already there in large numbers, numbers that are growing at a far greater pace than that of the financial industry itself (see Figure 2.2).
Figure 2.2 Advisor Talk as They Begin to Think Social
Source: Finect
And yet, while some advisors are hesitant about going more deeply into social media, their world already is being reshaped.
Take the wirehouse channel, for example. These top-of-the-food-chain brokerages have long had established ecosystems in which information and services were organized and the roles of brokerage, advisor, and investor client were fairly clear. Wirehouses could dictate products and fee structures, and their advisors and clients would get in line (see Figure 2.3).
Figure 2.3 Traditional Wirehouse Ecosystem
But advisors increasingly are finding alternatives to toiling in the wirehouse world. They're moving toward independence, bolstered in their efforts by third-party providers of every service from technology needs to asset management. Indeed, the registered investment advisory channel alone grew from 34 percent of all financial industry advisors in 2007 to an expected 47 percent in 2013, according to the industry research firm Cerulli Associates.4
Through technology and social media, advisors are finding new communities and capabilities to build their business – capabilities that allow them to work with open architecture brokerage platforms that don't dictate what securities they must buy, for example. And there's change occurring at the bottom of the investor market as well. So-called robo-advisors– firms that offer automated financial advice to low-asset investors for cut-rate fees – are growing as demands grows for advice among the mass affluent and tech solutions proliferate in response (see Figure 2.4).
Figure 2.4 The New Ecosystem Provides Greater Access to Advisors and Investors
Source: Finect
This shift is presenting both new opportunities and challenges. Financial professionals and firms face increasing pressure to discover, market, and network more efficiently and cost-effectively. And while business growth and marketing remain top priorities, regulatory changes and compliance issues also rank among the top concerns weighing on leaders and advisors. As a result, more than half – 63 percent – of all registered investment advisors say that investing in technology is far and away the top infrastructure investment they anticipate making over the next six months to accommodate business growth (see Figure 2.5).
Figure 2.5 Top Business Concerns among RIAs
Source: TD Ameritrade
And there's one other critical trend: the aging client base. We all talk about the generational wealth transfer – by some estimates totaling $41 trillion over 40 years – that is taking place. But have we thought about who, really, will be making those financial decisions – and how? By 2020, two-thirds of wealth is expected to be held by women. Already, the majority of women change advisors after the death of their spouses, according to LIMRA research (see Figure 2.6).
Figure 2.6 Top Industry Trends Pose a Challenge
Source: TD Ameritrade
And how are these busy women juggling work, family, and elderly parents? By going online and using their mobile devices. Yes, women continue to rely on the Internet more than men – a trend we saw in the early Internet days – and with new hubs and networks now at their fingertips, social media is the way to connect and engage with them.
So it's a changing world, both for investors and the advisors they work with. Social media clearly will accelerate the pace of that change in the years ahead. And yet, in many ways advisors feel held back in the social world (see Figure 2.7).
Figure 2.7 Asset Managers Talk about Going Social
Source: Finect
While social media use is practiced widely by Americans, many people simply avoid it. Some find the platforms unfamiliar or counterintuitive, while others see little value in sharing and engaging on the Web. Among financial professionals, however, the reasons for avoidance tend toward the technical and the specific. To look at why many in the industry feel held back in social media, let me just briefly touch on the “Four Multiples”:
1. Multiple Platforms– Facebook, LinkedIn, and Twitter all have growing value for our industry, depending on how those platforms are used. But if marketers are just now learning how to use these platforms, how can we expect compliance officers to also understand? Moreover, focusing on any one platform could be nearly a full-time job by itself.
2. Multiple Employees– If you have multiple employees on multiple platforms – or even one platform – how do you track and monitor them? It's enough to make you stop right there: Is it worth the risk to your compliance record? “Let's see how others do” is a common mode of action.
3. Multiple Regulations– Let's not forget the regulators. And this is problem one for many in the industry. You might be overseen by Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), or even the Office of the Comptroller of the Currency (OCC). How do you cope with all of those requirements for approvals, archives, recordkeeping, and more? Of course, no professional concerned about his or her job would want to do anything until they get some green light from officials that it's okay to use social media. But as we'll discuss later, that's one of the common myths. The good news is that regulators seem to be moving more quickly as they, too, embrace social media for their own purposes.
4. Multiple Internal Layers– Thanks to regulations and legacy bureaucracy, particularly at large firms, many organizations have multiple approval layers. It takes time to work through those layers, not to mention instituting new policies to abide by regulatory requirements.
Obstacles to social media adoption are real in the financial industry, but that hasn't frozen its professionals in their tracks. In the last year alone, we've seen major brokerages like Raymond James and Morgan Stanley, top asset management firms like BlackRock and Putnam Investments, and one-man financial advisors and everything in between begin to adopt social media in some way.
It's a channel that can't be ignored. Whether your clients are retail investors or financial advisors, firms are recognizing they have to figure out social media. Marketers are partnering with compliance officers to increase their understanding and ensure the right processes are in place. Many firms are using social media at two levels: the corporate level, for building the company's brand and leveraging content; and the individual employee or advisor level, helping them build their individual brand and customer base.
Here's how it breaks down across the different advisory channels:
▪ Broker/Dealers– Many brokerage
