Practical analysis for investment professionals
23 May 2012

How Wealth Managers Can Stay Relevant in a World of Social Media

Does your firm have a social media strategy in place? If the answer is “no,” consider this dire prediction: “Wealth managers who have not made initial steps in developing a social media strategy run the risk of losing their relevance in a world where even the most thoroughly vetted and sophisticated advice can drown in a sea of peer-generated content.” That’s the word from research and consulting firm Celent in a comprehensive report “Social Media in Wealth Management.”

The global study polled 40 financial services organizations and technology providers involved in social media. Isabella Cagnazzo Fonseca, research director for wealth management and coauthor of the report, said there were several findings that surprised her:

First, how little firms know about the rules of social media; second, that social media risks are not too clear; ultimately there is no single set of guidelines for social media, so firms will need to ensure they are following the compliance rules of each country; third, how social media has become a ‘must have’ so quickly either for support, marketing, or loyalty/brand, and how firms have not been proactive about their social media policy; and fourth, that so many advisers use social media to reach out to clients.

While the adoption of social media among wealth management firms is “at early stages,” the report notes that it is a communication channel that “financial institutions can no longer ignore.” Indeed, an article from On Wall Street noted that “wealth management firms are still gradually introducing their financial advisor forces to social media, but three years from now they fully expect the new medium to have fully taken hold in the industry.”

What has held back many firms from embracing social media is the regulatory environment. (For more on this topic, read “To Tweet or Not to Tweet: Social Media Rules in a State of Flux for U.S. Investment Advisers” from the Market Integrity Insights blog and “Investment Adviser Use of Social Media,” a risk alert from the Securities and Exchange Commission.) Other reasons why some firms may be slow to move could include entrenched mindset in the executive ranks and concerns about risk and controlling the message. Rich LoPresti, wealth manager and social media director at Baker Avenue Asset Management, wrote about why the financial services industry is bearish on social media in a recent blog post that is well worth a read.

The Celent report highlights four “drivers” or reasons why some wealth management firms have adopted social media. They are excerpted below:

  1. Building credibility amidst an economic crisis and falling adviser trust. As a result of the financial crisis, clients have less trust and belief in financial services firms and advisory services. This is forcing the wealth management industry to look at clients in a new light. They need to identify newer models to capture new customers and retain old ones, and to improve their communication to increase the confidence and trust of their clients.
  2. Matching clients’ behavior. Firms started realizing that customers had become social in their internet usage and behavior, and thus found social media to be an excellent marketing medium. The population in the United States is getting younger, forcing firms to cater to the younger generation through a communication channel of their choice.
  3. Creating a channel for improving client satisfaction. While customer support has not been the social web’s primary focus, firms have realized that most of the customer concerns are generic and repeating. Firms have realized the power of building an extended, dedicated community around the firm to enable faster and quicker resolution.
  4. Developing a high-impact sales channel. Social media has been accepted as a channel not only for marketing and support but also for generating sales opportunities.

In terms of social media best practices, the report notes that most firms have not been proactive on this front:

A majority of firms have a policy around their business email, but far fewer firms have a Facebook policy or a Twitter policy. The key reason is obvious: the rules and regulations around social media communications have been evolving only recently. Furthermore, most of the firms do not have a grip on the technology solutions available to execute their policy if they indeed develop it.

There are good reasons why wealth managers should adopt social media, according to Fonseca: “It is a cost-effective channel to attract prospective clients and keep happy existing ones. With social media, the number of interaction touch points have increased, both for employees to interact with their customers and for customers to view opinions about the firm.”

The long-term risk of not adopting social media, Fonseca said, is that advisers will “miss out on an important channel that will bring leads and create an effective brand for the firm.” (See this article on how LinkedIn’s group pages are a prime place to mine for prospective client leads.)

For those who are considering exploring social media, the report notes that there are a few important aspects to consider:

  • The reason. The firm should have a clear objective.
  • The type of social media to be implemented.
  • Which regulatory rules to follow.
  • The technology requirement to roll out an effective social media strategy.

The first step, says Fonseca, is to build a social media policy so that the firm has a clear understanding of the purpose of social media and how it will be used. has collected an extensive database of social media policies that you can reference when creating one for your own firm.

To learn more about how advisers are using social media to get an edge, read “Social Graces” from the January/February 2012 issue of CFA Magazine. And to better understand some of the risks and challenges that social media poses for your wealthy clients and their families, I recommend the white paper “Family Security & Social Media: Protecting Your Family from Security Gaps in Social Media.”

You can also read the February issue of CFA Institute’s Private Wealth Management Newsletter, which focused on social media.

And, for detailed information about Twitter, check out “The Financial Adviser’s Guide to Twitter.”

About the Author(s)
Lauren Foster

Lauren Foster was a content director on the professional learning team at CFA Institute and host of the Take 15 Podcast. She is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Lauren spent nearly a decade on staff at the Financial Times as a reporter and editor based in the New York bureau, followed by freelance writing for Barron’s and the FT. Lauren holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

3 thoughts on “How Wealth Managers Can Stay Relevant in a World of Social Media”

  1. Lauren, great article, and an even better blog! You have put together some great resources for Investment Professionals (or anyone in a regulated industry for that matter) who want to start using social media for business. Thank you for mentioning me in your post. Very much appreciated!

  2. Greetings! Very helpful advice in this particular article!
    It is the little changes that produce the most significant changes.
    Thanks for sharing!

    Here is my site: marketing for wealth managers

  3. Arrocomm says:

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