With the advent of social media and technology that keeps people "on" at all times, people's lives have become more intertwined and as a result, relationships have blurred as well. Where an advisor would give out his business card in the past, nowadays the advisor or prospect will reach out on LinkedIn to see who they know in common for a "trusted source" review.
From a relationship standpoint, social media and the financial advisory business are a perfect complement to one another. Prospects get more information to feel confident in their choices and also have more ways and more frequent communication with their advisors.
All good, right? Well, from a regulatory standpoint, social media presents serious compliance issues for firms and advisors.
SEC and FINRA regulations require all communications to be captured and retained for 6 years. On firm systems, email flows easily to an archiving system where the correspondence is supervised.
On social media sites, firms don't have a natural way to capture that, but their obligation to do so still exists. To fill this gap, niche "middleware" software firms sprung up. Companies like Socialware, Actiance, and Hearsay are key to firms' ability to allow compliant use of social media. They essentially create pipes between the social media sites and firms' archiving systems, allowing firms to treat social media communication like email.
Yet to make things more complicated, FINRA considers any profile on social media to be advertising, requiring preapproval. At Morgan Stanley, if an advisor writes at all about being an advisor, their LinkedIn profile crosses over from a personal page into being a "professional" profile. Because LinkedIn itself is a professional site, individuals can only have one profile (according to LinkedIn's terms of service). This means all profiles need to be reviewed before they are posted to make sure content is compliant.
Despite these clear requirements from our regulators, I believe FINRA is supportive of firms embracing these new communications mediums. We are regulated, not prohibited. Morgan Stanley has been open with the regulators as our firm piloted, and then fully launched, the use of LinkedIn and other socila media tools for our advisors.
Despite the technology being available and the regulators being supportive, the industry has still been slow to embrace social. I think this is because social media represents an organizational challenge and a steep learning curve.
The business and sales teams have to first believe in the value that social business brings, then technology has to prioritize the cost and time of implementing a middleware vendor, and finally, legal and compliance must dissect these sites to determine their interpretation of how various functionality should be treated. For example, should advisors be allowed to write their own posts, and if so, should those be reviewed prior to getting posted (which also has a resource implication)?
At some point, firms won't have a choice -- social media will become interchangeable with email (if it hasn't already). At that point all firms will need to offer advisors a compliant way to use social media. In my mind, they should be racing to meet compliance requirements since social media is actually a powerful business tool that creates new and deeper relationships -- and that's what social media is all about.
Lauren Boyman leads the digital strategy for Morgan Stanley Wealth Management, the first major wirehouse to allow advisors to use social media in a compliant way. She is responsible for client web and mobile, as well as advisor mobile and social media programs. Follow her on Twitter, @LBoymanMS.