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RIAs, independent broker/dealers and insurance companies are taking the lead in social media usage, ahead of wirehouses, regional firms and bank brokerages, according to a recent survey of advisors conducted by Registered Rep/WealthManagement.com. The e-mail survey was fielded between Aug. 4 and Aug. 19 and yielded 1,597 responses. The survey also found: compliance is the biggest hurdle to social media use among advisors; wirehouse firms and bank brokerages are more likely to have a written social media policy in place, but that tends to be part of a defensive rather than offensive approach; and advisors use social media most for networking, keeping up to date on industry news and client prospecting.

About 62.1 percent of RIA respondents said they use social media, while 65 percent of insurance broker respondents and 51.5 percent of IBD advisors said they do. By comparison, 43.8 percent of wirehouse advisor respondents said they use social media, while 45 percent of regional FAs, and about 31 percent of bank brokerage advisors do.

One reason that usage is higher at independent and insurance firms is that they also tend to offer their advisors more flexibility in the ways they use it. Bank brokerages and wirehouses are most likely to prohibit the use of social media sites for business purposes, while insurance firms, RIAs and IBDs are least likely to prohibit use. Overall, 92 percent of bank brokerages and 87 percent of wirehouse firms prohibit use of one or more social media sites by their advisors. The survey found 53 percent of RIAs prohibit one or more sites, while 59 percent of insurance companies and 65 percent of IBDs prohibit one or more social media sites.

“The very nature of independence breeds entrepreneurial spirit,” said Victor Gaxiola, social media strategist with Red 7 Marketing. Under the independent model, the advisor is the owner of the business, so he or she has more control over how the business is run, he added.



Compliance Hurdles

The biggest stumbling block to social media use is compliance, according to 91 percent of our survey respondents across all channels. That is in part because the guidelines are still somewhat unclear.

In early 2010, FINRA issued social media guidance that said all b/d member firms should have a system in place for tracking and archiving social media communications. The agency still requires that firms pre-approve content that is static in nature. And just recently, FINRA issued Regulatory Notice 11-39, which further clarifies FINRA’s rules on social media and more clearly defines “static” versus “interactive” content. Meanwhile, the SEC has not issued any guidance of its own, so the RIA firms that it oversees tend to look to FINRA’s guidance, if somewhat more loosely.

Blane Warrene, CEO of BMRW & Associates, which develops social media archiving software Arkovi, said he’s seeing much greater proclivity among RIAs to use social media. RIAs generally have to adhere to the same records and retention standards, but because most RIA firms are smaller than your average b/d, getting an immediate answer from compliance, whether internal or outsourced, tends to be faster.

Advisors at brokerages and b/d’s have to route their social media activity through the compliance department at the home office, which tend to be understaffed and overburdened with new regulations and which tend to have large numbers of FAs to oversee, said Michael Byrnes Jr., president of Boston-based Byrnes Consulting. This can really slow the process down, Warrene agreed. Firms are grappling with how to process social media efficiently.

For example, Vincent Esposito, an RIA in New Haven, Conn., recently made the switch from a b/d to an RIA because he wanted to be able to use social media more freely. He wanted to be able to promote his practice and build credibility through social media, but he didn’t like that he had to send posts to the compliance department, which would often take days to get back to him. “The social media world moves very quickly,” he said. “I just felt so restricted at the b/d.”

Now, Esposito just sends a quick e-mail to his attorney if he’s unsure about a certain post, and she sends him an e-mail back within a couple hours.

IBDs have definitely been vocal about their social media strategies. A number of IBDs, such as Raymond James Financial, Commonwealth Financial and Cambridge Investment Research, as well as National Planning Holdings, Advisor Group, LPL Financial and Securities America, have announced that they are allowing interactive social media usage.

Playing Defense, Not Offense

While wirehouse firms and bank brokerages tend to be more restrictive, they are more likely to have a written social media policy in place. Eighty-four percent of wirehouse advisors as well as 84 percent of bank brokerage advisors said they had a written social media policy, versus 73 percent for IBD advisors, 76 percent of insurance brokers, and only 52 percent of RIAs. Forty-four percent of RIAs said their firm did not have a social media policy, and 34 percent of RIAs indicated their firm did not have an official contact for social media.

This is the strength of the wirehouses and bank brokerages—that they have these policies, said Warrene. “You can’t just open the floodgates without a plan.”

Gaxiola said it’s not enough to give people access to social media; they also need training on how best to make use of it to scale their business. If someone is using social media only for prospecting, “people can see right through that.”

“A lot of industries are still trying to figure out where social media fits,” he continued, adding that responsibility for developing a social media policy or strategy may fall under the compliance, marketing, customer service, customer relations, public relations or sales departments.

Networking and Prospecting

According to the survey, 35 percent of advisors are using social media to network with other professionals, 24 percent for keeping up to date on industry news, 20 percent for client prospecting, and 18.7 percent for researching new/current clients. About 59 percent indicated they would like to learn more about social media for prospecting and 52 percent want to learn about marketing.

What’s the best way to network and prospect? Fostering relationships with investors and colleagues should be the first priority, and this can be done by sharing content and thought leadership, Gaxiola said. “The sales and prospecting will follow.” This is not unlike how you would prospect in the off-line world, Gaxiola said. “You can’t just walk into a rotary meeting and hand out your business card.”

Loic Jeanjean, director of sales and marketing for Advisor Websites, agrees that advisors should be using social media more as a conversation starter than a marketing tool. A lot of advisors want to use it like they would an e-mail marketing campaign, but someone can be flagged or ignored very easily on these sites.

Whatever you do, it’s important to have a clear social media strategy, says Bart Wisniowski, CEO of Advisor Websites. The advisors having success with social media educate themselves, observe others, look to industry best practices and then pick a plan and stick to it, he says.

When asked how many clients have been landed as a direct result of their social media efforts, 62 percent of insurance brokers said they’ve landed at least one, while percentages were lower for other channels. Insurance firms started using these tools ahead of the other firms, so these brokers have had more time and flexibility to figure it out, said Jeanjean. “They’re reaping the results of being early adopters.”

Byrnes said social media is not the be-all-end-all; it’s just one tool advisors can use for prospecting and referrals. But he believes it will become a stronger piece of the puzzle going forward.

“As advisors start to plan for 2012, allocating resources to social media makes a lot of sense.”