Welcome to Financial Advisor IQ

Social Media Use Still Growing Among FAs: Putnam

By Rita Raagas De Ramos May 16, 2017

The use of social media by financial advisors is growing, and the challenge faced by many advisors is maximizing the potential benefits of the medium while complying with regulatory guidelines.

“The question is no longer whether social media can function within the confines of closely-regulated communications and transactions, but rather how social networking strategies work best in tandem with traditional methods to optimize advisor reach, influence clients and cultivate a successful practice,” according to a 2016 Putnam Investments report.

Among the advisors surveyed by Putnam over the years, the percentage of those who have adopted social media for business use has been growing – from 75% in 2013 and 2014, to 81% in 2015, and 85% in 2016.

The percentage of advisors reporting success in gaining clients via social media rose to 80% in 2016 from 49% in 2013, the year Putnam started surveying advisors on their social media use. This year, the survey featured 1,018 U.S. financial advisors.

Recognizing that “investors and financial services professionals alike are increasingly using social media for a variety of business purposes,” Finra has been updating its rules on communications by releasing and updating guidelines on the use of social media. Finra takes the stand that rules on communicating with the public are applicable to the use of social media. Finra says the rules are meant to “protect investors from false, misleading claims, exaggerated statements, and material omissions.”

James Sampson

The latest update from Finra came in the Q&A format of Regulatory Notice 17-18, issued last month, which had additional guidelines on social networking websites and texting. The social media-related guidance covers hyperlinks and sharing, native advertising, and testimonials and endorsements.

The majority, or 81%, of advisors surveyed by Putnam say they are aware of their firms’ social media compliance guidelines. Around 57% of the advisors say their firms have compliance restrictions on certain devices, including home, office or mobile devices.

Putnam says that among advisors who don’t expect social media to play a significant role in their marketing, 64% cite compliance policies or regulations as the reason.

James Sampson, Boston-based director for retirement advisory services at consulting and advisory firm Hilb Group Retirement Services, says its broker-dealer, LPL, is “fairly progressive” on the use of social media but can still be “fairly restrictive.”

LPL’s compliance is “very tough” on social media use, he says. “If they can’t monitor it, you can’t use it.”

Sampson says Hilb Group Retirement Services has certain guidelines for social media use, and LPL “requires us to go through a fairly extensive training before being allowed to use any social media channels.  Posts do not need to be pre-approved, as our compliance team can monitor our social media sites, just like they do with e-mails.”

Since the company’s social media sites are monitored by its compliance department, and its relevant staff has been through the training to have the sites in the first place, anyone could post or share on social media, he says. “Obviously, posting opinions is frowned upon, especially without the disclaimer that our views don’t reflect those of our broker-dealer. We’re basically allowed to share articles or others’ posts, but have to follow certain guidelines.”

Sampson notes that “it’s very time-consuming to run a successful social media campaign,” whether on LinkedIn, Facebook, Twitter or via a blog. “To do it right, you’ve got to be committed to it,” he adds.

Top broker-dealers and RIAs surveyed by FA-IQ’s sister service Ignites Research are not heavy users of social media, however. Among the FT 400 top broker-dealer advisors surveyed in October to December last year, only 9% say they always post content on social media, while 12% say they often do it. Among the FT 300 top RIAs surveyed in March to April this year, only 15% say they always post content on social media, while 21% say they often do it.

Advisors make it to these lists based on six attributes: assets under management, AUM growth rate, compliance record, experience, industry certifications and online accessibility.

The results are in line with Putnam’s finding that age is factor in social media use. Among advisors over age 65 surveyed by Putnam, only 60% have adopted social media for business use, and that’s “not showing any signs of increasing” -- much lower than the overall adoption rate of 85%, according to Putnam. Around 20% of the FT 400 advisors are above the age of 65, while 47% are 50 to 59 years old.