Social media has surged in popularity in the past year. More than 43% of those who use the Internet now use social networking sites, such as Facebook, MySpace, and LinkedIn, according to the Consumer Internet Barometer, a report produced by the Conference Board and TNS, a global market research firm. That's an increase of 27% from a year ago. In fact, online networks are so popular that The Global Language Monitor named "Twitter" as the most used word in 2009. Advisors are beginning to become more aware of the advantages of using social networking sites to keep in touch with current clients and reach out to new clients. In a survey that Rydex AdvisorBenchmarking conducted in December 2009, we found that advisors are most interested in learning how to harness social networking platforms for securing new clients (46%), enhancing communication with current clients (35%), and advertising or promoting their firms (30%)--see Chart 1 below.
While Facebook is the most popular social networking site and is considered by many to be a must-have Internet address book, the leading social networking site for advisors is LinkedIn. Seventy-eight percent of online households use Facebook, and 17% of households use LinkedIn. Among advisors, about half (42%) use LinkedIn, in large part because it is tailored for business use.
The Power of LinkedIn
LinkedIn--as well as other social networking sites--can be a powerful marketing and communications tool for advisors. "LinkedIn allowed us to expand our circle and connect with people. This social media Web site not only offers a way to reach out to others but also allows us to initiate trust and develop relationships through meeting a person on a level he or she is most comfortable," says Robert Fuest, COO and head of investment research at Landor & Fuest in New York.
Building a network is the most important part of LinkedIn. While the site provides new ways for advisors to connect with, inform, and interact with customers, compliance issues are still being ironed out for these emerging technologies, particularly for those in the broker/dealer world. In January 2010, FINRA instituted new regulatory changes and released guidelines for financial advisors who use social networking sites and blogs. As you consider using social media, it's important to become familiar with these evolving regulations.
Getting Started on LinkedIn
Using LinkedIn is still a learning process for some financial advisors. Here are some tips for advisors who would like a head start establishing their LinkedIn presence:
1. Complete your profile with as much detail as possible, including your credentials, background, affiliations, and services. If possible, add a professional photograph (preferably not from Sears).
2. Preview prospective clients' profiles-you can learn about their interests and activities, and have a more productive conversation when you meet them.
3. Join your colleagues-such as the RIA Marketplace group. For best results, actively participate in the group's conversations.
4. Explore adding clients' connections and searching for people with whom you have lost touch. By viewing the contacts of your contacts, you may be able to build referrals.
5. Make sure you have a unified marketing plan--and message--for all social networking platforms.
Regulations and Risks
There are many benefits to social networking, including relatively low cost (especially in light of tight budgets) for communicating with current and prospective clients. By using social networking sites, advisors can get their messages out quickly, measure the effectiveness of their communications efforts, and get feedback directly from clients.
However, there are some things to be aware of in order to most effectively use sites such as LinkedIn:
Because these technologies are new, industry regulations regarding social networking sites will likely be in flux for a while. Before posting a profile on social media sites, you should get approval from your compliance department.
If you use social networking for personal connections, be sure to separate your personal online presence from your professional presence.
To get the most out of their efforts, you have to actively participate on LinkedIn and other social networking sites. If you'd like people to recommend your work, for instance, volunteer to recommend theirs first rather than simply hitting them up for a recommendation. Communication is a two-way street, and other users quickly dismiss those who only post for their own benefit.
If you use social networking for personal connections, be sure to separate your personal online presence from your professional one.
Social Networking Is Here to Stay
While most advisors are only beginning to take advantage of social networking sites--about half (55%) of RIAs say they spend no time on social media and about 40% report they spend less than one hour per day on such sites, and even their knowledge of existing sites is spotty (see Chart 2)--there are many reasons to consider gaining a presence on these sites.
First and foremost: Your clients are online and they are using social media to communicate; if you aren't, your practice may be missing opportunities. While you don't have to master every aspect of social media all at once, you're doing yourself (and your bottom line) a disservice if you don't at least make a foray into this new medium. By going social, you'll gain an edge in securing new clients, enhancing communication with current clients, and advertising or promoting your firm. More than half (62%) of advisors agree that social networking is here to stay, saying that social media will have a lasting impact on the financial services industry. Since social networking use is still in an early stage of use within the industry, it's the perfect time to establish a social networking presence that you can expand in years to come.
Maya Ivanova is a market research manager with Rydex|SGI AdvisorBenchmarking She can be reached at mivanova@advisorbenchmarking.com.
Rydex|SGI AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business.
AdvisorBenchmarking is an affiliate of Rydex|SGI. The analysis on Rydex AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general in nature, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments|SGI and it affiliates or any of its affiliates.
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