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BD Firms Reveal Their Big Social Media Worries

By Rita Raagas De Ramos July 11, 2018

When it comes to the use of social media, the biggest worry for broker-dealer firms is the potential for unauthorized use of accounts by their registered representatives.

Around 69% of the mostly compliance-related personnel from broker-dealer firms polled at Finra's annual conference in Washington, D.C. in May said such unauthorized social media accounts concern them because they cannot be supervised and there is no way for the firms to retain records of those posts or interactions.

Robert Salvador, chief compliance officer at Motif, which describes itself as a technology-driven thematic RIA, said at the conference that the firm doesn’t let its advisors mention the firm’s name in social media. He said such prohibitions eliminate the need to monitor individual social media accounts.

A distant second worry, cited by 10% of those polled, is registered representatives embarrassing themselves or their firms with “business-inappropriate posts.”

Every time Bank of America Merrill Lynch’s summer associate program starts, Evan Charkes, the firm’s associate general counsel, said his “biggest fear” is “one of them getting drunk and landing on the New York Post” as fodder for social media.

The other social media-related worries are registered representatives posting false or misleading content about their securities business (cited by 9%), a cyberattack on clients of broker-dealer firms using the firms’ social media channels (cited by 7%) and the inadvertent sharing of information, such as account numbers and investment details (cited by 5%).

The results of the most recent Putnam Investments survey about the use of social media by advisors, published in April, show that social media is changing advisor-client relationships. Last November, Putnam surveyed 1,014 U.S. financial advisors who have had retail clients for at least two years.

“Advisors reported that it has improved both professional and personal relationships with their clients, thanks to more frequent communication and an easier exchange of information,” according to Putnam.

Around 83% of the advisors surveyed said social media has helped shorten the time required to convert a prospect into a client. Approximately 46% of the advisors surveyed consider themselves social media experts, but only 24% have had training by a hired third-party specialist.

Finra’s rules on communicating with the public apply to social media posts or comments. The rules are aimed at protecting investors from false or misleading claims, exaggerated statements, and material omissions. And the self-regulator requires broker-dealer firms to supervise the business-related content that associated persons post on social media sites.

Around 55% of those polled at the Finra conference said their broker-dealer firms prohibit registered representatives participating in social media beyond static profiles and pre-approved content.

Around 33% said they have internal staff who are trained to monitor and review social media accounts and posts. Around 8% said they use automated alerts that notify them of new social media channels being used by their registered representatives and new content being posted. Around 4% said they outsource the monitoring of individual social media accounts and posts.

Charkes said Bank of America Merrill Lynch lets its advisors use only LinkedIn via a single-sign-on method that helps ensure risks are controlled.

The firm is considering allowing the use of Facebook business pages because there “has been a lot of demand from our FAs” to have a presence on the site, but the firm hasn’t reached a decision, according to Charkes.

“We’re still exploring how to use this,” he said.

Nubiaa Shabaka, global head of cybersecurity legal and North America head of privacy and data protection legal at Morgan Stanley, said the firm lets its advisors use Facebook and is considering the use of apps for communications.

“People want the convenience” of having more options for communications, according to Shabaka.

Salvador said Motif is also considering the use of apps for communications.

“Our customer base expects it,” Salvador said. “We encourage communications between our advisors and our customers. They expect to be able to communicate with us [in other ways] besides by phone and email.”

But the majority, or 65%, of those polled at the Finra conference said their broker-dealer firms don’t let their registered representatives use instant messages, texts or messaging apps to communicate internally or with their clients. Around 33% of those polled said their firms allow it.

Morgan Stanley’s Shabaka said the key to using instant messages, texts or messaging apps is to be able to retain records of all communications, as required by Finra.