From the June 2011 issue of Investment Advisor • Subscribe!

June 1, 2011

Commonwealth Financial to Allow Rep Access to Social Media

Third-party vendor will capture and retain data, deliver back to BD’s existing compliance platform

Commonwealth Financial Network announced Thursday that, beginning in early June of 2011, it would allow its advisors to use social media, including Facebook, Twitter, LinkedIn and blogs.

The Waltham, Mass.-based independent broker-dealer has hired Erado Message Control, based in Renton, Wash., to monitor and deliver compliance that meets FINRA requirements for review and retention of online marketing. According to Todd Estabrook, Commonwealth’s chief marketing officer, advisors will bear no additional cost.

“We’re first and free,” Estabrook says. “We recognized the importance of social media to advisors from the beginning. We wanted them to partake of the social part of social media; it was just a question of getting it done within the confines of FINRA regulatory guidance.”

Commonwealth will offer a weekly selection of pre-approved Facebook status updates, tweets and blog posts to complement advisors’ social media efforts. How-to guides on establishing a social media presence, best practices and compliance guidelines for ongoing use, and a moderated forum to exchange ideas and consult with marketing experts at Commonwealth’s home office will also be made available.

Erado Message Control is a preferred vendor for LPL Financial and a number of other independent broker-dealers, says Craig Brauff, the 17-year-old company’s CEO. While declining to be specific due to non-disclosure and privacy issues, Brauff did say there will be a flurry of announcements similar to Commonwealth’s in the next 30 to 45 days involving roughly 25 of the top independent broker-dealers.

“We identified the need about two and a half years ago,” Brauff says, when asked about how he identified the broker-dealer regulatory niche in social media. “At its roots, social media is an electronic conversation and subject to FINRA regulation from a compliance standpoint. Not only that, but social media postings have to be captured and retained for discovery purposes from a legal standpoint.”

Erado, he says, captures and retains data and then delivers it back to the broker-dealers existing compliance and archiving platform.

“There is no additional cost associated with training existing personnel to handle this kind of compliance,” he adds. “So it’s a lower cost of ownership for the firm. Also, no additional hardware and software is needed, which again adds to that lower cost of ownership.”

Commonwealth chose Erado over other vendors because only profiles with a single log-in that are subjected to FINRA regulation are tracked, versus tracking an entire machine.

“For instance, if an advisor logs on at home, only his business Facebook activity is tracked, not his kids Facebook activity,” Estabrook says. “From our analysis, Erado was the only vendor that had that capability. The other solutions couldn’t separate them out.

When asked why the firm went with a third-party vendor, as opposed to tracking social media in-house, he says it’s a new space for the company, and having  outside expertise means they can get answers quickly, and the speed to market means their advisors can begin using it sooner rather than later.

“The primary reason broker-dealers use a firm like ours,” adds Brauff, “is that they have technical, as well as human management issues that they might not be familiar with in this realm.”

 “Knowing the landscape, I wasn’t holding my breath for something like this to happen anytime soon,” says Ted Kerr, managing partner with Sewickley, Penn.-based Touchstone Capital, a Commonwealth-affiliated firm. “They weren’t saying much about social media, because they didn’t want to put it out there and then not be able to deliver. But they mentioned a bit about it at their last conference. Once I heard that, I knew it was going to happen soon.”

Kerr says he will use it for two primary functions. Like many advisors, he has close relationships with clients, but only gets to see them in person two or three times each year. Social media adds a new dimension to the relationship, he says, that would not otherwise be available.

“My wife and I are in the process adopting a child from El Salvador,” he says. “Clients ask us about it when we see them, but now we can update them on how it’s going and post pictures via social networking. And it’s a two-way street. I can keep up-to-date on client surgeries and were they might be vacationing.”

The second function, he says, is in real-time market analysis.

“Our industry’s regulation makes communication difficult; any kind of market commentary has to go through a somewhat cumbersome compliance process,” he says. “Because social media is considered public speech, we can comment on market events much more quickly, which goes a long way in setting our clients at ease and making them feel comfortable.”

Commonwealth advisors will be able to comment, post, respond, “like” and retweet on Facebook, Twitter, LinkedIn, and company blogs. Interactivity will be captured automatically and sent to Commonwealth’s compliance team for post-review and retention.

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.