Social media has rapidly changed the business landscape over the last several years. Between marketing directly to customers on Facebook to networking on LinkedIn, businesses have the ability to connect with customers and engage with employees in ways not possible in the past. However, financial services companies have been largely unable to access this shift due to regulations in place to protect investors and a lack of clear direction from regulators in this area. Is it possible, however, that this landscape is changing? In 2013, the SEC stipulated that company announcements such as press releases could be disseminated through sites such as Facebook and Twitter. More recently, in March of 2014, the SEC clarified a policy for advisors with regards to customers posting advisor “testimonials” on sites such as Yelp. The SEC stated that advisors can point to reviews on sites such as these with restrictions on print, radio, and television testimonials. These are big shifts for an industry that has had to carefully manage the distribution of such information in the past. While the SEC has loosened some restrictions, financial services firms must still adhere to strict regulations regarding what they can and cannot communicate to clients, consultants, advisors, and the general public.
The Current State of Social Media
So how are asset managers using social media? PwC conducted a survey last year with interesting results. Some of the largest asset managers in the world have active social media campaigns, and most of them are US-based. The top five include BlackRock, Vanguard, and T. Rowe Price. Firms are using social media for the following reasons:
- Product/Market Information: 44% of respondents
- Investor Education: 34%
- Recruitment: 14%
- Disseminating corporate information: 8%
Increasingly, companies are seeing social media as a way to communicate and connect with the end client, to increase brand recognition, and to educate consumers on investing methods and products. As investment management continues to be a competitive market, managers see social media as a way of differentiating themselves in a crowded marketplace. As for which outlets they are using, Youtube is the most popular, with 44% of companies using this tool. Firms see this as better way to educate investors instead of publishing a white paper that people may not read or understand properly. LinkedIn is the second most popular network, with 31% of respondents using it primarily for recruitment purposes. Close behind is the use of Twitter at 30%; respondents are using Twitter to distribute information about products and market-related events. A distant fourth is Facebook, with 18% of companies using.
The caveat to all this is that legal and compliance must still be involved in a process that is not easily controllable. With the nature of social media being the quicker the better and more casual interactions preferred, the typical process of review and standardizing the content doesn’t necessarily sit well with the audience. Some companies are addressing this issue by implementing technology that “sits” between the employee and the network and identifies problematic language and terms. Additionally, automated systems can check social media networks for malicious account use. In the case of Vanguard, they created a cross-departmental team comprising HR, legal, compliance, IT, and marketing to establish internal guidelines and adhere to regulations.
Looking forward to the future appears to be a continuing adoption of social media networks by the financial services industry. Social media is a necessary part of current business planning and while financial services has been understandably slow to use this tool, more and more companies are seeing the benefits of participating in this phenomenon. As regulations are continually clarified and loosened, more and more firms will begin to make social media part of their marketing strategy and that can only be a good thing.