More On Legal & Compliancefrom The Advisor's Professional Library
- Use and Misuse of Social Media Social media is an inexpensive and effective way to communicate with established and prospective clients. Nevertheless, when RIAs utilize social media to promote their advisory practices, they risk compliance problems for their firms.
- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
By now, even the most computer illiterate of us has heard of the life-altering cyber phenomenon we now refer to as social media. Whether it’s Facebook, LinkedIn or Twitter, we are all becoming obsessed with reaching out and touching each other. Especially, if we can do it without having to actually speak to anyone.
Financial advisors, being exceptionally savvy, have long recognized the potential in this cold-calling panacea. Many have tried to jump on this bandwagon only to have the door slammed shut by their firm’s dreaded “Business Prevention Department.” But in defense of compliance departments across the country, the very instantaneous nature of social media must be a nightmare to police. That’s why they get the big bucks.
Apparently times are changing. More and more broker-dealers are allowing their advisors, within parameters, to use social media. In fact, many firms have entire departments devoted to helping their reps utilize the various social media. Not wanting to be left behind, more and more time and resources are being devoted to this craze well before any of us has a clue if it even works in our industry.
If I were an advisor today, I don’t think I would put a great deal of time and effort into this media experiment, yet. Save your money until someone you know has success with it.
I’ve come to this conclusion after attending a two-hour seminar on promoting business through social media. The instructors had built their company helping small businesses set up social media programs. While I did see lots of neat graphs, charts and web pages, nobody would say for certain that by creating a social media presence I would benefit financially. I couldn’t help but think about the $15 I just wasted on parking.
One thing I did take away from the seminar was that the early bird doesn’t always get the worm. In other words, the people who started a new industry or trend weren’t the ones who benefited most. It was people who copied the idea and improved on it. They made it easier for the masses to use.
Think about computers and the Internet. While they have both been around a long time, the masses didn’t use either of them until Apple Computer and AOL came along and made them easier to use. “If you build it, they will come” — if you make it easy to use.
Does this mean I think social media for advisors is a bust? Not necessarily. I’m just not sure a financial advisor is going to reap any great rewards from it, yet. You also have to keep in mind that in order to give good social media, you need to have new and current content. That means you will also have to devote time and resources to maintaining your social media presence (even though you may not get any benefit from it). For now, establishing a social media presence boils down to your desire to appear technologically savvy and your desire to tweet.
Someday, I’m sure a new killer app will come along that will tie all this social media stuff into a nice simple package. Then we will all be tweeting like Foghorn Leghorn, and the new clients will come marching in. In the meantime, I’ll keep using the social media like I always have, to spy on my kids.
As soon as I get credible information regarding advisors profiting from social media, I will tweet you all. Feel free to check out my Facebook fan page for more information.