Developing closer contact with clients and winning new ones is paramount to investment advisors, and in many ways these goals are made easier with the advent of social networking. But for every adventurous advisor that is tweeting on the latest economic or market news, or improving interactions with clients or prospects via Facebook, there are many others who fear overstepping the regulations currently affecting social networking, or simply wish to avoid burdensome recordkeeping requirements. Further complicating matters is that the alerts and guidelines issued by regulators are usually complex and often seem to raise more issues than they settle.

The latest AdvisorBenchmarking report indicates that while a sizeable number of advisors surveyed say they currently use social media, most do not—mainly because of uncertainty around navigating compliance issues. Success stories, however, abound, like the adviser described in a recent Wall Street Journal article who garnered Facebook friends through his family’s progress report of an adoption of a three-year-old El Salvador boy, or the adviser who uses Facebook to discover the leisure pursuits and passions of his clients. In many ways, the main value in social media so far is establishing closer personal connections with prospects and clients.

According to the latest AdvisorBenchmarking report, only 16% of advisors surveyed use social media currently, while another 31% say they plan to, probably as soon as the rules of the road become clear. Other surveys confirm that advisors are eager to use social media, if only to demonstrate to clients or prospects, especially younger, more tech-savvy ones, that they are technologically proficient and adaptable. Many advisors believe it also differentiates them from competitors.

The major concerns with social media are that advisors are not sure how to navigate the compliance issues (47%) and that they don’t know how to measure social media’s effectiveness (27%). These were also the top categories of concerns in the prior AdvisorBenchmarking survey.

In a regulatory environment where any mass communication can be seen as a sales piece, one would expect compliance review to be as stringent as it is with other types of sales and marketing collateral. But the nature of social media is that it’s both mass market and spontaneous. Putting a compliance filter on such communications is bound to be challenging. It’s also difficult to quantify how much and in what ways social media helps the client acquisition process. What advisors do know is that it takes time. Lacking staff to manage and maintain a social media presence registered the largest increase among reasons RIAs not using social media.

The AdvisorBenchmarking report also revealed that there has been little year-over-year change in favorite marketing methods cited by advisors. Among the top three strategies, “events marketing” categories (seminars, client appreciation events) appear to be holding firm, while newsletter marketing is down. And there appears to be a slight increase in electronic initiatives such as online searches, webinars, email marketing and conference calls. It is not surprising to see these numbers holding steady given the lack of focus on marketing from a planning standpoint. Just over half of firms reported that they have no marketing plan at all. And a quarter of firms don’t target specific types of clients, which is an essential first step in building a plan—knowing whom you are targeting and how to reach them.

But the biggest drop in 2011 among favorite marketing methods, aside from newsletter marketing, is social media, which has yet to prove itself as a valuable marketing tool in the RIA business. More than 34% cited it as a favorite method in 2010, compared with only 23% in 2011.

Much of the recent confusion over regulations governing use of social media among advisors began in January, when the SEC charged an Illinois advisor with offering to sell $500 billion in fictitious securities via LinkedIn, and used the occasion to issue alerts for investors and advisors on social media risks. The agency said that, while many RIAs want to use social media, they need to be sure they are in compliance, and offered suggestions for satisfying the antifraud, compliance, and recordkeeping provisions of the federal securities laws. What seems to be missing from current guidance is specifically what investment advisors should do to meet regulatory requirements and compliance standards. This contrasts with fellow regulator FINRA, which in 2010 issued guidance on blogs, social networking and personal devices for broker/dealers under its supervision, and has issued several revisions as it wrestles with categorizing online communications as a “public appearance” or “correspondence” subject to rules pertaining to retail communications.

So while rules governing use of social media may be in flux, what’s certain is that social media are not going away. Contributing to the staying power of advisors in the years ahead will no doubt be their ability to comply with the rules but ultimately establish or deepen connections with—but not overtly market to—clients and prospects through social media.