The social media revolution has been lost on a large chunk of financial companies because of the regulatory hoops they have to jump through to make it work. The Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) have passed regulations that make it difficult—but not impossible—to participate in popular forums like Twitter, Facebook and LinkedIn.
“The environment right now is still adoption all over the map,” said Stephen Selby, director of regulatory services for LIMRA, a research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.
Investment advisors and broker-dealers, that are both heavily regulated, have higher social media adoption rates based on whether their parent companies have adopted social media software, an electronic dashboard that allows companies to monitor all social media postings throughout their organization.
“We are seeing some companies really grab onto social media. Others are slow and methodical. It is a question of executive engagement. How much do they believe in the power of social media?” Selby said.
Like any other marketing tool, it is hard to link return on investment to any one social media presence, he said.
Tom Froehlich, President and CEO of American Executive Benefits, Inc., and Froehlich Financial Group, LTD, said both companies have integrated social media into everything they do. They utilize the social media software provided by broker-dealer, American Portfolios. That company allows all of the financial professionals it supports to use its Socialware software to help them monitor their social media for regulatory compliance.
Both Froehlich Financial and American Executive Benefits have Twitter, Facebook and LinkedIn pages, but instead of doing everything himself, Froehlich said he hired a professional writer to handle all of his social media for him.
“I learned a long time ago it is a lot quicker to pay a professional who knows what they are doing than to try and figure it out myself,” Froehlich said.
The person he hired to design the social media pages also provides all the content as well.
There are also blogs on both websites, written by another contractor.
“We try and post three to four times a month. Everything goes through compliance first. We have to be very cognizant of footnotes and links and our broker-dealer disclaimers have to be on there. We follow all guidelines and rules,” Froehlich said.
So far, Froehlich hasn’t received much push back from American Portfolios’ compliance department.
Froehlich uses social media to market his companies’ seminars, webinars and other marketing events. “It is a fair amount of work. There is no way I would have been able to do it all myself,” he said.
Froehlich calls social media one of the legs of the three-legged stool of marketing. He believes if companies stick to only the more traditional marketing methods they are missing a whole generation of potential clients who grew up using social media.
Froehlich has gained numerous clients and revenue by having such an extensive social media presence. He also wants to use his social media connections to help him find even more clients.
“Most people are putting out information, but not using [social media] as a prospecting tool. You have to be careful. You can’t use social networking mediums to [sell your products]. If you sound salesy, people get turned off. You have to position yourself as a knowledge source, someone in the know about what you are talking about,” he said
Froehlich’s next goal is to mine his 1,000-plus LinkedIn connections. He wants to break down all of his connections into target markets. He would like to look at his CFO connections to see if they have any other CFO connections that he could link to. He would like to offer them an opportunity to join his CFO group or create his own benefits group for CFOs or executives.
“It is extremely important. Timing is important. I think the timing is perfect. If you want to compete, you have to do it,” Froehlich said.
Smaller firms are adopting social media programs much faster than larger companies, LIMRA’s Selby said. That is due in part to smaller companies being more flexible and not having a large parent company to report to.
The good news in the social media arena in 2012 is that FINRA and the SEC “have been quiet and haven’t come up with large changes like we saw in 2010 and 2011 with regulatory notices. We have relative stability in the regulatory climate,” added Selby, adding compliance issues aren’t the main hurdle for financial companies that want to adopt social media tools, it is content.
The challenge is how to be interesting and engaging and not break any rules.
Many larger companies run their social media postings through a central marketing department. The problem with that is if content is released in the wrong way and brokers or advisors are issuing cookie cutter content, “we’ve lost relevancy, relationship and intimacy in the client producer relationship,” he said.
Some companies are trying to produce libraries of content that their advisors and broker-dealers can pull from on their own social media sites.
Selby recommends that producers take advantage of the marketing materials they have produced over the years that haven’t seen the light of day in a while.
“We can use existing content, perhaps, as the thing we’re going to say inside social media,” he said.
That means tweeting about approved topics or LinkedIn blogs talking about an approved subject. Many companies are so conservative they want even the smallest tweet to be cleared through their main marketing department before it is sent out. Others offer guidelines and let their advisors or brokers do what they want within the framework.
“I encourage companies to take that first step in with approved content. Find out what works. The great thing about social media is the audience will tell us what they think is relevant,” Selby said. The problem with bigger content questions is that they mostly deal with a company’s own products and services.
To make social media relevant, there has to be a human element. That may mean posting something about a local sports team’s win the night before or saying something in support of a local coffee shop you visited rather than solely tweeting about business concepts, he said.
The proposal focuses mainly on the stability and solvency of the state-based insurance exchanges.