Practical analysis for investment professionals
19 June 2014

World Wealth Report 2014: Can Social Media Help Close the Trust Gap?

The 2013 CFA Institute & Edelman Investor Trust Study found that trust in the investment profession is fragile — and that a lot needs to be done to improve trust, especially among individual investors. Enter the 2014 World Wealth Report from Capgemini and RBC Wealth Management, which suggests social media as a solution. While levels of trust and confidence among wealthy investors are on the rise, the report contends, “firms are aware they must work for it everyday. Social media offers the opportunity to reinforce trust by providing a platform for open, meaningful dialogue, which is capable of also driving business.”

The  authors of the report note that interest among high-net-worth individuals (HNWI) over the age of 40 in emerging digital channels such as mobile applications, video, and social media remains tepid — but that this low level of interest masks “the very strong acceptance of those channels by HNWI under 40.”

For example, 47.7% of HNWI under 40 see mobile applications as important for conducting transactions, compared with 22.5% of those over 40, and 40% view social media as an effective tool for gathering information versus only 18.9% of over-40s. In addition, 40.9% of under-40 HNWI see video as important for engagement, compared with only 24% of over-40s.

According to the report, several key catalysts will “cause an increase in the importance of social media well beyond the current level.” These include:

  • Demographics: The report’s authors believe this may be the most important driver, given the growing prominence of wealthy investors under the age of 40, and the fact that this is a “tech-savvy group that is far more open to using social media than older generations. Among under-40 HNWI, 40.5% cite social media as important for accessing information, 36.3% for engaging with wealth managers and firms, and 33.5% for executing transactions.”
  • Technology: “Social media software customized for the wealth management industry is becoming increasingly available, providing functionality such as content libraries, contact management tools, and data analytics, while ensuring compliance in terms of monitoring, archiving, and wealth manager practices.”
  • Regulations: Regulators, notably the Financial Industry Regulatory Authority (FINRA) in the US, have “become more proactive in educating themselves and developing pragmatic guidance, giving firms more comfort moving ahead with social media initiatives that were once stalled by a lack of regulatory clarity.”

The report outlined four elements for an effective social media strategy, excerpted below:

  • Be Findable: Social networks have become the personal directories of the modern era, so the most important starting point is to be findable by potential and current clients, as well as centers of influence and potential talent recruits.
  • Grow Networks: A critical mass of participating HNWI and other key groups, such as centers of influence and top industry talent, is necessary in your social network.
  • Listen: Firms need to be able to listen and act on key triggers and opportunities, such as HNWI life changes, including marriage, a new baby, or buying a home. This is a more advanced skill set for firms, but third parties are increasingly providing the algorithms and natural language-processing techniques required. Additionally, listening is critical for brand development and reputation management.
  • Communicate: Firms must become more comfortable with letting their wealth managers engage with clients via social media. Although communication for some firms will occur through pre-approved content libraries, other firms are moving to real-time, two-way interactions through social media.

Of course, implementing an effective social media strategy is not easy. As the authors note, “numerous challenges to social media’s expansion in wealth management remain,” including the fact that there is still “a significant lack of clarity” on the regulatory front (a global issue) and firms are unclear on how to measure success.

Nonetheless, the path forward is clear: “Firms need to adopt the same transformational mindset shift when embarking on a social media strategy as when thinking about their digital strategies overall. Simply adding tools will not be enough. Only through trained and engaged individual wealth managers and top-down leadership commitment will social media adoption and ROI appear,” the report contends.

Additional resources:


Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

Photo credit: ©2014 Capgemini & RBC Wealth Management

About the Author(s)
Lauren Foster

Lauren Foster is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Previously, she worked as a freelance writer for Barron’s and the Financial Times. Prior to her freelance work, Foster spent nearly a decade on staff at the FT as a reporter and editor based in the New York bureau. Foster holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

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