The financial services sector—in the wake of the mortgage meltdown, financial bailouts and the uproar over new fees—may be the U.S. industry most in need of social media to improve its reputation.
Yet the top 50 private banks and wealth management companies approach social media in an “amateurish” way, according to a study by investment portal Assetinum.com.
The study assessed financial services companies' involvement with Facebook, LinkedIn, Twitter and YouTube, as well as the integration of social media with the companies' websites. Assetinum found that one in three companies was absent from Facebook and the others weren't much engaged. Only 26 institutions out of the 50 businesses responded to Twitter posts, and only 13 added tweets about wealth management subjects.
The numbers were equally poor in regard to YouTube, and only half of the institutions studied integrated social media into their websites sufficiently, according to the study.
This is a huge mistake, said Benjamin Manz, managing partner at Assetinum. “Digital media does not only serve for information search but, increasingly, also for reputation building,” he said. “Reputation jeopardizing can be best avoided if banks themselves are prominently present on the important social media channels.”
Assetinum found the most socially engaged financial services company to be Citibank, followed by Paris-based Société Générale, Amsterdam-based ABN AMRO, London-based Barclays and Wells Fargo & Co.
Part of the drag on financial services companies' engagement in social is that they operate in an intensely regulated environment. Many are gun-shy about engaging on social networks, and some ban social activity by employees entirely.
But others are stepping into the social maze, cautiously but deliberately.
“We're looking at ways to ramp up our b2b outreach,” said Donna MacFarland, senior VP and CMO-retirement plan services at Lincoln Financial Group, which last year introduced a Facebook Forum to help client companies learn about retirement and savings issues for their employees. “Some will need custom solutions for their particular employee populations, and we'll often leverage our client relationships to make sure we're posting on their Facebook pages as well.”
Some of the more socially engaged financial services businesses are wealth management companies.
“LinkedIn has become a prime prospecting area for financial advisers,” said Alan Maginn, senior analyst at Corporate Insight, which provides research and analysis to the financial services industry. “Also, it doesn't require the constant, thoughtful updates that Facebook or Twitter require.”
But there are still risks for financial services companies engaging in social media. Data leakage—in which personal or business information such as credit card data is released inadvertently on social networks—is one danger.
“Also, many financial advisers are using instant messaging and Twitter, but many regulations require you to retain work papers, memos and all electronic records for seven years,” said Joanna Belbey, social media and compliance specialist at Actiance Inc., a social marketing technology company. “Social media is a form of electronic communications. There are more than 10,000 rules and regulations in the U.S. alone that a company needs to think about.”
Belbey warned in particular about financial advisers making investment recommendations via social platforms, which would violate many laws.
But even with the plethora of rules and regulations, some companies are exploring how social can help.
“Twelve to 18 months ago, we talked about how we as a firm could get our feet wet in social media and become part of the conversation,” said Eric Rehl, first VP- interactive at wealth management company Robert W. Baird & Co. “Since then and into this year, the conversation has shifted. We've moved beyond participating at the firm level and are exploring how to extend the power of social media to our advisers.”
Rehl said Baird is using teams of its financial advisers to reach out on Facebook and Twitter. The company isn't restricting the content advisers choose to distribute, Rehl said, but that content is “subject to review.”
“We're not prewriting or preapproving everything they send out,” he said. “We want this to be authentic. If not, people will see right through that.”
The advisers are distributing such items as financial news and insights, and retweeting similar content. Since the program began in August, Baird has received six new inquiries via Twitter, and two large clients became Twitter followers.
“I don't think that million-dollar client will just come through the door,” Rehl said. “It takes work. It's more about nurturing the community with meaningful relationships that over time will result in business coming your way.”
MFS Investment Management is another financial services company moving forward in the social space.
“In 2008 we brought in interns, gave them cubes and had them engage in social to see if our clients were in the space,” said Jennifer Dowd, MFS communications associate. “We learned that they were, so we decided to move forward to build a social foundation.”
Dowd said MFS' marketing department spearheaded the initiative, but with participation from its legal and compliance units. MFS started with podcasts, YouTube videos and white papers; then it introduced both an internal blog for salespeople and an external, client-facing one.
“Today, we always think about social when building a campaign,” Dowd said. “Building a strong foundation seems daunting; but, once you do build it, it will help you grow, and grow up.”