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NEW YORK, March 1 When many financial advisers ask their firms about fully engaging in social media, the answer is usually still a resolute "no" - to Twitter, Facebook, LinkedIn, Tumblr, Pinterest, blogging and just about anything else.
Only a few of the major financial firms, including Morgan Stanley Wealth Management, have started pilot programs to give their financial advisers access to social media, because each interaction has to be monitored by a compliance system to make sure advisers are abiding by regulations.
Advisers themselves aren't convinced that there's enough value for their practices in using social media. Only 19 percent of the 463 financial advisers surveyed by Aite Group, a research firm based in Boston, said they found social media to be useful to their businesses. LinkedIn use was up 10 percent since 2009, but professional use of Facebook and Twitter dropped 10 percent and 8 percent, respectively, and blogging was down 9 percent, according to the Aite study.
But that doesn't mean advisers are not engaging off the radar. Josh Brown, a financial adviser at New York-based Fusion Analytics who is known as The Reformed Broker to his 35,000-plus Twitter followers, says many of his friends at major brokerage firms regularly visit sites like Twitter, just to keep tabs on the chatter. Some are interacting using anonymous accounts, he said, a danger if their company's compliance office finds out.
It is unlikely that firms will make a wholesale shift to allowing open or even mid-level access to social media websites. But for advisers, there are benefits to simply listening on or lurking on social media.
EARS TO THE GROUND
Of course, not everyone is worth listening to. To start, financial advisers must figure out which influential people to follow and then devise a strategy to keep tabs on what those people are saying.
LinkedIn is a favorite among financial advisers because it's easy - and usually compliance safe enough - to simply maintain a basic profile page and connect passively with others. A research study by LinkedIn and FTI Consulting Inc in May 2012 found that 9 out of 10 financial advisers who use social media for business purposes used LinkedIn, while less than 30 percent used Facebook, Twitter or Google+.
The site's search function allows users to find peers with similar job titles, scan lists of people who work at particular companies or in particular sectors - you can even filter results by zip code - and find discussion groups to join. There's a multiplier effect to primary-level connections, said Jennifer Grazel, global head of category development for financial services at LinkedIn.
"If I have 1,000 people in my first degree, that's 800,000 amplified to the 2nd degree," she said.
Lurking isn't all that useful on Facebook, says Mike Slemmer, principal at The Collaborative and Advisors Trusted Advisor, consulting groups based in Boston that have studied social media usage among financial advisers. "It's too unstructured and (there's a) perception that it's very much for friendship and consumer-based usage," he said.
But on Twitter, listening might be useful. Brown says he follows the major journalists covering his interests, plus individual brokers who tweet and interact with him. The news tends to cycle over the course of the day, he says, as influencers talk about particular stocks or regulatory issues, and those become news segments later in the day - with the people who were tweeting about a topic earlier in the day invited as guests on air on various cable or news shows.
HOW TO LISTEN
Once you have those thousand connections on LinkedIn (or even just 200), the goal of most advisers is to convert that into business.
"Having basic read-only skills and leveraging search, advisers were able to garner a lot of prospects," says LinkedIn's Grazel, according to the research for the 2012 study and others she has conducted since.
For one thing, clients seem ripe for the picking.
LinkedIn found that 87 percent of investors use social media, but only 4 percent of them were interacting with advisers through a social media platform. Of the small percentage that did interact, 54 percent said they found value in doing so.
Even though advisers can be constrained from being active on LinkedIn, they still can use their monitored email to correspond with connections gleaned from the site.
For those who were allowed a little more activity - like being able to use the site's InMail feature - they were "turning a cold call into a warm call just by reaching out and connecting, with current clients, colleagues," said Grazel.
Those allowed to go even further and send out educational materials through the site have been landing many clients, some with big portfolios to manage. Robert Fuest, chief operating officer and head of investment research at New York-based Landor & Feust Capital Managers, constantly cultivates his list of connection and sends out information to his list, and it has paid off in millions of dollars in new business.
"If content is good enough, and not sales-based, people will connect back with you," he says. "You are slowly pulling them in. The reason why it works is because they know who you are."
PROCEED WITH CAUTION
The underlying reason for restricting engagement on social media at financial services' firms is the risk that advisers let loose in the vast and fast-moving world of social media will stray from their rule-bound world.
"I respect why the big wirehouses are hesitant to give 30,000 advisers access," Brown recently told a panel on Wall Street and social media in New York.
Nevertheless, he thinks that big firms have about two years to put together a plan for access, or they will be left behind. If their advisers are not engaging with Twitter, they are missing out, he says.
"Twitter is where the news is made."