In the wake of InvestmentNews' Social Media Special Report experts and thought leaders were asked to Sound Off on their thoughts on how social media is impacting them and their business. At least one such expert has had enough already.
The financial industry has a tendency to blame mainstream media for hyping financial news, and yet, is guilty of the same crime where social media is concerned. You've seen the headlines – LinkedIn gave a firm a head start in race to land clients, Brokerages charging into social media, Using social media as prospecting tool – these days, it seems like every industry journal is leading with them. An entire new crop of “social media experts” has arisen, specifically to sell it as the next magic sales and prospecting arrow in your marketing quiver. But does social media really live up to the hype?
While there are some excellent reasons for social media to play a part in the modern advisor's practice, it is vital to keep things in perspective. Social media is a tool for communication, nothing more. Social media should not be viewed as the hottest new marketing tool, the holy grail for prospecting, or the silver bullet for success. Frankly, social media is less important than email. According to a June 2013 study from marketing data outfit Custora that analyzed the behavior of 72 million consumers, email leads are 11% more valuable than Facebook leads and 34% more valuable than Twitter leads. So should advisors make social media part of their business? Certainly. They would not, however, be served by investing massive amounts of time into it or by relying on it as a primary lead source.
When you analyze the research, some interesting biases come to light. For one thing, social media stats are typically presented in favor of the tools to attract attention. If you look at the numbers for what they really are though, the odds aren't usually in favor of social media. Consider some examples.
Last fall, Accenture surveyed 400 financial advisers nationally and published "Closing the Gap: How Tech-Savvy Advisors Can Regain Investor Trust” where they found:
•40% indicate they have gotten new clients through Facebook (60% haven't).
•25% have developed new clients through LinkedIn (75% haven't).
•21% have earned new clients through Twitter (79% haven't).
In a survey of 4,000 U.S. investors with more than $100,000 in investable assets, Cogent Research found:
•34% of affluent investors specifically use social media such as Facebook, LinkedIn, Twitter, and company blogs for personal finance and actual investing (66% do not).
•About 36% said social-media research has caused them to reach out to their advisers to ask questions (64% did not).
•Of high net worth individuals with more than $1 million in investable assets, 25% seek investment advice from social media (75% do not).
I'm sure you get the point here. While the results that social media can generate are too significant to ignore, they are not as outstanding as the pundits and marketing experts would have you believe.
If you are aware that I run a marketing firm that helps financial advisors with social media, you probably think what I'm sharing in this article is odd. Candidly though, it is vital for advisers to understand the realities of social media. Overestimating its importance can lead to diverting too much time away from other vital marketing and practice management activities. Humorously illustrating this point, a cartoon in the September 2013 edition of the Harvard Business Review pictured a group of executives at the boardroom table with the caption: “Although our quarterly earnings dropped by 25%, I feel compelled to point out that our Facebook likes have doubled.” It's scary how close to the truth that cartoon is for companies who place too much emphasis on social media.
There is no question that financial advisers should be using social media, but there is a right and a wrong way to do so. Shrewd advisers spend as much time as possible in the company of their top clients and prospects. This means that any activities distracting from this all-important job should be delegated or outsourced. Whether it's filling out new account forms, placing trades, or tweeting, these tasks can be handled by someone other than the adviser himself. If an adviser wants to participate in social media personally, his time spent should be limited to no more than a few minutes, a few times each day. If an adviser's own activity is supplemented with auto-generated posts from a compliance-centric third-party social media marketing firm, the outcome will be a professional, consistent, and personalized social media presence that wins.
The benefits of participating in social media include improved search engine results, a modern image, the ability to engage the children and grandchildren of aging clients, and a way to attract Gen X and Gen Y investors. Yes, the benefits are there, but social media cannot stand on its own. An adviser's social media activity must be balanced with face time, phone time, email communications, varied prospecting efforts, a world-class client experience, and many additional factors. Social media needs to be embraced, I agree. But please – stop hyping it.
What do you think? Has the financial press overhyped social media? Join the discussion below
Robert Sofia is the COO and co-founder of Platinum Advisor Strategies, a web-based marketing and consulting firm to financial advisors nationwide. For more information on Platinum Advisor Strategies visit www.platinumstrategies.com.