Here's the good news: Compliance-conscious financial advisers can choose from a number of offerings when seeking online social networks to connect with peers, clients and prospects. Also available are services to help advisers create and store any social-media content to ensure compliance.
The bad news? The adviser-focused networks now available don't always deliver on what they promise, so advisers may throw up their hands in frustration and stick with their familiar standbys — such as LinkedIn — rather than look for new networks that may be more specific to their community.
Social networks focused only on adviser professionals include FPA Connect, offered by the Financial Planning Association, and FA today Inc., formerly linkedFA.
FPA Connect has found a relatively small but natural audience. Of the organization's 23,000-plus members, more than 9,000 are on FPA Connect, according to FPA communications director Ben Lewis.
LinkedFA struggled to find an audience prior to its acquisition by FA today. Its original model of connecting advisers to clients was unsuccessful because advisers didn't want to connect to clients on a social platform, according to the network's founder, Jason Bishara, who currently serves as president of FA today. The network now only connects verified independent financial advisers to other independents, and numbers 5,000 members, Mr. Bishara said. He added that the website is free to members, as it is funded by advertising.
Then there are the services around social networks used by firms to ensure content on sites is compliant. This category comprises a large and growing number of providers, including Actiance Inc., Erado Message Control Solutions, Hearsay Social Inc., RegEd Inc., Smarsh Inc. and Socialware.com.
Part of their growth is due to the rising demand for these providers to offer prewritten, or “canned,” content that saves advisers the time and trouble of writing their own tweets and other online content.
Actiance, Hearsay Social, Socialware and other providers help advisers stay compliant, but they're not true social-networking sites, according to Crystal Thies, a former financial adviser and co-author of “The Social Media Handbook for Financial Advisers” (Bloomberg Press, 2012).
“They preserve social-media interactions and archiving services for social media, and now they're bleeding into the marketing side of things with dashboards. It's like an internal HootSuite,” Ms. Thies said. “These are major enterprise-level software services. They're very expensive, and you have to have a lot of financial advisers to make it worth it.”
And then there's Finect. It would fit into the actual-social-network category, but has been in beta for the last year. Finect proposes to offer a “one-stop shop” for compliant networking that connects advisers, clients and prospects on a single dashboard. It is free for a basic membership, but with additional features can cost as much as $2,500.
Jennifer Openshaw, president of Finect, said that about 1,000 people have used the network in its “test-and-learn” period so far.
Investors make up 40% of members, up from 30% two months ago, with the remaining portion being professionals.
Finect's founders already successfully launched a social network linking professionals and customers in Europe, according to Ms. Openshaw, and are looking for a strategic partner in the United States.
“Finect is new to the U.S.,” she said. “The challenge is that social media is still new to the financial services industry.”
Finect may be struggling to catch on in the United States because it violates a lot of the protocols for social networks to be successful in this country, said Tim Welsh, president of Nexus Strategy.
“Why would an investor go there? Advisers might perchance go there, sort of like ladies night at the bar, but no investors are there,” Mr. Welsh said.
“That's not how people interact on social networks,” he said.
Mr. Welsh also highlighted the fact that Finect charges advisers to participate above a certain basic level.
“They've put up a page and nothing has happened,” he said. “You need critical mass — millions and millions of people — to make it work and get the traffic there.”
LinkedIn has ended up being the go-to site for many advisers when they seek to connect with colleagues, clients or prospects, even though the social-media behemoth doesn't meet some large firms' compliance standards, according to Ms Thies.
“I don't believe Finect will ever get a large number of true financial prospects for business development purposes,” she said. “They'll go to LinkedIn because they're there for other purposes, too.”
Ms. Openshaw responded to her critics by saying that in preparation for the U.S. launch, Finect has built in compliance controls with the help of Stuart Fross, the former general counsel and head of compliance for Fidelity International.
“An adviser would never have a conversation with a prospective client on LinkedIn, Facebook or Twitter,” she said. “With that compliance overlay, we give more to an adviser for free than LinkedIn.”
But having investors commit to yet another social network that is purely about investing and filled with advisers isn't likely, Ms. Thies said.