Drive for Results

interviewed me for my thoughts on his findings a couple of months back and I shared with him much of what you will see below. The title of the study states that “The Bloom is Off the Rose” meaning that advisors are discovering that there is not as much value as proponents of social media claim. While that title is provocative the subtitle “Most Have Unrealistic Expectations Or Fail To Use It Correctly“ gets to the root of the challenge.

Here is my take on how advisors and financial firms should interpret the results of the survey.

My first question to the author was, “are these the same advisors?”

The advisor sample used in 2011 is similar but not the same as that used in 2009. The headline in the RIABiz article seems to indicate that the advisors who were originally surveyed back in 2009 are the same advisors responding to the 2011 survey. This is not the case. It is actually a different random sample of advisors using social media who are reporting a lower level of success than those advisors surveyed two years earlier.

Statistically this is an acceptable practice. Random samples are supposed to guard against selection bias. This is how marketers and political pollsters run their surveys. However, in this case I think it may lead many readers to come to a false conclusion that there is less value to be had for financial advisors on social media now compared to what existed back in 2009.

What I would really like to see is a second survey of the original participants that compares their sentiments in 2009 with the those of 2011. I suspect we might see a different picture emerge than what the 2011 survey respondents reported. Why? Well, I know two years doesn’t sound like a long time but when it comes to social media, it’s a lifetime.

The social media landscape in 2009 was vastly different than the environment in 2011

Below are a few simple facts about the environment in which financial professionals were operating in 2009 compared to those surveyed in 2011.

• The advisors surveyed in 2009 were likely, as a population, much earlier adopters of social media than those surveyed in 2011.
• The population of people and financial advisors on social networks was much smaller in 2009 than in 2011. To put it into perspective, Facebook had 25o million users  back in July of 2009 compared to approximately 900 million at the end of 2011. Twitter is said to have over 200 million users/accounts but over 100 million of those accounts were added in 2010.
• The volume of posts from individuals and brands was much smaller in 2009 than it was in 2011.

Social media in 2011 was vastly different for financial professionals than it was in 2009. This is important to understand.

Why is the difference in the social media landscape between time periods important?

The logical assumption is that it must have been easier for advisors back in 2009. Since social networks and the concept of an interactive web were so nascent by comparison, advisors who were first on the scene found the streams of Facebook, Twitter and LinkedIn paved with gold. The simple act of being on social was enough to make the skies open up and rain assets under management.

As funny as that image is, it actually was a different world back then. As someone who has been using social media since 2004 I can attest that it was much easier to gain access to influencers before their follower counts exploded into the millions and it was much less noisy in peoples streams before every brand in creation started interacting with us all. But, I can also tell you from personal experience that the early (bleeding edge early) adopters back in 2009 and before saw something the rest of the world didn’t yet grasp.

The early adopters saw opportunity before anyone else. We saw that social media was where the world was headed and we got to work. We joined Twitter before Oprah and Ashton Kutcher put it into the collective consciousness. We were the ones inviting our professional networks to try this new thing called LinkedIn and convincing our friends and family that Facebook really had value. So in many ways is was significantly harder to find success on social media back then mainly because the tools were not as widely adopted by the general population.

Convincing people to join a social network is substantially more labor intensive than asking them to connect with you once they are actively using the network.

The opportunity for financial professionals using social media is still great for those who are willing to put in the effort and use best practices.

Success in any business endeavor requires work. It takes effort to build a network and it takes a consistent amount of interaction with that network to build the trust and familiarity necessary to drive business results. I suspect, based on what I commonly see, that many of the advisors surveyed have not yet put the effort into social media that the original population had when it was surveyed.

This suspicion was echoed by the study’s author as well when we talked. His take was that many advisors are sort of poking at social media by publishing links to their blog posts and market commentary but not going much further to build rich interactions with their networks.

This is not to say that the 2011 advisors were lazy. Far from it. They took the initiative to explore new tools and channels for marketing and client service. These advisors, like the 2009 participants, want to grow their business and serve their clients in a manner that suits their needs. However, the bleeding edge advisors I mentioned above were the innovators and pioneered the new space. The next wave likely jumped on to social media without the full conviction necessary to build a robust network and the marketing savvy (as Ron say in his subtitle) to take advantage of the network they did build.

This phenomenon is common. The innovators come first. These people are driven by a fire within to blaze a new trail. Tales of the innovators’ success is told far and wide. Excitement spreads among those itching for an edge and the second wave begins its pursuit of success. In this next wave some succeed and some come up short. Tales of disillusionment and risk begin to bubble up and people wonder if the tales of success were but a fantasy. But then, as the dust clears people begin to see it clearly…the innovators were right. Their vision of the future was true and now a system of success begins to be developed and honed.

A dramatic rendition to be sure but this is exactly what we saw with the gold rush, the industrial revolution, the internet boom, e-commerce and with social media usage in unregulated industries. The brute force, over the top efforts of the early adopters eventually lead to repeatable patterns that others can use to achieve their own success. Systems like the Social Business Activity Cycle are very prescriptive and a direct result of those early efforts.

In my next post I will share a very numbers focused pattern for success. I’ll start with a simple question “How many clients, prospects and referral partners are you connected to via social networks?”

You can have the best product or service in the world but if it doesn’t fit the customer’s needs or desires it will still find its way onto the fail pile. Consumer behavior is also important when it comes to your marketing and communications efforts, including social media. We live in a day and age where people fast forward through commercials on their DVRs, avoid ads altogether with Spotify and let incoming phone calls go straight to voicemail. If you want to get the attention of your target market today you need to engage on their terms.

Check your assumptions about social media.

We are all guilty of making assumptions from time to time that are later proven false. I shared one of my biggest misses in a post about the importance of connecting to active users on social networks. It took me a few months to come to the realization that Twitter is a powerful tool for the financial professional. Like I did, I am sure you have a few assumptions about how you will use social media, what it is good for, who uses social media and which tool is best for you.

Below is a short list of assumptions I have heard in my conversations with financial advisors in 2011. Each assumption is a challenge that needs to be addressed before you, the advisor, can achieve success with social media in your practice.

• “My clients aren’t on social media.” Are you sure? Have you checked? With 800 million people on Facebook, 200 million Twitter accounts and 120 million on LinkedIn are you sure none of your clients are using social media? The big problem with this assumption is that it halts you from digging in to see which clients are using social media and what are they using it for.
• “I’m only going to focus on LinkedIn because that’s the most professional network.” True, LinkedIn is a professional network. However, are all your clients professionals who spend significant time on LinkedIn? LinkedIn is important and a great source for networking and seeing money in motion opportunities created by people changing jobs but what about small business owners or people who don’t really do much business networking like say…developers? How much time are these people spending on LinkedIn? Be aware that your clients and prospects may not have the same preferences when it comes to their social networks of choice.
• “I am going to use a Business Page for all my professional interactions on Facebook. I don’t want to mix personal and professional networks.” Did you know that over 90% of the people who “Like” your Facebook Business Page will never come back to that page? Your Facebook Page also can’t friend people on Facebook, so you are going to have work extra hard to drive traffic to your page to generate likes so you can take advantage of all that Facebook has to offer. Should you have a business page? Sure, but remember people are connecting with you not just your business.
• “I’m never going to get on Facebook. I’m a private person. I don’t want people knowing everything about me.” Come on…we all remember plenty of people (maybe you were one of them) who said they saw no need to have a cell phone or that the internet was a fad. I had people tell me the same thing about LinkedIn back in 2004 but they are all using the service now. Planting your foot in the ground doesn’t help you explore the potential value of a new technology. What’s worse is such a statement increases the likelihood that you will be a laggard and feel completely out of touch with your network at some point in the near future. Lastly, who said you have to share details about yourself that you aren’t comfortable sharing on Facebook? It’s not like joining Facebook magically causes all of the most intimate details of your life to be sucked in. What’s most important is that you are there for your clients and prospects when they are sharing things that are important to them.

How your clients, prospects and referral partners use the tools available to them should be the primary driver of your social strategy.

When in Rome…Go Native!

You wouldn’t show up to a black tie dinner wearing shorts and flip-flops just as you wouldn’t go to the clambake at the beach in a tux. Observing the cultural norms of the community and the situation is key to successful networking. I often use the cocktail party analogy to illustrate how to effectively work the “social media” room. The key takeaway being that you should consider your participation on social networking sites to be akin to your attending a real world social event.

More importantly, remember you actually KNOW the people at this social event. You need to be real and approachable with these people.

The assumptions listed above and many other preconceived notions can hinder your ability to navigate this new world. This is especially true if you let it blind you to the value of how your clients, prospects and referral partners are choosing to engage online.

What should drive you as a professional in any social situation is a desire to add value and build relationships. Relationships are built on shared interests, values and connections. Your ability to add value to those with whom you have, or seek to have, a relationship is predicated on your relevancy to that person’s life. Value, is created in many ways (see Maslow’s hierarchy of needs) and people engage at nearly every level you can imagine via social.

To be successful you have to pay attention to how, and why, people are using the tools. Here are a few things people use social media for:

• Connection – People are social beings. They love to connect with others. Using social allows them to feel connected and ensures they will never lose touch. Your clients, prospects and referral partners are people too.
• Fun – People like to laugh and play. “But, I want to make money!” you say? Hello?! Golf course, tennis, sailing, wine tastings….any of these ring a bell? You are already out there having fun with your network. You can do it here too.
• Venting – People love to blow off steam. It’s not uncommon to see someone go off the hook about the little things that drive them nuts on social networks. You can learn a lot about people by understanding and identifying with their pain points. Remember, people want to be heard and understood.
• Requests for Help – People turn to their networks for referrals (that got your attention), information, support and occasionally genuine pleas for help. Does it makes sense that you might want to be there for your network when they need help? If for no other reason than to protect your client base?
• Exploration and Discovery – People love to find new things, venues, services, entertainment and connections. The cool thing is, they tend to remember the people who introduced them to the new hotness very fondly.
• Sharing and Thought Leadership – I put this one at the bottom so you would have to scan through the others and let their importance sink in. People absolutely share business updates and thought leadership on social channels. They have professions and goals too. They want to plug in to social in hopes of their network spreading their message just like you do.

The list could go on forever I am sure but you get the point. Your network is on Facebook, Twitter, LinkedIn and beyond and they are using the tools for all sorts of reasons in all sorts of ways. Your job…join the conversation.

Much has already been written about the fact that “liking” a piece of content can be viewed as an endorsement (for now I won’t go into all of the compliance issues associated with endorsements, entanglement, etc.). As a result most firms with registered reps choose to block this capability on the social networks.

Before going any further let me offer a quick 101 class on sharing content. There are in fact multiple ways to “share” content and information across Facebook, LinkedIn and Twitter. Likes, Shares, Favorites and ReTweets – these are all actions you can take on these popular sites but all basically produce the same result. They publish a “message” to your social network thereby spreading the content further. Since it was an action you took there is a perceived endorsement of that content.

To make things a little more complicated we also have to remember that “liking” on Facebook has multiple uses. It is used to share information and show interest in a particular post but it is also used to connect to Facebook Pages (vs. adding a friend on a personal Facebook page). For the latter you are basically subscribing to that Page, opting in to receive that Page’s updates.

As a test I wanted to see if the terms around content sharing affected a firm’s policy. In fact, today it does. We analyzed policies from across the industry and found the following:

• 36% block Facebook and LinkedIn “Likes”
• However, for those that block Facebook Likes, 0% block LinkedIn Comment Sharing, News Sharing and Update Sharing.
• For those that block Facebook Likes only 20% block Twitter Favoriting and Retweets.

It would appear that the action of “liking” is viewed differently than “sharing.” But should it? I would suggest no. If your policy is to prohibit the programmatic sharing of content (meaning it is shared by clicking a button vs. posting something manually) then that policy should apply to all social networks, for all content.

Let’s dig into the notion of creating a basic post on these social networks. For example, creating a status update on Facebook or tweet on Twitter. Those posts may be original content or they may be a reference to some other piece of content you’ve found interesting. From this perspective you could argue that if you are going to block “liking” (used in the generic sense) then you should also limit the posts being made directly via the social networks themselves. While I hope this is not the case I feel compelled to offer the perspective.

One thing I think we can all agree on is that whether it is social networks or some other medium the test is of the content itself. Sharing a post about the Cardinals winning the first game of the World Series (Go Cards!) clearly does not pose a risk, whereas sharing a message on a specific financial product could…it all depends on the content. As you can see, content is king. The message should be scrutinized vs. the action that delivers it to your social network.

What is your take? We’d love to hear it. Just leave a comment below.

And one more thing, this will be one of the many topics we are discussing at our Compliance User Group on November 4^th. If you need more information please contact your Customer Success Partner.

This week I would like to talk about Facebook and its importance to the financial professional. Like Twitter, the tool is often mocked by those who haven’t used it or who have created an account and have yet to spend any appreciable time on the service. Additionally, many of those who understand the personal significance and utility of Facebook struggle to see the true business value inherent in all the photos, status updates and games being played on the site.

Like last week, I ask you to stop and think about this concept for a moment.

There is a site where nearly everyone you know (there are over 139 million Americans on Facebook) has an account. On this site, these people are sharing details about everything that is happening in their lives. True, some people overshare but to them what they are sharing is important.

The average user spends over 15 1/2 hours each month on Facebook. During their time on the site each month, the average user shares 90 pieces of content. They are connected to a network of 130 people on average and are actively adding new connections.

Facebook is bigger and much more important than you can imagine.

It is hard to watch TV, read the paper or a magazine or visit a website without seeing a call for action on Facebook. The reason for this is the collision of the social graph and the interest graph that happens on Facebook.

• Social Graph – People connect with everyone who is important in their lives on Facebook and many connect with people with whom they have only a casual relationship. These connections and how they overlap across populations create a social graph. And since people tend to connect with people who have common interests, beliefs and lifestyles this graph offers marketers a powerful medium for targeting their message to a relevant audience. The logic goes, “if your friends like this, you most likely will too.”
• Interest Graph – People also declare their interests on Facebook on every facet of their human experience. They share what they are reading, what TV shows and movies they are watching, what music they like, their favorite sports teams, their politics, religion and more. They share this information either explicitly in their profile or in the pages and content they like or they share it passively through their behavior. As a result it is really easy to target an audience of people who have already indicated an interest in what you are sharing.

While all this might sound a bit creepy and a little big brotherish it also creates a lot of value for the user. An experience designed around what YOU find interesting, relevant and important is much more desirable than a haphazard random walk.

How can you use Facebook in your financial practice to drive value?

To answer this question I think it would be helpful to ask you question. What are some things that your clients, prospects or referral partners might share that would be helpful to you in terms of bringing in new assets or improving the profitability of your business?

To frame the approach you should take on Facebook let’s use the five steps in the Social Business Activity Cycle:

1. Connect – Build a robust network. Reach out and connect with as many relevant people as possible. Think about friends, family, colleagues, classmates and beyond. Imagine how powerful it would be if you could connect with all the great people you have met in your life? This is so important because it’s hard to see value in a social network without connections. Use Facebook lists to categorize your connections as clients, prospects or referral partners. The recent updates to the list feature on Facebook give you a lot of control and efficiency both in terms of sifting through the noise for relevant posts and who see your posts for greater message targeting. Think social and interest graph here.
2. Listen – Use your lists to listen to your network. FINRA has a rule that requires you as a financial advisor to “know your customer.” Your clients are sharing all sorts of things daily. Pay attention! Your prospects and referral partners are also sharing things daily. Some of the things people share like job changes, expecting a baby, getting engaged or experiencing a death in the family are indicators of money in motion. If you are listening, you can seize the opportunity to help.
3. Respond and Amplify – It’s odd to think that a person would take a picture of a tarantula crossing the road, post it to Facebook and expect a reply but that’s exactly why they are doing it. People use social tools to connect and engage with other people. We are social beings, we crave interaction and validation. Your clients and prospects will love that you chime in from time to time on things they post. That’s why they posted. You can be their most engaged and caring advisor. You can be the one who helps spread the word about the cause they are raising money for. You can share the link to their most recent blog post. Using the list approach mentioned above makes it quick and easy to scan your clients for opportunities to respond or amplify.
4. Share – People want to hear from you too. What did you read today that was interesting to you? Was there a Facebook share button on the article where you read it? If not, grab the URL for the webpage and paste it into a post on Facebook. What topics do your friends find interesting? What do you like? Share stuff about that. Be the one who shares the good stuff. And of course you should share timely content about relevant topics for your business.
5. Expand Your Network – Relationships are the lifeblood of a financial practice. Growing your network is a sure way to keep your pipeline full and your referral engine strong.  As you go about life you are going to find new people and new people are going to find you. Friend the ones that look most relevant. Remember, everyone you know has the potential to send you business.

There is a reason why companies have historically advertised on television, radio and print. You put your message where the people are. The same can be said of Facebook as the stats I shared earlier indicate. But there is something much more valuable here. Instead of broadcasting your message to the masses in hopes that your target customer might happen to see it and pick up the phone, you now have the ability to build a large network of highly relevant individuals, build and maintain relationships with them over time and be there for them when they need your services.

So what do you think? Do you see value for your business on Facebook? Are you using Facebook for business already? If not, what’s stopping you?

We just released the 2011 version of the survey results with even more data about the impact of social media on the financial services industry, particularly focused on the advisors themselves.

Here’s some background on the advisors:

• Age- It wasn’t just the younger advisors who said they were using social media.  75% of the advisors replying to the survey were 36 years or older.
• Practice type- Advisors from all segments expressed interest in the survey.  Independent advisors, others with large firms, advisors just starting, and many with very established books of business.

Social media usage had definitely increased since last year.  In our 2010 survey, 60% of the responding advisors were using social for business purposes.  Fast forward to this year, and the number was greater than 80%.  And they are seeing results telling us about the referrals, prospects, and new clients coming from developing and deepening relationships through social media.

Prioritizing social media among the advisor’s tool set of options is increasing as well, so it’s not just a matter of “using social media.” Here’s how some of the advisors described social media in their own words:

• “This is where the people are.”
• “I think it’s a must going forward if you look to be competitive.”
• Social media is a “great way for prospects and clients to learn more about us and deepen relationships.”
• “We want to grow our firm by 20% annually for the next 5 years. We find social media to be an incredibly cost effective way of achieving that.”

To learn more about the survey results, the executive summary is available now.

Three things happened soon after that completely changed my mindset about Twitter and more broadly expanded my understanding of the potential of social media.

1. My one Twitter follower/followee, Aaron Strout, added a link to his Twitter profile to his email signature. That seemed absurd to me until I clicked the link and saw that he had some 600 followers. I thought “Whoa! That’s a lot of people following him. What’s going on here?” My next move was to Google his name and low and behold his Twitter profile showed up in the first page of results. “Ah! Twitter is Google juice!” I realized. Every tweet (post) creates a unique URL with your name in the content of the page. Each time someone from your network on Twitter mentions you, your name shows up on a page. The SEO benefits of Twitter, and other social networks, alone made it worth exploring.
2. I attended a Jeff Pulver social media breakfast event. I had no idea who Jeff was but a friend of mine suggested I attend the event since I was showing interest in social media. I later learned that Jeff is the founder of Vonage and very influential in the social media space. At the event I met dozens of people who were all interested in social media for business. What was really interesting was that everyone was on Twitter. Each time I met a new person we exchanged Twitter handles allow with our standard contact info. I left the event connected to a bunch of new people who were all excited about social media. My network had legs.
3. It turned out that two of the people I met at the breakfast were already very active and having great success in the social media world. Laura Fitton and Doug Haslam each already had a couple of thousand followers. One thing I noticed about both Laura and Doug on Twitter was that when they asked a question they would get a lot of replies. I immediately realized that having more connections on a social site lead to an increased likelihood of engagement from ones network.

Lessons Learned and How You Can Benefit From Them

I learned a few key lessons about social networking in those early days. While these concepts may seem basic to my friends listed above, most people in the financial services industry are just getting started in social business at the time of my writing this post.

1. Attending social media events are a sure way to fill ones network with people who will be actively using social media. At first this might seem like a time waster for the financial advisor or insurance agent but beyond the benefit of building a network and learning social, you’ll meet a whole bunch of potential new clients. So…trust me…start looking for Social Media Breakfasts, PodCamps, Social Media Clubs, Meetups and Tweetups in your area.
2. 100 connections is a magical number. It is not necessary to have tens of thousands of connections to be successful using social media. This is especially true given that most financial advisors need only 100 clients or so to have a very profitable business. Network size does matter however. If you only have 40 followers or friends or contacts the social sites are going to look very stale to you. You will have a hard time seeing value with only a few new updates to look at each time you visit the site. A small network also means that it is unlikely that you will see a lot of interaction with the content you share. Ask a question and you’ll hear crickets. I noticed something magical happen when my connections rose above 100. Suddenly I was seeing something interesting each time I looked at my stream. On Twitter and Facebook I started to see people reply to me when I posted something. I don’t have any science to back up the 100 connections equals a tipping point to value creation assertion but I think you’ll agree it makes sense.
3. Connect with some highly active social media users in real world, offline, friendships. I was very lucky to have met and become friends with the people mentioned early when I did. Very few people were turned on to social in those days and even fewer had thousands of connections. Now, it is relatively easy to find people who are going gangbusters. These people are not only going to fill your stream with frequent, high quality content, they will also help you grown your network and encourage you through their example.

In the Social Business Activity Cycle you will notice that “Connect” is the first step in the process of deriving business value from social media. It makes sense doesn’t it? Social networking requires people to network with. More quality people in your network naturally lead to more opportunities for to spot money in motion events from clients, prospects and referral partners. More connections who are active users of social also means you will be more likely to see people retweet and share your content with their networks.

Activity breeds activity is something I say frequently when asked “How do we get advisors (or agents) moving on social?” The surest way to ensure activity happens is to connect with enough people so there is never any dead air.

The good news for those considering a move to social is that FINRA clarifies you do not need prior approval for communications posted on social sites as long as they qualify as interactive electronic forums. FINRA tried to introduce the concept of static vs. interactive with Notice 10-06 but unfortunately it created more confusion than clarity in the market. That was the one component introduced in 10-06 that was new, but there were no rules in place to support the actual definitions. The rest of 10-06 was clarification on existing rules. So we are back to where we started. It is all about the content and it’s classification.

You can access the entire SEC submission here, but to save you some time I’ve gone through and called out the parts that are most applicable to social media.

Communication Categories

The current NASD Rule 2210 divides communications into six separate categories:

• Advertisement
• Sales Literature
• Correspondence
• Institutional Sales Material
• Independently Prepared Reprints
• Public Appearance

FINRA is proposing to reduce the categories from six down to three. The new categories would be as follows:

• Institutional communication: includes all communications that fall within the current guidelines.
• Retail communication: includes any written (including electronic) communication that is made available to more than 25 retail investors within any 30-day period.
• Correspondence: includes any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30-day period.

The proposal eliminates the current definitions for advertisement, sales literature, institutional sales material, public appearance and independently prepared reprints. They point out that “communication that currently qualifies as advertisements and sales literature would generally fall under the definition for retail communications.”

As it relates to Retail communication they provide a supervisory exemption for specific categories of this communication type. Two of these categories matter for social media. The first is any retail communication that is posted on an online interactive electronic forum (eg., social networks).  The second is any retail communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member.

FINRA explicitly points out that the clarification around interactive electronic forums “codifies their current interpretation of the rules governing communications with the public on interactive electronic forums.” In other words, Notice 10-06 provided guidance to the industry but did not actually create any new policy. This change will make the interpretation explicit from a rule standpoint. There is no mention of the notion of static vs. interactive, which has caused confusion in the industry since no policy exists to back up those definitions introduced as part of 10-06. The second exemption broadens a current principal such that it would apply to all retail communication. This second exemption is important for social media because so much of what gets shared isn’t financial or investment related.

Both of these are positives for firms looking to embrace social for their reps.

In a nutshell it makes clear that organizations DO NOT need to pre-review content that is posted to social networks like Facebook, LinkedIn and Twitter.

Of course, recordkeeping requirements sill must meet the current standards. In addition to the recordkeeping, firms must supervise this content in the same manner as correspondence (i.e., post-review).

FINRA also reminds readers that rules around predicting performance, implying past performance will recur or making any exaggerated or unwarranted claim, opinion or forecast still apply. In other words your content must be fair and balanced. Something that a California-based broker failed to adhere by and as a result of her tweets was fined and suspended by FINRA.

One of the other interesting additions was the following: “Given the rapid changes to technology used to communicate with customers, FINRA believes it will be useful going forward to have exemptive authority with regard to the principal pre-use approval requirements applicable to retail communication in certain circumstances.” This statement shows an understanding that technology and communication mediums are evolving faster than policy can keep up. In theory this will help FINRA support the industry in a timely fashion without having to wait for formal rule clarifications or modifications (like this one).

3^rd party comments were mentioned but FINRA felt that Notice 10-06 in combination with previous guidance adequately addressed that topic.

The one area not specifically called out is social networking profiles. Going back to 10-06, FINRA calls for this content to be pre-reviewed and classified it as an advertisement. Under the proposed rule change it would now be classified as a retail communication. There is nothing in the proposed changes that would suggest it qualifies for the exemptions outlined above. As a result this content must still be pre-approved before being posted to social networking sites.

Comments on the proposal must be submitted to the SEC on or before August 24, 2011. At this point it is anyone’s guess as to when this will be finalized and approved. Independent of that date, these changes provide some great insight into how FINRA will look at social media communications. I suspect other state and federal regulators will be taking note as well.

In my opinion there are 10 reasons why firms should start down this path immediately.

1. Competitive advantage
   The industry slowly started moving towards social early last year. Near the end of 2010 the pace accelerated. Today firms feel the competitive pinch, recognizing that major players are not just opening up access but treating social as a competitive weapon in their business. Social is becoming core to an effective, integrated digital strategy. In a world of no call lists, indifference towards email and lack of trust in advertising, firms and advisors must find new ways to connect with customers.
2. Recruiting
   Over the last 12 months we’ve seen firms use the fact that they provide social media access as part of their overall advisor recruiting message. In an InvestmentNews article Amy Webber, President of Cambridge, mentioned that as part of their social media program they’ve “launched a council to help shape the way the broker-dealer accommodates and recruits the next generation of advisers.” Clearly placing an emphasis on how next generation technology (ie., social media) will be critical to the advisor of the future. In 2011 and 2012 this message is going to evolve to focus less on providing access and more on partnering to help drive true social business. Firms that start now will have a head start in the recruiting battle and will be more effective at helping advisors use these tools effectively and efficiently.
3. Consumer demand
   Today 1 out of every 6 minutes is spent social networking by consumers. And the volume of users is massive. There are over 750mm users on Facebook, over 275mm on Twitter and over 125mm on LinkedIn. Social networking for consumers is as core to our online experience as Google is these days. What this means for you is that consumers expectations are increasing. They expect their advisors to be on social. They expect to be able to communicate via this medium. They also expect more transparency – largely due to the last few years. And if you aren’t there, you should expect your competition to be, waiting to help fulfill YOUR customer’s needs.
4. Advisor demand
   In a recent research piece we found that advisors that participate in social earn more money, have larger average account sizes and more clients (look for the full report shortly). Results like this are reasons why Ledermark found that 85% of financial services professionals under 50 are utilizing social media. And this number is only increasing. Most have already seen the news about Morgan Stanley, opening up access to advisors and as April Rudin, CEO of The Rudin Group, points out “When Morgan Stanley Talks, People Listen.”
5. Compliance risk
   Some firms still believe that a policy of prohibition will keep them safe and out of the cross hairs of the regulators. This couldn’t be further from the truth. A Socialware survey from last year showed that over 40% of advisors were knowingly violating corporate policy by use social media for business purposes. If you do have a policy of prohibition you must have procedures in place to test and ensure adherence. A quick search of LinkedIn will illustrate that trying to prevent this tidal wave is a futile exercise. FINRA started doing some cursory audits using this approach last year. For 2011 they made social media an examination priority. In addition, you are starting to see action by the SEC and the state regulators. This action is not only guidance and examination, it is also fines and suspensions. Earlier this year FINRA took action on an advisor who was posting inappropriate content to Twitter. This is just the beginning, especially for firms that choose to hang on to a state of prohibition.
6. Brand awareness
   In an age where trust in brands is decreasing and trust in friends and family is increasing, firms have an opportunity to leverage the power of social networks to grow their brand’s awareness. It won’t necessarily come from corporate pushing the brand message, but rather from the people that make up the brand. Specifically, those individuals that have personal networks that will listen to what they have to say and ideally help spread the word.
7. Top line growth
   As firms progress from prohibition to participation, the next level and ultimate goal is social business. It isn’t enough to simply have a presence. If you are going to take the leap into social, the goal should be to support your corporate objectives and your advisors individual goals. This ranges from lead generation, partner development, account growth, client retention and of course recruiting. Not only can the right social program drive these objectives, but you can also measure your results. As you work to develop your strategy you might find the following videos helpful from industry leaders like Morgan Stanley, Guardian, Forrester and Thomson Reuters.
8. Wealth of information
   A few of the top objections I hear about adopting social is that advisors don’t know what to say or that it takes too much time to create content. Independent of whether you agree with that objection, it is important to recognize that you can realize so much value simply by “listening” to what your network is saying. Did someone just take a new job? Get promoted? Did they recently get married? Perhaps they just found out they will be having a new baby. All of this information is valuable to an advisor and it is all sitting right there for you to consume on social networks.
9. Broaden the conversation
   Building a business as an advisor isn’t always about 529 plans, mutual funds, life insurance, etc. It often starts with building a presence in the community. Perhaps you’ve joined the local Rotary club. It starts with current events. You are at a friend’s party and start discussing the latest topic capturing the country or your town’s attention. Perhaps it’s a hobby. I still remember the first HD broadcast of The Masters. Amazing! The point is there are so many ways to “connect” with people on social networks. What may start as a discussion about triathlons may end in a fruitful, long-standing business relationship.
10. Relationships, Relationships, Relationships
    More than any other reason stated above, advisors and their firms should move on social because of the value it brings to your relationships. No other medium constantly keeps you connected to your friends, colleagues, clients, prospects and partners. It is a way for you to stay plugged in to what matters to your connections and gives them a mechanism to do the same. It will help you manage more relationships than you thought possible and in the process actually more meaningful ones as well. In today’s volatile market the world is going to have questions, your network is going to be seeking information, your clients will want to be assured. If you aren’t on social, you are missing an opportunity to further develop the most important relationships to your business.

I hope these 10 reasons provide valuable food for thought. As a bonus I have one more to share.

10.5 Social is a Journey, not an event
Social media is not a silver bullet and results don’t happen overnight. You will be starting a journey with your social initiative. One that will require in depth knowledge about the issues. One that will require you to evolve your processes. One that will require you to redefine how you do business. The key with this journey is that you take the first step – you have to start somewhere and I would suggest that you have to start today. If not, you risk losing ground to the competition, you risk unrealized opportunity, you risk losing clients, advisors and most of all you will look up one day and force yourself to scramble to catch-up. An approach that will likely cost you more in the long run.

I’m sure this is only a partial list, so feel free to add your own reasons below. We would love to hear your thoughts.

In the early days of my role as Socialware’s Social Business Strategist I have noticed what I would describe as a gap between understanding intellectually, at least at a high level, that there is business value in using social media and a full on conviction that these tools are powerful and arguably indispensable to the modern financial professional’s business. In doing some brainstorming with Stacy Yamaoka and Carolyn Pawelek, of our Customer Success team, about the user path to social media adoption I came up with what I believe is a simple process to close this gap.

The process builds on an idea Stacy had for a simple checklist of tasks that users at financial firms could use to get up and running. In her role as Implementation Manager she uses a checklist at the company level for our customers. It seemed only logical to use a similar checklist at the user level. But, as I thought about it more the checklist’s linear “get it done” approach wasn’t really going to go very far in getting the financial professional to success with social. We needed a to create an easy to understand framework for ongoing activity designed to produce profitable business results.

Introducing the Social Business Activity Cycle

The Social Business Activity Cycle is a simple, five step process for managing relationships with clients, prospects and referral partners. With this process, users can easily get started and quickly move into realizing real business value from online social networking. The efficiency of the system ensures that users won’t get bogged down in minutia or be overwhelmed or frustrated. In financial services time really is money and what we have created with the Social Business Activity Cycle is a way to realize positive ROI via a straight forward daily process.

Below is an outline of the Social Business Activity Cycle. You can also download a PDF  to use at your desk or share with your colleagues by clicking here.

The goal of using social networks for business is to:

• Enhance the profitability of existing client relationships by retaining clients longer and increasing share of wallet per client.
• Win new clients by staying engaged with prospects and referral partners.

Older clients have young heirs

The other day Sarah Moore, our Sr. Director of Sales Operations here at Socialware, and I were role playing a mock sales presentation in our office. She played the role of a seasoned advisor/executive at a financial firm and I was playing the role of Social Business Strategist evangelizing the benefits of social to her business.

The conversation was going along fine until she hit me with a stumper of an objection and we were interrupted by each of us needing to run off to meetings. There’s nothing more maddening than feeling like you got smoked and having to stew on your reply not knowing when you will get a chance to circle back. Of course later that day I had the “I GOT IT!” moment and couldn’t wait to share it when I saw Sarah a few days later.

So, what did Sarah hit me with that stopped me in my tracks for a few hours? Older longtime clients.

Me: “Can you see how using social tools such as Facebook, LinkedIn and Twitter might help you develop deeper relationships with your clients?”

Sarah (arms crossed): “I already know my clients. I know everything about them. They’ve been with me for years. And besides, most of them are older and they aren’t using social media.”

Of course, most of us know that the last point simply isn’t true. The 55+ demographic is strong and growing on Facebook and other social media venues. But, that wasn’t her real objection. What she was saying is that her relationship with these older clients was solid and she did not see how social media was going to improve her business with these clients.

She was effectively asking “How can developing a social business help an advisor like me? I have a mature client base. And frankly, life is pretty good.”

The Response – Your clients will change. You need to change with them.

Social media interactions may not move the dial with Sarah’s existing clients. She may be right, they are likely loyal and very comfortable working with her. But, what about her clients’ heirs? Who will be charged with assuming legal authority over her clients’ assets and accounts when those clients lose their decision making capacity? Who will these people turn to when they have questions about the finances of their parents and grandparents?

This is where the game changes. For even if we concede, for the sake of conversation, that older generations aren’t using social tools to interact with their advisors, we know for sure that their offspring are. And increasingly people expect social media interaction from their service providers just as they came to expect companies to have websites back in the late 1990s. These connections are the ones who hold the keys to the lifetime value of an advisor’s book of business. They will decide whether to keep assets with Sarah’s firm or move it somewhere else when they assume control.

So, my response to the objection is…start developing relationships with your next generation of clients now before they are faced with the decision of what to do with the money.