Social Media Boosting Client-Adviser Relationships

Although several regulations still limit use of social media in retirement planning and the wider financial-services industry, many advisers are finding that platforms like Facebook and Twitter are becoming excellent tools for building client relationships.  

Before reaching retirement age, people go through several life events where money plays a significant role: job changes, getting married, having children, and seeing their kids go through all these steps. For advisers in the retirement-services space, it’s critical that they help participants manage their finances efficiently during these times. But how can they keep track of all these events?

Look no further than what is in your pocket: social media.

Despite the historic pushback from social media in the asset-management space due to regulatory pressure, financial advisers have been embracing social media in the past few years. According to the 2016 study “Advisors ARE Social” by Putnam Investments, 85% of the more than 1,000 advisers surveyed said they used social media for business, up from 75% in 2014.

However, the report also indicated that 15% of advisers were not using social media for business at all, and among the top three reasons for why they weren’t engaging was “my clients aren’t there.” There is a common misconception that older generations, particularly those closest to retirement, aren’t online. They most certainly are. According to a survey by digital-communications agency iStrategyLabs, people between the ages of 50 and 64 increased their presence on Facebook alone by 80% between 2011 and the first half of 2014.

Moreover, a 2014 LinkedIn study reported that more than five million high-net worth people in North America were likely to use social media to assist with financial decision-making.

So the social adviser helping participants with investments like managed accounts can benefit from connecting with them on social media. Platforms like Facebook, Twitter and LinkedIndefined as the “Big Three” in the Putnam Investment study—offer a window into their clients’ life events in real time.  

NEXT: Keeping up with life events

Several advisers reflected on this notion during a panel at the Securities Industry and Financial Markets Association (SIFMA)’s Social Media & Digital Marketing Seminar. Julia C. Fellerhoff, digital content specialist at financial-services firm Janney Montgomery Scott, called these life events “social signals,” which can come in the form of photos, videos, or comments.

They can be positive such as noticing posts about a clients’ daughter getting married or even negative like finding out a client got into an accident or is falling ill and in a hospital. Jamie Cox, managing partner at LPL Financial shared a story about how he found out a client was critically ill after scrolling through Twitter and Facebook, before he reached out to him.

He added that these life events were more often presented on social channels like Facebook and Twitter. The Putnam Investments study reported that adviser usage among Facebook jumped to 54% in 2016 from 36% in 2014; and 44% of advisers are using Twitter, up from 27% in 2014.

However, money was not the first thing these advisers talked about when reaching out to their clients based on social media activity. Rather, these posts served as a reason to re-connect and start a conversation that would later trigger a more formal one about money management.

But social media isn’t a one-way mirror. It also offers investors a personal view into the lives of their money managers in ways that were perhaps not as common before the days of Facebook and Twitter. Mark Kaschenbach, vice president of investments at Wells Fargo Advisors, echoes this view. “It’s not just about listening, it’s also letting them listen to what we’re doing,” he said at the panel.  

“We want clients to see us as regular people and not just as someone on a desk running an algorithm or trading their money, and we’re all about numbers. We’re married. We have charitable endeavors. It humanizes us.”

And that strength in client relationships can boost referrals. Kaschenbach says he has gained prospects from clients who have recommended their friends to reach out to him on LinkedIn or Twitter.

According to the Putnam Investments survey, 80% of respondents said they were using social media to win new clients, up from 49% in 2013. The study also showed they were gaining an average of $14.6 million in new assets.

NEXT: Educating participants and plan sponsors through social media

Beyond fostering a personal connection, social media can also serve as a useful educational platform on topics like financial information, financial wellness, asset management and learning about retirement and other points that resonate throughout the financial-services space.  

According to a Brightwork study conducted for MassMutual Retirement Services, participants who actively contribute to their plans are more likely to use social media. A recent study by Spectrum Group suggested that participants are interested in retirement plan information on social media, with 49% using Facebook and 39% using LinkedIn.

Fellerhoff noted that the most engaging content her firm’s advisers shared on social media were posts about topics like personal finance, financial planning, and especially human interest stories that explored these subjects.

For plan sponsors, plan advisers can benefit from using their social media posts to share content about topics like plan design trends, educational material about the mechanics of automatic programs like qualified direct investment alternatives (QDIA), or relevant news about the changing fiduciary landscape. Although a 2013 study conducted for the Northwestern Mutual Granum Center for Financial Security at The American College found less-than-favorable levels of engagement between financial advisers and consumers, it found that these were some of the topics plan sponsors found most engaging, especially on LinkedIn.    

A Cogent Research study found that 63% of deferred contribution (DC) plan sponsors are using social media as a regular source of information for 401(k) plans and for the providers that serve this market. The study of more than 1,000 plan sponsors of varying size were seeking this information through websites or blogs (39%), LinkedIn (24%), and Facebook (22%).

But just because an article or blog post can be deemed useful for a specific audience, it doesn’t mean every adviser can use it on social media. When it comes to social media, advisers ultimately have to abide by the limitations set by the Securities Exchange Commission, the Financial Industry Regulatory Authority (FINRA), and their company’s in-house compliance rules. But this doesn’t mean advisers can’t navigate these roadblocks in order to use social media effectively.

NEXT: Share and comply

According to the Putnam Investments survey, the No.1 reason why non-users aren’t engaging in social media is compliance and it has remained at the top for the past three years.

FINRA and the SEC generally place social media content under two categories: static and interactive. Static content is considered an advertisement and requires pre-approval by a principal of the firm. Interactive content is seen more like a presentation in front of a group of investors and doesn’t require pre-approval, but does require post review. Of course, the lines could blur, so clear communication with the firm’s compliance department is essential.

As Kaschenbach noted, compliance guidelines can be as specific as which social media sites advisers may use for business and which must remain personal, and even what type of device can be used for business-related social media activity. Still, various technologies exist to facilitate this filtering process. Fellerhoff noted that her firm provides these tools as well as different training programs about how to use them.

According to the Putnam Investments study, advisers surveyed are generally looking at a “less vague and more manageable compliance requirements.” Eighty-one percent of respondents said their firms have social media policies and they understand them.

Still, there may be some room for improvement. Many of the panelists expressed a desire to have more freedom in marketing their services using tools like YouTube, which the Putnam Investments study said 35% of advisers reported using, up from 25% in 2013, but slightly down from 35% in 2014.

In an interview with PLANADVISER, Director of Social Media for Putnam Investments Jayme Lacour said he expects the sophistication of social media tools to increase. “We see the adoption of all three major social networks and some of the minor ones as part of an adviser’s overall scheme to bring new assets and clients into the business.”