Another new survey reports that wealthy investors are using social media — up to 90% of them according to Cogent Research — yet many advisory firms who yearn to gain these people as clients are still staying away from Facebook, Twitter and the other sites.
Last week, an audience of about 250 financial advisers and compliance professionals who gathered in Washington, D.C., for the Investment Adviser Association annual compliance seminar were asked whether they or their employees use social media. A small number of hands — maybe 10% — went up. Most advisers say “compliance concerns” is the top reason they aren't out there blogging and tweeting to build their professional reputations and personal brands. But that no longer seems valid given that both the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc. have told advisers and brokers how they can and can't behave on social media.
The SEC isn't going to come out and tell advisers to join Facebook and the rest, but consider this. One increasing way this regulator sends a message about what it doesn't condone is by bringing an enforcement action against an individual or firm that violated a certain rule — something the SEC has done recently with regard to its oversight of hedge funds and private-equity firms.
As far as social media is concerned — look around. There are no significant cases against advisers who have used social media improperly and, in fact, the commission continues to offer practical guidance. Just today it offered mutual funds and investment companies
more social media advice.
Last week, SEC branch chief Sarah Buescher offered several suggestions to that group of advisers at the IAA conference. She urged firms to think about and plan their social media compliance policies well before they unveil a Facebook page or let loose on Twitter. And incorporating people from all parts of the firm in the policy discussions can help vet all the issues and risks social media could spark in violation of either the advertising rules or the record-keeping obligations, she said.
Ms. Buescher also said advisers should train their employees on social media, and then retrain them whenever firms unroll new initiatives — like a new blog or participation in some other social media forum.
“Employees may not be aware that if they put something up on their Facebook page or do their own blog, that there are risks with these things,” she said.
Compliance and legal professionals also chimed in to offer advisers recommendations, including:
• Think about what the firm is trying to achieve through social media and that will drive the policies and procedures.
• Spell out how the firm will track use of social media and how it will test to ensure policies are being followed.
• Investigate state labor laws when considering what password and other information to require from employees, as certain states are very restrictive about what employers can ask for from workers.
• Take care when associating with another site or group's content, and consider a pop-up link that says the viewer is leaving your site and that you are not responsible for the content of where the viewer is landing.
• Always understand the complete functionality of any social media platform the firm is using, such as whether there are options for someone to write a testimonial, and choose which functions to allow employees and site visitors to use.
