershing Advisor Solutions and Aite Group, Creating Growth: The Increased Use of Social Media by Independent Advisors, which included responses from 144 RIAs, social media activity appeared to support practice management:
• Forty-two percent using social media said it has helped them identify prospects
• Thirty-one percent saw it helping to promote awareness of their business
• Twenty-seven percent credited social media with supporting their efforts to differentiate themselves from other advisors
• Twenty percent said social media delivered an increase in revenue or fees from existing clients

“Considering the benefits and business impact they have experienced, it is not surprising that RIAs who use social media on a professional basis are more likely than other advisors to consider social media important for the future,” noted Ron Shevlin, senior analyst at Aite Group. “Still, many advisors will be challenged by their firms’ decisions to limit or prohibit the use of social media because of regulatory and compliance concerns, as well as other factors.”

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