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Seven broker/dealers have signed on this week with software provider Erado to launch interactive social media initiatives for their financial advisors. The new b/ds, representing about 5,000 reps, include independent broker/dealer Summit Brokerage Services in Boca Raton, Fla.; IBD J.W. Cole in Tampa, Fla.; Liberty Partners Financial Services in Bakersfield, Calif.; Jeffrey Matthews Financial Group in Millburn, N.J.; IBD Protected Investors of America in San Francisco; IBD LaSalle Street Securities in Elmhurst, Ill.; and Financial Management Network in Mission Viejo, Calif. LPL Financial also signed on recently with Erado.

Erado CEO Craig Brauff said the partnerships will allow these firms’ reps to post interactive content to Facebook, Twitter, and LinkedIn without pre-approval by their compliance departments. Jeffrey Matthews Financial Group, however, is using Erado to police its 19 advisors, who are only allowed to have a pre-approved profile on LinkedIn. The b/d still has a policy that prohibits its reps from using social media because the firm doesn’t have the staff to monitor it. With Erado’s new b/d clients, over 35,000 advisors now have access to Erado’s software, and Brauff said the company expects to add another two or three dozen broker/dealer clients this month.

With Erado’s technology, b/ds are able to monitor, track and archive reps’ social media activity, in compliance with FINRA’s social media rules. 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.

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A number of independent b/ds, such as Raymond James Financial, Commonwealth Financial and Cambridge Investment Research, as well as National Planning Holdings, Advisor Group and Securities America, are already allowing interactive social media usage, while many other b/ds allow their advisors to post static content, such as profile pages, with pre-approval by the firm’s compliance department. Morgan Stanley Smith Barney is also allowing reps to use Twitter and LinkedIn for pre-approved messages.

FINRA’s recent notice on social media, 11-39, is driving growth in Erado’s business, Brauff said, because the guidance more clearly states that interactive content only requires post-review. In addition, firms are looking at the early adopters, such as Cambridge, and seeing how social media has improved their business.

“Finally, the financial services industry is recognizing that social media has value and power for their advisors,” Brauff said. “It’s another touchpoint.”

Summit Brokerage Services, with about 330 reps, decided to take the leap into social media to be competitive in the marketplace, said Thomas Terpko, executive vice president of technology. Firms are using social media as another needed step to serve existing clients and get new ones, said Dennis Kaminski, executive vice president and chief marketing officer. Kaminski said the firm wanted to stay ahead of the curve or at least in lockstep with other firms in the industry with offering social media to its reps.

Michael Byrnes Jr., president of Boston-based Byrnes Consulting, said the industry is catching up with its use of social media, especially the independents, because it can help advisors get exposure, win new business and retain clients. When existing clients get to the “advocacy stage,” or when they start raving about their rep, social media can help with referrals because it’s so viral, Byrnes said.

Many independent advisors have their own websites, and social networking sites are another way for these FAs to drive traffic to their sites. And the more links that are directed to the site, the higher up it gets when people are searching, Byrnes added.

As for Jeffrey Matthews Financial Group, which is not allowing its reps to use social media, Byrnes said they’re going to be at a competitive disadvantage to other firms that allow FAs to use it freely.

“They’re way behind the times, and that’s going to have to change.”