One-third of wealthy investors use social media platforms like Facebook, LinkedIn, Twitter and YouTube for personal finance and investing purposes, according to a new study by Cogent Research. While most investors continue to rely on a variety of resources for investment information, nearly 70 percent have reallocated investments or began or altered relationships with investment providers based on content found through social media.
Social Media's Impact on Personal Finance and Investment surveyed more than 4,000 investors with more than $100,000 in investable assets.
Investors who use social media for personal finance and investment purposes are using various platforms to form first impressions about providers and their decision to use a firm's investment solutions. Regardless of the platform, investors primarily turn to social media to conduct research on investing, products, and companies or to seek advice regarding investment decisions.
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"Today's investors' are scrutinizing 'traditional' sources with content and commentary they are finding through social networks, and are becoming much more critical and conversant when it comes to their investment choices," said Remy Domler Morrison, project director and co-author of the report. "On a positive note, social media is also motivating investors to engage more with their advisors and investment firm representatives, which can lead to more asset-gathering opportunities for providers."
For financial companies, investors' use of social media for this purpose can be a double-edged sword. While engaging in social media presents the opportunity to increase and develop relationships and trust, it also presents the risk of getting negative feedback.
"For every positive comment and favorable investment decision comes the possibility for damaging content. However, the larger risk to a firm is ignoring negative comments that may already exist. Overall, there are significant opportunities to strengthen brand equity for firms that regularly pursue strategies to foster positive relationships with brand followers and address negative sentiment," says Tony Ferreira, managing director at Cogent Research. In general, investors recall a higher ratio of favorable to adverse brand-related content for several firms on social media, including Fidelity Investments, ING, and Vanguard.
The top 10 brands with the highest ratio of positive to negative impressions via social media were: Fidelity Investments, ING, Vanguard, USAA, Charles Schwab, John Hancock, American Funds, Wells Fargo, T. Rowe Price and Janus.
Cogent Research provides custom research, syndicated research products and evidence-based consulting to leading financial services, life sciences and consumer goods industries.
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