Worth the Investment – Social Media for the Financial Services Industry

January 28, 2011

Every brand needs a strategy before venturing into social media, but financial services companies face more challenges than most.  Members of a highly regulated industry, financial services executives not only have to consider their overall business and customer objectives, but also work around compliance restrictions and keep in line with FINRA regulations when implementing their strategy.  Despite these bumps in the road, many companies are taking advantage of social media as a new channel for communication with prospects.

FINRA and Compliance Overview

In 2009, the Financial Industry Regulatory Authority finally released the long-anticipated Regulatory Notice 10-06, detailing guidelines on communications for Blogs and Social Networking Web Sites.  In a nutshell, these regulations include:

  1. Archive – All communications via social networks must be retained.
  2. Supervise – Employees must receive training on the firm’s written policies and procedures before engaging in social media.  Static content must be pre-approved by the firm, while real-time interactive communications need to be “supervised.”
  3. Include Disclaimers – Although not required, it is recommended to add a disclaimer to remove any doubt about the organization’s affiliation with third-party opinions expressed within the social media platform.
  4. Avoid Recommendations – Company representatives should not advise or endorse financial investments via social media. Warning: This DOES apply to the “Like” feature on Facebook, and ReTweeting on Twitter, both of which could be considered entanglement.

Social Media Statistics

With many prospective customers adopting social technologies, financial services companies should recognize the need to enter this space.  A 2009 Forrester report revealed that 60% of online investors are active social media users, with the most rapid growth occurring among Boomers (ages 44-64) and Seniors (ages 65 and older).

Although firms may understand the need to meet their target audience in their preferred media, many still hesitate to “get social.” With the challenge of working around compliance restrictions, it’s no wonder that for the most part, financial services companies haven’t been early adopters.  However, now that the waters have been tested, more enterprises are jumping in and recognizing the business value of these initiatives.

Financial Social Media Examples

Charles Schwab

Charles Schwab launched an online community for active trader clients.  This channel allows clients to:

  • Participate in timely discussions on both short and long-term investing topics
  • Swap information, ideas and trading experiences
  • Connect with other traders to make trading more fun by learning from each other
  • Gain access to Schwab and third-party trading experts both informally and via a series of blogs, tutorials and live webinars


Fidelity created a well-rounded presence on a number of open social networks,  engaging and interacting with investors and financial advisors to establish thought leadership.  Fidelity’s social presence includes:

Communities for Financial Advisors and Analysts

Many communities are forming for financial analysts to interact with each other and share research, opinions and best practices.

  • Lantern Research – the “fastest-growing online network of Financial Analysts.”  This community has more than 1,800 members, and also engages more than 3,400 professionals through LinkedIn.
  • Finance 3.0 – an online network for Financial Analysts.  This site has over 40,000 visits per month.  Members communicate within the community, as well as through the Facebook page, LinkedIn group, and Twitter.
  • SumZero – a private community for buy-side investment professionals (hedge fund, private equity and mutual fund analysts) to share research.  The site has been around for about a year, and has 3,500 members.  Only industry professionals can join, and they can invite others as well.

Content Archival and Management

As FINRA begins to audit financial services organizations, companies like SocialWare make it easier to control activity and archive all content on Facebook, Twitter, and LinkedIn for compliance purposes.  A cloud-based SAS service, SocialWare has recently announced a 250% increase in annual growth.  Given its substantial addition of 25 new financial services clients, it is apparent that solutions like this can help more financial services companies enter the social space.  According to Socialware CEO, Chad Bockius, “Where six months ago financial services companies were cautious and wary of social media, now we’re seeing heavy interest in getting programs and strategies going to take advantage of this medium.”

Social media communication platforms like Shoutlet also improve the management of New Media communications.  The tool allows for social media updates to be saved for review and approval, then scheduled for release.

As the above examples demonstrate, it is more than possible for financial services companies to effectively use social media.  Despite the risks, the benefits of such initiatives greatly outweigh the costs.

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