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Microsoft-LinkedIn deal may help advisors, but compliance fears loom

Now that Microsoft has acquired the professional networking platform LinkedIn, it looks like the deal may benefit financial advisors, who increasingly depend on LinkedIn to grow and maintain their client base.

First, there may be additional productivity tools in the making, which will help advisors capture the attention of prospects and current customers. Earlier this year, LinkedIn introduced a new feature, ProFinder, which helps its users find experts, including financial advisors. LinkedIn’s Sales Navigator also helps advisors target the people they want to become clients, and get introduced through their networks.

ProFinder and Sales Navigator could be further strengthened by the Microsoft-LinkedIn relationship, especially if LinkedIn sponsored content becomes more visible to Microsoft users. The companies are expected to marry LinkedIn’s professional network data with Microsoft services, including the Microsoft Office Suite (connecting Widows, Outlook, Excel, Skype and other products) and the Microsoft Dynamics CRM platform, which would help professionals combine work and networking.

Recent data also show LinkedIn is gaining traction with financial services firms. The Smarsh 2016 Electronic Communications Compliance Survey Report revealed that firms are using LinkedIn more often for professional reasons. Out of the financial services compliance professionals who were surveyed, 72% said their firm used LinkedIn in 2015, compared to 39% in 2011. Also, survey respondents said that when firm employees request permission to use additional communications channels for business, the most requested is LinkedIn, followed by text/SMS messaging and instant messaging.

Microsoft LinkedIn deal analyst JP Morgan

However, as LinkedIn continues to gain popularity within the financial services industry, firms need to be careful to keep up with their regulatory requirements, including SEC rule 17a-4, which obligates firms to archive electronic business communications —including social media — in non-rewriteable and non-erasable formats for at least three years.

Along with retention, firms are required to regularly perform risk-based reviews of correspondence and internal communications, and content must be easily viewed in the event of a regulatory audit.

Compliance must enforce these mandates, to minimize the business risks of noncompliance, including fines, reputational damage, and even loss of license to operate. It doesn’t matter whether an advisor uses a personal or corporate-ssued device for business communications with LinkedIn as the channel, or any other social platform for that matter; it’s the content of the message itself that determines its classification as a business record.

What’s alarming is that the Smarsh survey report showed the use of LinkedIn still represents a compliance gap for firms, since many are still behind in implementing archiving and supervision systems for the platform. The Smarsh survey respondents indicated that when LinkedIn is allowed for business communications, only 54% of firms have an archiving/supervision solution in place.

At the same time, respondents cited social media as the number one type of communications content perceived as the source of the most compliance risk. This points to the fact that firms that use but don’t archive and supervise platforms like LinkedIn leave themselves open to significant compliance threats that may go undetected.

Even if a firm prohibits social media channels like LinkedIn, risks remain if staff do not adhere to the policy. In the Smarsh survey report, 30% of compliance professionals who work in firms that prohibit the use of LinkedIn for business communications said they have minimal or no confidence that they could prove the policy of prohibition is being adhered to.

What’s even more worrisome is that 17% of respondents who said their firm allows but doesn’t archive social media also said archiving will create too much content for compliance to review. Twelve percent said they are waiting to see industry regulators enforce regulatory guidance around the social media channel before taking action. At best, these approaches leave advisors and firms exposed to the risk of non-compliant findings in the event of a regulatory examination.

No matter what value the Microsoft and LinkedIn deal ultimately brings to advisors, it’s clear that firms will need to move quickly to modernize their approach to electronic communications supervision. Sound social media policies and procedures must be in place, and archiving technology can help a firm reliably and effectively enforce those policies, to reduce risk and operate within compliance boundaries.

A smart first step is to consider a comprehensive archiving solution that captures LinkedIn and other social media platforms alongside traditional communications tools like email and instant messaging. When these are retained in a single search-ready repository, all content can be accessed and reviewed in the same way, at any time.

Along with sound policies and archiving of communications content, training of advisors and firm employees on social media use can help firms proactively prepare for the day when LinkedIn becomes an integral part of the daily business workflow. With policies, training and archiving in place, firms can also become more diligent about their compliance obligations, and be ready to respond to a regulatory examination.

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