Rivals watch, wait as MSSB starts tweeting

Although its wirehouse rivals are keeping their electronic drawbridges closed to social media, Morgan Stanley Smith Barney LLC last week became the first major Wall Street firm to allow its financial advisers to use popular networking websites

Although its wirehouse rivals are keeping their electronic drawbridges closed to social media, Morgan Stanley Smith Barney LLC last week became the first major Wall Street firm to allow its financial advisers to use popular networking websites.

But don’t expect MSSB’s nearly 18,000 representatives to be “poking” their client “friends” on Facebook or tweeting their views to the world anytime soon.

Just 600 advisers — many of them big-producing members of the firm’s elite Chairman’s Club — will be given greater access to LinkedIn and will have “partial use” of Twitter by the end of next month, according to an internal memorandum to senior executives at the firm from Andy Saperstein, the head of its U.S. wealth management unit.

The firm hopes to expand the program to the entire adviser force within six months.

“We wanted to get out ahead of this because it’s an important evolution in how financial advisers will communicate with their clients,” said David Lessing, the unit’s chief operating officer.

While social media may become an important channel of communication between advisers and clients in the future, compliance concerns remain a major roadblock to widespread adoption.

UBS AG, for example, is still evaluating the landscape, said spokeswoman Karina Byrnes.

“There’s a large, ongoing effort across the firm to look at the social networks and how we might use them,” she said. “The market seems to be going that way, but we have to be careful.”

Wells Fargo Advisors has been “actively involved in finding a social-media solution” for its financial advisers for some time, according to Rachelle Rowe, vice president of external relations.

“We will have an announcement for our FAs soon,” she said.

Bank of America Merrill Lynch is running a pilot program on LinkedIn with some of its advisers, “allowing full interaction with clients for business purposes,” said Selena Morris, a spokeswoman for the firm.

“We will have a few hundred on board by the summer, with a full rollout expected by the fourth quarter,” she said.

Independent broker-dealers, including Cambridge Investment Research Inc. and Commonwealth Financial Network, already have committed to providing their advisers with social-media access, and many registered investment advisers have been using Facebook and other social-media sites for some time.

At MSSB, the 600 participants in the first phase of the program will be allowed to post profiles on LinkedIn and communicate with others through the network. On Twitter, they will be able to share preapproved “status updates” with their social and professional networks.

“Preapproved” is the operative word. Every one of the items posted on the social-media networks by advisers will require preapproval from the firm. MSSB is using the Voices software platform recently launched by Socialware Inc. to control the process.

“We plan to offer financial advisers a library of preapproved content,” said Lauren Boyman, the firm’s director of social media.

The idea is that clients can quickly get the firm’s ideas on the implications of the flash crash or the global consequences of the Japanese earthquake. “We’ll be able to get a message from the firm out to clients quickly,” she said.

For the time being, Facebook — the heavyweight of social media — remains off-limits for MSSB advisers.

While they are allowed to have a personal Facebook account, they can’t disclose on it that they are financial advisers. Given the more freewheeling nature of communications on the site, MSSB is remaining cautious.

“Facebook is a whole different animal,” Ms. Boyman said. “There’s an overlap of the personal and professional, and there’s so many different ways to use it. We’re still figuring out how to deal with that.”

Determining how Facebook-like interactions will work is central to whether social media become a major marketing and communication tool for wirehouse financial advisers or merely a bulletin board for their firm’s research.

FINRA RULES

According to current regulations of the Financial Industry Regulatory Authority Inc., social-media communications are considered the equivalent of any other communication. In addition to meeting suitability standards and the rules governing marketing and advertising, all social-media posts and exchanges must be retained so that regulators can review them if they wish.

With their large network of advisers, the wirehouses are mindful of the risks of spontaneous communication, but also are aware of the growing popularity of social networking.

“If they give advisers a free hand, the social-media sites could be a wonderful tool for them,” said Patrick Burns, a lawyer specializing in compliance matters. “But if advisers are getting calls all the time from compliance officers, it may cause more headaches than it’s worth.”

There is also the question of whether the typical 50-something financial adviser and his or her 50- or 60-something clients want to “tweet” or use LinkedIn to discuss financial matters.

“It’s not necessarily for everyone. But financial advisers are all about networking and relationships, and they will respond to where their clients want to go,” Mr. Lessing said. “We’re confident that they will want to use these tools.”

E-mail Andrew Osterland at [email protected].