Not clued in about LinkedIn? Big mistake, advisers say

Financial adviser Cathy Curtis is a big believer in the power of social media to drive her business. She has been actively using the biggest three social networks — Facebook, LinkedIn and Twitter, since 2008 as a marketing tool for her San Francisco-based solo practice.

She doesn’t talk about investments on the networks, nor even about investment strategies. She is simply looking to make connections.

“My purpose in using social media is to drive people to my website and blog,” she said on a panel discussing the subject at the TD Ameritrade conference in Orlando, Fla. “The social networks are the best and cheapest way to do that.”

Cheap and rewarding. Ms. Curtis recently landed a $500,000 client that she met through LinkedIn. It started with a couple of messages through the network, which is popular with professionals, followed by a meeting at her office. Two weeks later, the client committed the capital. “I basically didn’t have to do anything but be on LinkedIn,” she said.

The social networks offer advisers low-cost opportunities to reach millions of potential clients — many of them of the Generation X and Y variety that advisers find it difficult to attract.

Nevertheless, lack of comfort with the technology and fears of running afoul of regulators have kept most advisers on the sidelines when it comes to using the social networks. It shouldn’t, said Blane Warrene, chief executive of Arkovi, a consulting firm that helps financial service firms use the social networks as a marketing tool.

“Initially, the thinking was that social media would hit a concrete wall in the advisory industry, but over the last 12 to 18 months, regulators have identified ways that advisers can leverage these great platforms,” Mr. Warrene said.

There are compliance issues, of course, just as there are with all communications and representations to the public. Chief among them is the need to archive all communications with clients over these expanding networks. That can be accomplished with fairly cheap off-the shelf software, the panelists said. The second rule of thumb is to not talk investments on these sites.

Ms. Curtis said her objective was to introduce herself to others and provide some personal information that could attract potential clients. She keeps her discussion of financial planning to broad personal finance issues.

Her use of the social networks also has enhanced her online visibility, leading to more opportunities.

“This sounds unbelievable, but the last ten clients I’ve taken on found me starting with a Google search,” said
Bill Kovacs, general counsel for Summit Wealth Management. Nevertheless, he continues to be cautious about his firm’s use of the networks. His concern is that clients who come to advisers based on profiles and messages they see on social networks, could put firms at risk if the client ends up having a bad experience.

If the information posted by the adviser is in any way exaggerated or inaccurate — for example, the charity work wasn’t as extensive as stated, they could be vulnerable in court. There’s no question, it could add a whole new dimension to the discovery process in litigation — putting a premium on firms’ controlling the use of social networks by advisers.

“The worse the experience the client had, the more appealing the argument will sound in court,” Mr. Kovacs said.