Close Close

Practice Management > Marketing and Communications > Social Media

Financial Firms Eye Up Instagram, YouTube; Compliance Pros Remain Wary

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Firms that allow Linkedin, Facebook and Twitter are less concerned about capturing data than about adequately supervising the content itself.
  • Firms that don't let employees text compliantly or prohibit texting bear the burden of ensuring that employees adhere to the policy.
  • Today, firms are most interested in adding Instagram and YouTube, which enable them to showcase who they are.

Compliance teams at financial services firms remain wary of social media’s reputational influence, enablement of compliant texting for advisors and adoption of new technologies that assist supervision processes, Hearsay Systems reported Tuesday.

Hearsay, which provides social media compliance solutions, also asked about firms’ plans around social media in the next year and found many of them eager to adopt Instagram and YouTube.

“The quantity and complexity of digital communications for financial services have exploded in our hybrid and remote work environments, and compliance teams often lack the resources — both human and machine — to effectively manage this increase in volume,” Iain Duke-Richardet, vice president of compliance strategy at Hearsay Systems, said in a statement. 

“With compliance team sizes expected to remain steady, technology must be leveraged to carry the weight.”

Hearsay’s 2021 Finserv Compliance Survey found that financial services firms no longer view social media as a significant compliance risk, but as a reputational one.

Although more than half of financial services firms surveyed reported that they allow Facebook and Twitter and about 90% permit Linkedin, they are less concerned about capturing, monitoring and archiving the data than about the intrinsic risk of being able to adequately supervise the content itself. 

Two-thirds of firms said they allow advisors to generate unique content for social media, and 90% of firms pre-approve some or all of this original content, even though regulators have lessened the obligation for such pre-review. 

Sixty-three percent of survey respondents reported that they permit texting for business purposes. Hearsay said this indicates that these firms likely have a compliant texting solution in place, and that for these, the solution meets their regulatory requirements with respect to capturing and monitoring that activity. 

Responses from firms in the survey that do not allow texting, however, indicate that they view texting as a significant regulatory risk. 

Hearsay noted that recent enforcement actions have shown that when firms do not provide a channel for their employees to text compliantly or simply prohibit texting, they take on the burden of ensuring that employees adhere to the policy. It said the measures these firms rely on to defend their policy are costly and complicated.

Hearsay conducted an online survey in August and September among 50 North American compliance leaders.

What’s Changing

Financial professionals most commonly use LinkedIn, Facebook and Twitter, according to the survey. But after 18 months of not being able to interact with clients in person, firms today are most interested in adding Instagram and YouTube, which enable them to showcase who they are and what it’s like to work with them.

The most common social channels leveraged by financial professionals are LinkedIn, Facebook and Twitter, while the channels firms are most interested in adding are Instagram and YouTube. Particularly given the lack of face-to-face interaction over the past 18 months, video has emerged as an important tactic used by financial representatives to showcase who they are and what it’s like to work with them. 

Hearsay said the challenges in adding such new channels first and foremost focus on concerns about regulatory acceptance of supervisory technology and methods. This goes back to the need for, and challenge with, adopting and overseeing new technologies, including artificial intelligence, for supervision support. 

Wealth and asset management firms offer advisors fewer opportunities to give and receive endorsements and testimonials than do life and P&C insurance firms.

The survey found much less consensus on whether to allow endorsements — e.g., LinkedIn skills and Facebook likes — and testimonials, such as reviews and recommendations. 

Wealth and asset management firms are keen to seize the opportunity provided by peer-to-peer testimonials, and they are also responding to the Marketing Rule that comes into effect in November 2022, Hearsay said. 

Twenty-nine percent said they will start allowing advisors to accept testimonials over social media within the next 12 months, and 18% of this group will also allow giving and receiving endorsements during that period. 

“Compliance teams need to face their real or perceived lack of technical skills and open the proverbial black box in order to fully leverage digital communications,” Duke-Richardet said

“A key goal for 2022 planning should be to develop these technical skills within the team and learn best practices in documenting, explaining, supervising and testing automation tools.”