access to real-time information, from scrolling through Twitter on their smartphones to pulling out their iPad while at the gym. In fact, a Fidelity Investments survey found that two-thirds of the millionaires surveyed said they would like to use electronic media with their advisors. And young millionaires – those ages 44 and younger – are three times more likely than millionaires of all ages to select a financial professional through a website providing detailed information on advisors, according to Spectrem Group.
▪ They're engaging online. Young millionaires are four times more likely to express interest in a blog or tweets from their advisor, and nearly six times more likely to say they'd like their advisor to be on Facebook. “The overall percentages of young investors wishing to connect with advisors via social media remain small, but the differences in attitudes between young millionaires and millionaires of all ages are striking,” Spectrem Group says.
Indeed, investor involvement with social media will play out profoundly in the years ahead, with serious implications for advisors who fail to take the trend seriously.
Think about it. Suppose an investor decided the time had come to begin working with a financial advisor. It's natural to start such a search on the Web. Would the investor be able to find your business on the Web? And if so, would he find the information on your site that he really wants to know?
It turns out this may be harder for the investor than you would think. In late 2013, a survey with investors uncovered some surprising findings (Figure 1.2). Nearly half of those surveyed want to connect with their financial advisors through social media, but they either cannot find advisors or they conclude the advisors don't operate through this online channel.
Figure 1.2 Investors' Preferences for Financial Advisors on Social Media
Source: Finect Inc.
The survey also found that those investors who do connect with their advisors through social media are generally satisfied with their interaction.
Among the key findings:
▪ Investors age 44 or younger are more likely to connect with their advisors on social media than those over 45.
▪ Emerging affluent investors (more than $100,000 to under $1 million in assets) use social media more than mainstream and high net-worth investors do.
▪ Investors who connect with their advisors on social media tend to be satisfied with the level of access to their advisors.
▪ Female investors are 11.5 percent more likely than male investors to connect with their advisors on social media.
▪ Investors do not care about the details of their advisors' personal lives on social media – which is not to be confused with being personable.
▪ The most important social media interaction with advisors, according to investors, is sharing trending investments or personal finance news.
▪ The number of social media followers an advisor has is the least important feature for investors when choosing advisors through social media.
▪ An advisor's availability to answer questions is the most important feature for investors when choosing advisors through social media.
The message is clear. Successful American industries have adapted when consumer preferences and behaviors change. Automobiles are safer to drive, restaurants serve healthier food, and home computers operate more quickly and with more sophisticated software. The financial industry now faces new demands from investors who are more empowered via social channels. As the survey underscores, younger investors already expect their advisors to interact with them in this medium. Clearly those advisors who do so will be the ones who thrive as the future inevitably closes in. The financial industry has adapted to paradigm shifts of this sort in the past, and will continue to do so. Advisors and other professionals who adapt to the trend will have a leg up on their competitors. What are you waiting for?
Chapter 2
What Are Social Media's Implications for the Financial Industry?
At the end of Chapter 1, I alluded to examples of how different industries in the United States responded to changes in behavior by their customers – new safety features in automobiles, less sugar and salt in food, and so on. It also happens that many American industries also are au courant with developments in social media as well.
Whether it's fashion or food, they not only have embraced social media, they've incorporated it into their businesses or built online communities around niche markets. Think of Yelp or Hotels.com for locally rated restaurants or overnight stays. Amazon.com has refashioned retail, not only by making it easier for consumers to buy what they want, but also by tracking customer interests and using that data to suggest other products their clients might enjoy. Even in our personal lives, places like Match.com have, for nearly a decade, transformed the way consumers can find their life partner.
And yet a good portion of the financial industry remains skeptical about this revolution. To be sure, there is a healthy and growing presence of financial advisors on professional networking site LinkedIn, yet participation in other key social media channels is still pretty thin. A 2013 survey by InvestmentNews showed that only one out of four advisors used Facebook, and participation in other channels was markedly lower.1
Industry experts say many firms are just tiptoeing into this new channel – testing tools to allow content distribution, piloting basic regulatory compliance through social media, and shaping their online voices. The goal is to build brand and awareness or increase engagement with investors, although many in the industry remain concerned about how strong the impact will be on revenue growth and the return on their investments (see Figure 2.1).
Figure 2.1 LinkedIn Leads Among Advisors
Source: InvestmentNews' Advisers & Social Media Survey 2013
And yet the pace is picking up, says Alan Maginn, an analyst at Corporate Insight, which follows developments in the retail financial services industry and conducted one of the industry's earliest studies on social media involvement.
“In 2008, there were just a few early adopters of social [media] in the financial industry,” he says. “Now, the ship has sailed: most financial firms who are going to be involved in some capacity are…Those who do a good job are the ones that are able to effectively engage with their audience.”
Still, the difference between social experience by investors and that of advisors is striking; it's almost like comparing a go-cart race to the Indianapolis 500. For example, the Pew Research Center found in 2011 that 70 percent of millionaires use social media; of those investors, 46 percent used Facebook, nearly double the 26 percent in 2010.2 By comparison, a recent survey by TD Ameritrade found that more than 90 percent of advisors have a social media profile of some sort, but only 5 percent of their referrals come from social media.3
So the good news is the financial world is moving – gradually – into the social media
“Advisor Index,” TD Ameritrade, March 11, 2013, www.amtd.com/files/doc_news/research/Q22013_AdvisorIndexResults_FINAL[1].pdf.
