More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Advisors in the business just 15 years ago will remember when the whole world suddenly was using e-mail—except for financial advisors.
The Internet had taken the economy and society by storm, Internet stocks were fueling an investment industry boom, yet advisors were making phone calls and sending out letters because regulatory compliance had not yet caught the wave.
Eventually all that got resolved, and now Jennifer Openshaw wants to help the industry overcome its current diffidence about using social media.
Last month, the serial entrepreneur launched Finect, an online network meant to ease communication between financial advisors and their clients, prospects and colleagues while letting their compliance officers take the day off.
Here’s how it works: In one fell swoop, the advisor can share content with followers on Facebook, LinkedIn and Twitter—thus cutting down the time involved in staying social. Meanwhile, merely by checking a few boxes, the compliance officer can permit allowable communications in advance and know that everything will be tracked and archived for a period of five years, as required.
“This is about moving the industry forward—about enabling the industry to operate in an online world,” said Openshaw (right) in an interview with AdvisorOne.
“We wanted no barriers to using this,” she added, noting the one-stop social platform is free to advisors, though a premium service is available by subscription.
Further eliminating barriers, the site automatically populates an advisor's profile with information from the other social sites such as LinkedIn and verifies their status as registered investment professionals.
The site is also open to individual investors who may be looking for an advisor. Openshaw cites an advisor who started a group whose name, Impact Investing, got picked up by an interested investor who had a google alert on that term.
A survey last year conducted by ING Direct showed that 4% of advised social media users are connecting with advisors through social sites, but importantly, that 52% would interact with their advisors through social media.
Finect is helping advisors to do just that. For example, Openshaw mentions an advisor who wants to build his brand around his Social Security expertise who just launched an open group from which he distributes content and engages around Social Security.
That same advisor also started a closed group for select followers called “Free-Advice Fridays.” Members of the group can see the advisor’s response to group members’ questions.
An old-fashioned phone call or e-mail approach would lack the amplification of a social setting. And a newfangled LinkedIn approach would still lack the tracking and archiving.
Openshaw hastens to point out that content distributed through LinkedIn groups appears to users as if the advisor is on LinkedIn.
Driving Finect’s business model is the industry’s need to monitor communications.
“It’s literally a checkbox,” Openshaw says. “They [compliance officers] are going to check boxes to give permission or not: Can they write new content? Can they share content on Facebook, LinkedIn and Twitter? Can they create groups? Yes or no.
“After all that, everything is tracked and monitored; everything is backed up and time stamped,” she says.
Advised by Fidelity’s former compliance chief, the financial industry social media site is seeking to draw independent broker-dealers to its platform. “They’re less bureaucratic and have the need,” Openshaw says.
As for advisors who have not yet dipped their toes in social media, Openshaw says the site offers advice on do's and don’ts of going social—tips such as properly tagging (in order to be picked up by search engines), keeping a regular schedule (to maintain engagement), and being brief.
“Content should not be two pages. It should be short, succinct, informative and reflective of the advisor’s personality and brand,” she says.
The Finect exec says social media should be part of every advisor’s business plan, with advisors strategically calculating which platforms they want to be on. Users of her site could exclude Twitter, for example, with the click of a switch.
To those worried they don’t have the time to create content, Openshaw reminds advisors, “you could be sharing your firm’s analyst’s knowledge or [distribute] a TV interview you did.” To that end, the site will soon be home to a vast online library of content advisors can share.
Check out 5 Reasons Advisors Are Wasting Their Time on Social Media on AdvisorOne.