Cottage Industry Springs Up Around Compliance In Use Of Social Media

Friday, March 23, 2012 09:50
Cottage Industry Springs Up Around Compliance In Use Of Social Media

Tags: advisor industry people | compliance | marketing | Social Media


The entrance of social media outlets like Twitter, LinkedIn, and Facebook have posed a challenge to industry firms. How can they take advantage of these huge new marketing and community building media and stay compliant with regulatory guidelines? New challenges give birth to entrepreneurial ideas and this time is no exception.

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Companies who specialize in building software that monitors compliance in firm Twitter messages, LinkedIn profiles, and Facebook pages archive messages and build a cache of pre-approved, pre-written content. They also facilitate oversight of message use by compliance officers.
Such oversight is a complicated task. Success in social media depends on authenticity. It can be hard to sound authentic using pre-written messages. It can also be hard to make sure advisors at firms are using the pre-approved messages and not writing their own. Touting a particular investment or disclosing an advisor’s personal ownership of shares or securities violates regulations. The price for such violations can include being banned from the business.
That said, some firms are allowing advisors to write their own messages, requiring compliance approval before they are posted to a social media site. Social media is already a powerful marketing tool. The evolution of how firms are taking advantage of social media outlets is interesting to watch.


Comments (4)

Although controlled by compliance officers, who differ markedly in their interpretations of the rule and by firms who are skittish about informal posts, social networking barriers are not that onerous. Facebook posts and Twitter tweets need archiving and monitoring, but since they are dynamic as opposed to static, they do not, by rule, require supervisory approval. This means that the chatter that humans use, though spontaneous and authentic, should be possible for financial advisors, if they wish to engage in it. Ethical practice is always required and the rules are clear. But human people seek to know, like and trust an advisor. It might be more important to them that the advisor have grandchildren's photos than that they can make Monte Carlo simulations sing. We'll learn best practices together, never fear.
kevinpaulcondon , March 23, 2012
Learning together is the one of best uses of social media, Kevin. Building a community around the exchange of ideas and learning best practices is powerful.
lisagray , March 26, 2012
To be clear, tweets and status updates do not require pre-approval, as Kevin says. They do require archiving and an RIA or BD supervising a registered rep must be able to retrieve and messages in case of an exam by a regulator.

Pre-written tweets can be useful, however. In fact, Advisor Products this week is expecting to put into beta testing a social media dashboard for advisors that provides tweets.

The tweets can be edited by advisors and scheduled, allowing for personalization.

With regard to content people want to see, Kevin is right in suggesting clients want to see pictures of an advisor's grandchildren as well as the latest twist on minimum required distributions on IRAs.

However, I believe advisors should provide a mix of touchy-feely content (i.e., grandchildren pictures) as well as RMD rule analysis.

Prospects -- people who don't know you but are following you because you provide content about RMDs and other financial issues -- may not care much about your grandson's Bar Mitzvah picture but really value your financial content.

I like the idea of mixing it up. I personally favor only using content about me on a rare occasion (because I know you don't care about my life) and mostly want to post tweets and other content about wealth management matters.
agluck , March 26, 2012
Just want to point out, creating a solution like this is much harder than writing about this stuff. If all I did was critique other systems trying to do this stuff, I could look really smart. Creating solutions is much more difficult, especially solutions that really work. This one really should be great. Finally,
agluck , March 27, 2012

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