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?”

Substantial social media change and growth

The entire social media landscape has evolved quickly on the regulatory front (the release of FINRA 11-39 was already months ago!), technology front (numerous updates to Facebook, LinkedIn, Twitter, and more), and also, very importantly, best practices as financial advisors discover and improve upon using social media to develop new and strengthen existing business relationships.

A few weeks ago, Chad Bockius, Socialware CEO, and I hosted a 2011 Year in Review webinar. There were so many potential discussion topics, yet we focused on a few specific points:

• Growth of Facebook, LinkedIn, and Twitter
• Evolution of the regulatory landscape (For even more recent developments, read about SEC and FINRA updates this week.)
• What it takes to deliver social business success within a firm
• It’s about the client, not the firm: how client relationships are changing and why social media matters.

Future social business potential

Since we are already in the second week of January, now it’s time to move onto the potential of 2012.

This week, Chad tackles 2012 Predictions for Social Media in a live interview regarding what to expect going forward. Social networking is getting personal for firms. Here are few topics that you can look forward to exploring:

• Overarching trends for business social networking
• Realizing corporate leadership commitment for social media
• How to grow social media use effectively throughout your organization
• What are some of the emerging social media technologies for 2012?

Tune into the webinar and the Q+A to learn more about what to expect for social business developments in 2012.

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?

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 agenda sparked a lot of questions and involvement from the audience including topics such as the empowered consumer and the regulatory environment especially for financial services firms. When Chad Bockius, CEO of Socialware, was asked whether there was truly a high cost of not participating in social media, Chad explained that the train had already left the station.  Firms need to take advantage of the opportunities to build valued customer relationships using social media.  Since this is constantly evolving landscape, there is no perfect time or plan.  If firms wait six months to put the “perfect” plan in place, that plan will no longer address all of the changes that will take place from now until that time.

Addressing practical implications of setting a social policy, Steve Selby of LIMRA explained that the difference between a good and bad social policy is finding the right balance vs. operating at either end of the spectrum of complete prohibition or wide open access.  Steve went on to address audience questions about FINRA regulatory notice 10-06, specifically static vs. interactive content, and guidance from other regulators like the SEC.  Steve explained that we shouldn’t look for  a “sea stage” from an expected FINRA clarification on social media later in 2011.

Edgar Rodriguez of Distribion, Bockius, and Selby all discussed the connection between the relationship dynamics of social networking and the need for technology to assist in the large volume of interactions, and Edgar expanded on the ability to measure the effectiveness of these interactions and provided helpful suggestions for getting the most of the social interactions.  To learn more about the webinar, you can follow the conversation on twitter #socialmediawebinar and view the webinar.

At our recent customer user group meeting, we were impressed by how open and frank our customers were with us, but more importantly with each other.  With a common goal in mind of developing a community that allows sharing of best practices and pitfalls, we spent a day working through a number of challenges and opportunities.

One of the hottest topics that everyone wanted to discuss was static vs. interactive.  When all was said and done, we agreed on two things.  (1) Content (i.e. what is posted) is king regardless of how/where it is posted.  Trying to label specific features of a social network, as static or interactive is a fool’s mission.  And (2) intent is everything – using the term “extemporaneous” to focus your compliance guidance was well accepted by all.

This led us directly into a conversation tied to pre-review and post-review.  Because of the conclusion on static content, it was agreed that pre-review of content is a critical aspect of a compliance solution and without it you cannot truly be compliant.  However, this does not relieve the compliance obligation, which demands that all information available must be captured whether, performed on network or off network (home computers).  It was very reassuring to all attendees when hearing peers confirm understanding of the regulations and ensure they are using the same solution to meet those regulatory requirements.

Part of our conversation focused around the constant changes occurring daily with the social networks.  Everyone was relieved to hear Socialware’s approach to addressing these changes through our agile product management and development strategy.  This was reaffirmed when Facebook announced a new video chat feature through a partnership with Skype. On that same day, we released a blocking filter should you choose to block this functionality for your users.

Personally, it was a very enjoyable day watching so many of our customers across numerous companies interact with each other.  We all walked out in the afternoon smarter and more educated for the time spent.  I’m looking forward to the next one already.

My summary is that advisers are failing to take advantage of key technology that will allow them to prospect more effectively, build stronger relationships with clients and tap into the referral sources waiting for them in their client base.

Their first finding is that “62% of financial advisers don’t communicate with their clients on a regular basis and acknowledge this flaw is their greatest failing when it comes to providing service to investors.” What I find shocking about this finding is the fact that communication has become exponentially simpler in the last 5-10 years. You can email, IM, text, send messages over social networks and more.

Also consider a finding by the Spectrem Group. “Nearly 40% of investors with net worth between $1 million and $5 million said they expect a call back from their adviser within two hours or else they would consider making a change and finding another financial professional to service their accounts.” Clearly the expectations of affluent investors are increasing. Part of this is being driven by the fact that so many new communication channels are focused on instant gratification. We live in a world where email is the new “snail mail”!

So what can you do as an adviser? First and foremost, you need to recognize the needs and expectations of your clients and prospects have changed. In addition, it is critical to understand the power of the social platforms, like LinkedIn, Facebook and Twitter. These platforms not only allow you to quickly and effectively grow your business network, but they also give you a constant two-way flow of information.

John Anderson, the head of practice management for SEI believes that “Frequent and meaningful communication, delivered in a variety of ways, is the best method to build lasting trust between advisers and clients, which ultimately leads to stronger relationships.” Used properly, the social networks are your best tool in the battle for more productive and efficient relationship building. These sites won’t replace a face-to-face conversation but they will make every interaction stronger and help you stay connected between those infrequent meetings.

With all this opportunity you would think advisers are flocking to the social networks. There are obviously compliance issues that have slowed adoption but there is also a lack of knowledge on how to best utilize these sites for business. The SEI report found that “only one in five advisers connected with at least one new prospective client last year.”

The companies and advisers that are going to win in this market will first figure out that prohibition is not an option, and second that true engagement will be the way to lasting and measurable business results.

With this release they have turned LinkedIn into a true daily destination. It is a critical step to becoming more Facebook like – at least in terms of how much time users spend on the site (the average Facebook users spends over 7 hours a month on the site!). For LinkedIn this will translate to more users, more engagement and of course more opportunities to monetize the traffic.

The notion of news curation is nothing new. In fact, we are all curators of news – we do it in our daily lives. Have you ever asked someone “did you see that story about the latest…? You have to check it out!” This notion of personal news curation adds value to the people we interact with, starts new conversations and exposes our interests in unique ways.

With LinkedIn Today they’ve taken a conversation that would happen when we see friends, colleagues, clients and partners and exposes it across your entire network and the networks of those in the industries you care about. In the process you learn not just about news, but also what matters to your network and the individuals it represents.

We’ve established this is a great source of relevant news but it is also a valuable fact-finding, engagement, networking  and awareness generation tool. Let’s look at each one:

1. Fact Finding: As news bubbles to the top of LinkedIn Today you not only see the content but also the individuals that shared it. This is valuable source of information for any sales rep or client manager trying to build a more meaningful relationship or looking for an opportunity to engage.
2. Engagement: Sharing out a news item implies a level of interest. Someone took time to post a message to his or her entire network that this piece of information was interesting. In return you have the opportunity to engage directly with that individual either by commenting back, or indirectly, by sharing that article out as well showing that you have shared interests.
3. Networking: Part of exploring a news story is seeing who shared it. This group will be made up of individuals you are connected with directly as well as those that you might wish to connect to. For those professionals looking to expand their network this exposure of content + connections is yet another way you can start to expand your own personal network.
4. Awareness Generation: Now that LinkedIn has over 100mm users it is more important than ever to establish and grow your presence on LinkedIn. If you’re producing valuable content for your industry and network be sure to include a LinkedIn Share button so the rest of LinkedIn can discover you and your great content.

Although the notion of content curation is nothing new, LinkedIn has found a way to make it all the more valuable for professionals. We rely on people we trust to help make critical decisions and seeing the sources they view as important will only help to deepen those relationships and discover new ones.

After reading through the Notice here is my take and a few of the most interesting points:

“Whether materials are classified as advertising or sales literature will generally be determined by their content and purpose rather than by the method of communication used”

In other words the communication platform itself doesn’t dictate the regulation but the content & distribution does. This mirrors FINRA’s guidance as well. There was no new regulation issued as part of 10-06 it simply clarified existing regulation in the context of social media sites like Facebook, LinkedIn and Twitter.

“Dealer Members’ policies and procedures should include a process to approve the involvement of particular individuals in such endeavors, and guidance and training to ensure that they are aware of the boundaries between general commentary and advertising or sales literature.”

Social media can create many new opportunities and challenges. As a result Dealer Members’ must train on the ins and outs of these sites and ensure individuals understand the compliance boundaries. FINRA made this same point in 10-06.

“Dealer Members must therefore design systems and programs with compliant record retention and retrieval functionalities for all methods of communication”

This means that all of your content associated with business activity on social networks like Facebook, LinkedIn and Twitter must be archived according to NI 31-103.

From a supervisory standpoint they point out that it is at the discretion of Dealer Members to determine whether to employ pre-use approval, post-use review or post-use sampling. However they go on to say “Static content, such as a profile, background or wall information, usually considered an ‘advertisement’, must be pre-approved pursuant to IIROC Dealer Member Rule 29.7(3).” They further clarify that “an interactive electronic forum such as Facebook and Twitter, on the other hand, includes real time discussions and although it does not require prior approval, must be supervised to ensure compliance with IIROC Dealer Member Rules and securities legislation.”

While they don’t go into as much detail as 10-06 offers, it is pretty clear that they are relying on the same definitions of static vs interactive so the classifications identified through the interpretation of FINRA’s Notice should apply here as well. If you haven’t downloaded the social networking compliance guides that offer this detailed classification you can get them here.

As it relates to third-party communications and research they point out “third party posts may be attributed or considered an endorsement by the [dealer], thereby triggering regulatory and legislative requirements. For example, re-tweeting a client’s post or providing a thumbs-up may be considered an endorsement.”

This interpretation is identical to what we’ve seen on the FINRA side as well. The Guides mentioned above discuss these types of issues and provides recommendations as to whether you should block or allow the site functionality.

It is great to see IIROC providing this additional clarification. Judging from the activity here in the U.S., this Notice should help Canadian firms accelerate their move from prohibition to participation, all in a compliant fashion.

A survey of almost 3,300 executives from various industries reveals significant increases in the percentage of companies using social networking (40 percent) and blogs (38 percent); and the number of employees using Web 2.0 technologies continues to increase — respondents at nearly half of the companies that use social networking say, for example, that at least 51 percent of their employees use it.

Among respondents at companies using Web 2.0, a large majority continue to report that they are receiving measurable business benefits—with nearly nine out of ten reporting at least one. These benefits ranged from more effective marketing to faster access to knowledge.

Three levels of social networking integration

McKinsey found three levels of social networking business integration. Internally networked organizations tightly integrate Web 2.0 into their daily work flows, sharing information easily and among all business silos, easing collaboration.

Externally networked organizations spread interactions beyond corporate borders to interact with customers and business partners. While collaboration internally isn’t usually as smooth, these businesses gain advantages from outside sources, and usually have larger percentages of their customers, partners, and employees using Web 2.0.

Three percent of organizations surveyed were fully networked enterprises, deriving very high levels of benefits from Web 2.0’s widespread use, involving employees, customers, and business partners, according to the survey. These firms are much further along than others, seeing the benefits of internal and external collaboration, breaking down organizational barriers that impede information flows.

By forging close relationships with customers, fully networked and externally networked organizations see the largest market share gains. McKinsey finds this correlates with these companies by effective marketing through social networking and involving customers in customer support and product-development efforts. Companies that are internally networked also see some market share gains.

Fully networked organizations also see higher operating margins. In these organizations, Web technologies let frontline staff make local decisions that lead to greater agility.

Most surprising? Increased market leadership correlated most with internally networked organizations, but externally networked organizations correlated negatively with market leadership. However, McKinsey does not believe that external uses of Web 2.0 decrease market leadership; it’s more likely that market leaders use Web 2.0 to strengthen internal collaboration, seeking to enhance the organizational resiliency required to maintain their leadership positions. Market challengers, by contrast, may be more focused on external uses of Web 2.0 to win customers from industry leaders.

SOURCE: “The rise of the networked enterprise: Web 2.0 finds its payday,” McKinsey, December 2010.

Overall, McKinsey finds that 27 percent of the companies have both market share gains against their competitors and higher profit margins. This kind of performance clearly makes these companies profit consolidators in their industries, with earnings growing faster than the rest. And highly networked enterprises are 50 percent more likely to fall in this high-performance group than other organizations were. This finding suggests that the fully networked enterprise could become the benchmark for more vigorous competition in many industries.

Direct impact for financial advisors

A report from Aite Group, based on a survey of 402 advisors, showed that, of advisors who use social media professionally, 36 percent say it has helped them increase awareness of their practice and differentiate them from the competition. While many firms have policies that decrease the use of social media, advisors who use Web 2.0 believe it benefits them.

SOURCE: “Financial Advisors’ Use of Social Media,” Aite Group, December 20, 2010.

“Beyond the benefits that they have already realized,” says Ron Shevlin, senior analyst with Aite Group and author of this report, “advisors using social media feel that the tools can help support a range of business objectives, from building customer relationships to supporting customer acquisition and employee recruitment efforts.”