Advisers at brokerage firms could be about to catch up to registered investment advisers in the social media race, as technology improves and compliance fears ease.
Overly restrictive compliance departments at broker-dealers have been the biggest hurdle in getting brokerage-firm representatives up and running on social media, observers said. Unlike RIAs, many broker-dealers require pre-approval of personal messages, or limit posts to canned corporate material.
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The Financial Industry Regulatory Authority Inc. doesn't require pre-approval of social media posts, but B-Ds have to have “one policy that applies to thousands of advisers, so they take as many precautions as they can,” said Kristen Luke, owner of Wealth Management Marketing, a consulting firm.
Pre-approval can pretty much kill interactive Twitter usage, and limits Facebook and LinkedIn postings as well.
“If you're posting scripted tweets … it won't be relevant,” said Kristin Andree, founder of Andree Media & Consulting, who works with advisers.
Using the “same content used by hundreds or thousands of other advisers” won't be effective in building a following, Ms. Luke added.
But “the tables are about to turn” in the brokerage firms' favor because of better compliance tools, said Michael Kitces, a partner and the director of research for Pinnacle Advisory Group Inc.
He points to technology provider Hearsay Inc., which this month raised $30 million in additional venture capital funding. The company manages social networks for employees of such highly regulated companies as financial firms. In July, Raymond James Financial Inc. signed on as a Hearsay client.
“That's a lot of … dollars and technology being pushed towards larger broker-dealers,” Mr. Kitces said.
Indeed, brokerage firms are making progress on the social media front.
Cambridge Investment Research Inc. lets its representatives post on Twitter, LinkedIn and Facebook, subject to a post-use review, said Cindy Schaus, a Cambridge spokeswoman.
“About a third of our 2,400 advisers are active on some level, and have all their [social-media] accounts in place,” she said.
Commonwealth Financial Network allows use of LinkedIn, Twitter and Facebook.
Representatives cannot make recommendations of specific products or services on Twitter, said John Hagberg, assistant director of licensing and compliance at the firm.
About 1,100 Commonwealth advisers out of 1,450 total are registered for at least one social-media platform.
At LPL Financial LLC, about 5,000 of the firm's advisers, or about 40% of the total, are signed up to use social media. That number is up almost 60% for the year as of August, said Joan Khoury chief marketing officer.
About 36% of LPL reps use LinkedIn, 10% use Facebook and about 6% use Twitter, Ms. Khoury said.
“We do see growth on Twitter because we're all active there,” she said.
LPL advisers must get pre-approval for YouTube videos, but other than that, only static content needs to be pre-approval, Ms. Khoury said.
In a few months, the firm will be rolling out a new social media training program called LPL Digitial IQ.
Raymond James advisers can use Facebook, Twitter and LinkedIn, but content has to be pre-approved.
“It's not real-time [posting] but they usually get approval within a couple hours,” said Katie Berg, product manager for digital assets at Raymond James.
Most advisers seem to use Twitter to follow other people and news, she said, so advisers don't seem to be affected by the delay.
“They do a good job of actually getting” content approved, said Chris Beard of Gateway Wealth Strategies, a branch of Raymond James Financial Services Inc.
“But I hope to get to the point where we can put out more content on the spur of the moment,” he said.
Close to 2,000 of Raymond James' 5,300 advisers in its independent and employee channels have connected to the Hearsay software, Ms. Berg said, although not all of those are active users.
Bank of America Merrill Lynch allows its reps to use LinkedIn only, said spokeswoman Susan Atran.
But “advisers have full use of LinkedIn: they can connect, message, invite, search, etc.,” Ms. Atran said. Messages are supervised, but not pre-approved.
“For now, LinkedIn is our primary channel,” Ms. Atran said. “Twitter is looked at more as a firm content channel.”
Merrill adviser James Maltese has used LinkedIn since late 2011 as a way to keep up with his clients.
“I look to see what's going on with my connections,” most of whom are clients, Mr. Maltese said. “A lot of things happen between [client] reviews, like job changes.”
LinkedIn also helps him connect with the children and grandchildren of his clients, Mr. Maltese added.
Wells Fargo Advisors has had a LinkedIn pilot program in place since last September in which about 50 of its advisers can post content. In the meantime, the firm has gotten about of third of its 15,000 reps to put up a profile on LinkedIn, said Jeff Leonard, vice president of digital marketing strategy. This year, the firm added Twitter to the pilot.
“LinkedIn will be our lead platform, at least for the foreseeable future,” Mr. Leonard said.
Expanding posting capability next year to more of the firm's advisers depends on getting funding for the extra cost of compliance software, Mr. Leonard added.
Morgan Stanley has about 4,700 of its reps approved for use of social networking, said spokeswoman Christy Jockle. About 75% use just LinkedIn, and 25% use both LinkedIn and Twitter.
The firm's advisers can send messages and use other LinkedIn functions without pre-approval, but can tweet only pre-approved content, Ms. Jockle said.
Use of social media by Morgan Stanley advisers has seen “steady growth,” Ms. Jockle said, with about two-thirds of the approved reps actively using LinkedIn by sending at least one invitation to a contact.