More On Legal & Compliancefrom The Advisor's Professional Library
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
The “fear” over social media use has been “ridiculously overblown,” advisor, blogger and Twitterphile Michael Kitces told advisors at Schwab’s IMPACT conference, held in mid-November in Washington.
“A lot of what we [advisors] talk about on social media is far from what the SEC is scrutinizing. I think we’ve gotten way too wrapped up in the compliance fears around social media,” Kitces told a packed room. “I don’t want to minimize [social media compliance] to nothing; [advisors] should have a social media policy in place and know what their people are doing, but we’ve made [compliance] out to be much more of a demon than it really is.”
Kitces was part of a panel that included two other advisors who are using social media as a way to educate clients and build their brands.
Jim Bell with Bell Investment Advisors, located in the San Francisco Bay area, told advisors that social media “is really about education, not selling.” Advisors using social media should be a “resource for relevant content; you want to position yourself as a thought leader.”
Catherine Maniscalco Avery, president of Catherine Avery Investment Management, agreed that social media is best used as a tool to educate clients, which for her includes baby boomers and high-net-worth women. Avery said she started using social media to not only educate clients, but to “draw people to our web site.”
Avery offered three tips to best leverage social media. She told advisors that the best way to “grow their client base” using social media is to “think about who your clients are and what social media they use.” Also, she said, use the social media platforms “that you’re comfortable with. Don’t use one that you won’t use on a consistent basis.”
Kitces agreed, stating that for him, Twitter is his social media platform of choice because the “most connections get formed” through it. Twitter, he said, is a “mass relationship” builder and a good way for a self-professed introvert like himself to get referrals.
All three agreed that LinkedIn is the most “professional” social media outlet, with Facebook considered to be more personal. “I’m incredibly unimpressed with Facebook and its professional potential,” said Kitces. “Facebook is the lowest ROI for me.”
Added Avery: “I found the same thing. My clients don’t want to go to Facebook to hear about investing.” She added that her firm now uses LinkedIn for “prospecting.”
Bell agreed that Facebook is viewed to be a more personal venue. “We don’t do Facebook. I think the general understanding is that from our fiduciary perspective, Facebook is about your personal life and LinkedIn is about your professional life.”
At the end of the day, Kitces said, “social media is about getting your brand out there.” Bell agreed, and warned advisors that if they’re going to launch a social media presence, they must “cultivate it” and make sure they’re “keeping it fresh and relevant.”
As to compliance, Bell agreed with Kitces that while “the fear about compliance was more pent up than reality,” his firm’s compliance officer reviews all of the employees’ tweets, as well as the firm’s videos and blogs.
“I’m the chief compliance officer and write the content, and I know what I can and cannot say,” Avery added. “When in doubt, I err on the conservative side, or I put it through an outside [compliance] firm.”