NEW YORK (TheStreet -- Financial firms that embrace social media now can get the inside track on the competition as most companies resist using the tools.
According to a recent report by Aite Group, 84% of advisor firms prohibit the use of social media, citing compliance concerns. But that could change as the advisors that do use social media on a professional level say it helps them with prospecting and makes their business more visible.
Still it appears the advisors themselves are more aggressively using social media as Aite's research found: "More than one in four RIAs [registered investment advisors] use Twitter, while one in five maintains a blog."
Some brokers like Vincent Esposito have gotten so frustrated over the inability to use social media tools that they have walked away from traditional brokerage firms in order to grow their own businesses and stay current.Esposito went off on his own so that he could have more freedom to send tweets and prospect clients online. He maintains that he operates within regulatory guidelines and is careful about how he uses the tools. Esposito believes using social media will be vital to his business in the future and in order to keep his business growing, he felt he had no choice but to strike out on his own. He is equally certain that the old fashioned ways of dinosaur brokers will have to change with the times. Schwab (SCHW) is one of the brokerages that attempts to be social media friendly. The company has a variety of Twitter channels it uses but only at a corporate level. Its brokers are clamoring for more access to use these tools, but Schwab says it hasn't given permission as of yet. "Over time the rules will become more clear and the functions better understood," says Lindsay Tiles, a spokesperson for Schwab, "Everyone is trying to analyze it now." Stephanie Sammons of Wired Advisor, which consults with financial firms on e-marketing strategies, says she knew wirehouses would not let advisors get involved right away. "It's not that different from when e-mail arrived," says Sammons, recalling how long it took for wirehouses to allow brokers to converse with clients via e-mail. The firms frequently cite compliance and regulatory concerns and it's a fair argument. FINRA has clear rules and guidelines when it comes to advertising and client communication. However, when the topic turns to social media, the guidelines become a more grey. As example, FINRA sees a static posting as advertising and a principle has to approve the posting beforehand. But if there is interactive communication, then it doesn't require approval. Most blog sites have a comment function, making them interactive. But what is it when a broker posts content but then no one comments? Is it considered static or not? FINRA says the sites are both -- static and interactive. That certainly clears things up.
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