Instant access to social networks such as LinkedIn, Facebook and Twitter are powering asset managers with unprecedented information to aid in outreach efforts to institutional investors.
However, compliance headaches and other hurdles abound, and most managers have not yet realized the full potential of social media, or set corporate policy, to augment their institutional sales and marketing efforts.
At a recent LinkedIn Finance-Connect conference in New York, panelists discussed new research that identifies how emerging technology is being leveraged for insights during the investment process.
They also highlighted key opportunities for managers to influence the decision-makers at institutions such as defined benefit plan sponsors, foundations and endowments.
Nearly all institutional investors - 95% -use digital resources for investing purposes and more than three in four (77%) are using social media resources for investing insight, according to a survey of more than 250 institutional investors around the world conducted by Greenwich Associates and LinkedIn.
"Those figures are higher than what our expectations were going in," said Daniel Connell, a managing director at Greenwich Associates.
About 80% of institutional investors who use LinkedIn for their role are doing so weekly or more, with the vast majority using it daily. "Social media is right on par with news sources, which is an astounding result," Connell said.
According to Greenwich Associates, 40% of respondents said they increased their use of social media over the past year.
Roughly 44% planned to increase use of social media generally over the next year - 98% plan to either increase their usage or stay at the same level.
Institutional investors who use social media for each of the top purposes are more than likely turning to LinkedIn versus Facebook or Twitter, Connell said.
* 60% read market news or industry updates (of those 38% via LinkedIn, 18% via Facebook and 31% via Twitter)
* 47% research specific industries (of those 51% via LinkedIn, 34% via Facebook and 14% via Twitter) 44% seek opinions or commentary on market events (of those 55% via LinkedIn, 21% via Facebook and 36% via Twitter)
* 45% said social media changed their perspective on an industry issue or topic,
* 32% chose to work with a particular company or client based on the party's social media usage
* 31% shared information they gleaned via social media with other decision-makers at their company
* 29% made an investment recommendation or decision based on information they got via social media
"Most institutional investors who use social media to inform their investing have learned something that has influenced their decision-making - for example, 52% conducted further research on an industry issue or topic via social media that led to an interaction with an asset manager," Connell said.
"Social media is already playing a significant role for the institutional investor and it will only get more prominent," he said. "It must be a key component of marketing and distribution strategy if managers want to get in front of institutional investors."
Even asset managers who understand the potential for social media to bolster their institutional sales and marketing efforts feel the need to quantify their initiatives to prove return on investment.
"There are several different metrics we analyze, such as click-through rates, but also, are they liking, sharing or commenting on the content?" said Kerry Ryan, director and head of global web services at Legg Mason.
"Impressions are also important, because there is a lot of good content coming through the feed, so people might not have time to stop and click but they have a positive impression and maybe they'll go back and read it later.
"Social media is important to Legg Mason's brand and engaging with the institutional marketplace," she said.
Retail clients aren't the only party that institutions should be concerned about too - one recent study found advisors make decisions about whether to engage and choose fund offerings partly based on a provider's site quality.
Ryan acknowledges a fair bit of skepticism when people think about social media broadly and question how it is really going to move the needle for business.
"Metrics will help to inform that help people to understand where the real power is with social media," Ryan said. "Like any living breathing organism you have to tend to it and make sure to offer relevant and timely content.
"You need to augment that with listening strategies," she said. "You can't just publish out content because it won't seem authentic - listening to what's being shared is really important.
"The communications dimension of social media is a challenge, as is the velocity of content delivery."
Tom Libretto, managing director and the global head of digital at J.P. Morgan Asset Management, said that over the past 12 months his company has found a synergy between its approach to reaching and engaging segments of audiences in the institutional channel and the retail space via social media that it previously didn't have access to.
"You can't put a toe in the water - social media has to be part of a larger distribution strategy," he said.
"It's doomed to fail if there's not a long-term commitment to it."
J.P Morgan Asset Management has an internal ambassador program where the company encourages key people to thoughtfully communicate their ideas and use their own personalities when they interact with the broader social network.
"We're continuing to learn more and more, as behaviors change we are going to have to move and change and adapt," Libretto said. "We'll have to try and test new things, fail and learn in a variety of environments that we wouldn't even contemplate today. It's all about knowing where our clients are."