How Investment Advisers Should (and Do) Use Social Media

Firms have discovered the powers of tweeting, blogging and connecting. There are, however, risks and novel regulatory twists.


Among Facebook’s more than a billion users are a growing number of investment advisers who use the network, as well as other social media sites such as Twitter and LinkedIn, to communicate with clients and prospect for new business. The migration into social media has state and federal regulators and investment advisory firms wrestling with how to update, tweet, like, blog and otherwise participate in social networking without running afoul of compliance rules.

Morgan Stanley began a pilot two years ago with 600 financial advisers using LinkedIn and Twitter. “This pilot was a success, and the ability to utilize these social media has been extended to all of our advisers,” says James Wiggins, managing director of corporate communications for Morgan Stanley Wealth Management in Purchase, New York. “As of this July, 4, 300 of our FAs had gotten engaged with LinkedIn, Twitter or both.”

Morgan Stanley advisers can send pre-approved tweets featuring market, investment, and wealth management commentaries, and topical messages such as holiday greetings, says Wiggins. On LinkedIn, they set up personal profiles and engage with others on the social network. “While this program is still in its early stages, many of our advisers have reported success staying in touch with clients and bringing in new business as a result of their social media presence,” says Wiggins.

Morgan Stanley keeps a tight rein on the program. Financial Advisers (FAs) need to take an online social media tutorial and the firm helps with marketing and website construction and maintenance. Even LinkedIn profiles have to be approved, though FAs can make connections on LinkedIn and ask for introductions by themselves.

While using pre-approved material may work against spontaneity, it also reduces the need to monitor thousands of FAs. Ara Jabrayan, a compliance consultant in Boca Raton, Florida says most bigger firms use pre-approved messages and templates. “They don’t want to deal with thousands of reps coming up with thousands of postings and sending them to compliance for approval,” he says. “It creates a pretty big burden.”

Social networking for investment advisers isn’t as easy as simply opening up a Facebook account. “Investment advisers are finding there is a use for social media,” says Paul Glenn, special counsel for the Investment Adviser Association. “But there are some lines they probably should be alerted to.”


In July, the Investment Adviser Association announced a survey showing that the percentage of investment advisory firms with written policies governing social networking has nearly doubled since 2010, to 83 percent. Most (51 percent) haven’t prohibited outright use of personal social media sites for business, which represents a slight decline from last year.

Some clarity on compliance issues came in January 2012, when the Securities and Exchange Commission released a risk alert on investment advisers’ use of social media. One of the takeaways was that Facebook updates, tweets and other social communications should be treated like advertising, according to Jabrayan. That means, among other things, making sure social media conforms to firm policy and that all activity is tracked and recorded.

But, of course, this new technology produces some novel twists that don’t necessarily appear in traditional marketing. In the interactive world of social media, communication flows both ways. One issue that has arisen from this interactivity is whether when a client “likes” something on Facebook it is considered a testimonial that would raise red flags with regulators. The answer, Jabrayan says, is that it depends. Liking a specific post is viewed as a testimonial, but liking a page isn’t. “It gets into some weird territory,” he says.

States are also weighing in, no less strangely. Massachusetts last year put out a guideline stating that a Facebook “like” might not be a testimonial, but the same thing on LinkedIn would be.

Investment advisers are navigating the compliance maze. David Edwards, president of Heron Financial Group, a small Registered Investment Adviser in New York City, says he blogs on Facebook and includes in comments a Twitter hashtag that leads users to the firms’ website.

“I call social media the force multiplier,” says Edwards, who hired a social marketing consultant to teach him how to employ the technology in reaching and selling to new prospects. He even videotapes his presentations and posts them on YouTube in order to improve his firm’s Google page ranking.

The size of the firm makes it easier for Edwards to ensure social media activity meets firm guidelines. Heron doesn’t post pre-approved materials. “Clients know when they’re getting canned material,” he says.

Edwards uses the same vendor as Morgan Stanley, Austin, Texas-based Socialware, to capture and archive social media activities. “If the SEC ever comes around and says, ‘Show us your social marketing,’ we have that covered.”

Social media isn’t a cure-all for investment advisers’ marketing challenges. Edwards says it will continue to be just one of many ways they seek to market the firm’s name to prospects. However, it is among the lowest-cost ways to market, he adds, and, until fairly recently relatively few of the larger investment adviser firms participated.

That’s changing, as Morgan Stanley’s initiative indicates. Social media will only become a more important aspect of investment advisers’ marketing strategies, says John Thomas, managing director of asset management compliance at BNY Mellon in Pittsburgh and a member of the IAA’s social media working group.

For a while to come, firms will be working out how to conform to inconsistent rules from federal and state regulators and, for those with dual registration as broker-dealers, the more stringent guidelines from the Financial Industry Regulatory Authority. But they will have to figure that out, Thomas says, because social media is becoming such an important communications tool.

“You really can’t afford not to have a presence,” says Thomas. “Now the question is, what does that presence look like?”

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