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Digital Strategies in Focus

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Morgan Stanley Chief Digital Officer Naureen Hassan says the key challenge for broker-dealers and other financial firms is meeting the expectations of both advisors and clients — not competing with robo offerings. “The financial technology revolution … is a myth. It’s just another step in the continual evolution” of the business, Hassan explained recent at Hearsay Social’s annual Innovation Summit in San Francisco.

“The winning strategy is combining the best of digital with the power of our 16,000 advisors,” she told an audience of several hundred financial services and fintech professionals. Getting there, however, is not a simple or easy process, given the industry’s regulatory hurdles and legacy issues that have limited how quickly large broker-dealers adapt to change.

“We are starting from a base that is complex,” Hassan said. This means the challenge is “how to build off that and [deal with] the complexity of building on top of the history of mergers and acquisitions” at the firm.

Morgan Stanley has four focus areas for its digital goals: marketing, digitized process, next-gen products and client experience. The wirehouse is using data and technology more “to understand our clients better, so the advisors can take action,” she explains.

But it’s clear that advisors “need to be there — texting, emailing, using social media and all channels of communications,” Hassan says. Plus, the financial services industry needs to do more “to take paperwork out of system — financial services is so archaic,” she explained.

“We need to focus on next-gen products, so clients can stay with us through their [entire] lifecycle,” Hassan said. “It’s about being mobile, anytime and anywhere for [the best] client experience.”

Ahead of the summit, Hearsay Social CEO and founder Clara Shih released a book, “The Social Business Imperative: Adapting Your Business Model to the Always-Connected Customer.” In it, Shih argues that leaders must grasp the “tectonic changes arising from today’s social, always-connected customer, embrace digital at all levels of their organizations and re-architect business practices and models accordingly.”

She brings up several examples within the financial services space. For instance, executives at Raymond James have “found a way to operationalize social media from vision to practice.”

This means that rather than having a separate social media department, the company embraces it from top to bottom. At Raymond James, the firm’s three company presidents are active on Twitter and two-thirds of its advisors are active on Facebook, LinkedIn and Twitter, she says.

In other words, social media isn’t a siloed or marginalized activity — it is a standard (and well-accepted) way of engaging clients, employees and other stakeholders.

Also at the Summit, venture capitalist Jon Sakoda explained, “There are waves of disruption with peak amplitudes.” And that means disruption basically surrounds the industry.

The four pillars of disruption, he points out, are new platforms, big data, favorable (meaning less) regulation for disruptors, and millennial behavior. “Remember, millennials are OK with sharing data online,” the venture capitalist said.

The main force driving disruption in financial services is the “unbundling” of these services by firms largely concentrated in Silicon Valley, he adds. For instance, there are financial firms that focus on car insurance by charging by the mile (Metromile) and no-fee trading applications (like Robinhood).

“The new normal is to hyper-target customers with lower cost products and differentiated services,” Sakoda explained. And these clients are being pursued by “dozens and dozens of firms” — many referred to as fintech enterprises — rather than just a limited number of large organizations such as the big banks and insurance firms.

Will these new armies of fintech firms overpower the traditional entities? “There should be healthy skepticism about any one of these companies putting a Merrill Lynch or State Farm out of business,” the tech specialist said. This is because some 90% of new firms fail. “Of those that are funded by VCs, about 50% make it” long term, he stated.


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