If firms can take a leap of faith and deal with these issues in an appropriate and cost-effective manner, they will see similar success that other industries have achieved by using social media, the author of this article argues.

Editor’s note: The following article is by Graham Aikin, a former private banker who now operates his own consultancy, The Bizlinks, focusing on issues relating to social media and the wealth management sector. His views are his own but this website is grateful for permission to publish them. As always, responses are welcome.

It isn’t difficult, with a quick internet search, to find a plethora of articles and white papers extolling the benefits for the banking and wealth management industry of utilising social media.

However, the vast majority of these seem to be generated by US firms, primarily in the New York area, and very few are written by UK firms or authors. So why is this? Why has the UK industry in particular been comparatively slow to embrace social media, and what hurdles need to be addressed and overcome in order to see some real engagement?

As we are all aware, much of the social media industry finds its home in the US and many global trends begin on the other side of the pond. The wealth management and family office sectors in the US are relatively mature and over the past few years have seen the need (and indeed have not had much other choice) to find other ways of sourcing new clients, broaden their professional networks, and engage with clients and prospects. With the development of many sites which have already become part of everyday life, such as Facebook, Twitter, LinkedIn and YouTube, as well as blogs and other tools, it soon became apparent to the more astute firms that these channels could solve their problems.

Some firms, such as AMEX, are trailblazers when it comes to the effective use of social media to engage with the wider world, and Morgan Stanley has recently launched an initiative whereby all employees have a Twitter account. My personal view is that the UK wealth management industry is approximately two years behind its US counterpart, and by 2014 most if not all firms will have some form of online presence other than their own website. However, clients will expect to be able to engage across multiple formats, so for example a firm may use Twitter for releasing news updates, Facebook for engaging with existing clients, YouTube for videos of advisors explaining the features of products, and Linkedin for engaging with other professionals.

New generation

There is also an expectation from the new generation of clients that all of these services will be available either on their mobile or tablet. Firms should view all of these tools as a means to get closer to the clients and potential clients, rather than as a hindrance.

Which brings me to the two major issues most firms need to address. These are how to protect their brand across multiple media channels, and how to deal with the mass of compliance issues associated with social media.

The first issue, one of concerns over a “lone wolf” employee or disgruntled client posting some damaging information online, can be addressed by putting in place a monitoring programme. The latter issue, which is that of a disgruntled client, should be seen as a chance to engage with that client by seeking feedback and finding ways to improve service, for example. Having worked in the industry for several years, I always found it satisfying to “turn around” an upset client into one who was engaged. The former issue, that of employees, can be mitigated by a) having effective user guidelines , and b) using one of the many social media aggregator/monitoring programmes which are available, one of the most relevant uses of which is the ability to pre-screen employee posts.

As far as compliance is concerned, the Financial Services Authority, the UK regulator, has unfortunately has been somewhat lacking in providing any guidance (other than a two-page report in June 2010). However, we work very closely with the FSA to try to understand its expectations of firms. There are a number of areas of relevance in the FSA Handbook (for example, regulations around real-time communications and assessing suitability), and each firm should have its own set of employee (user) guidelines.

If firms can take a leap of faith and deal with these issues appropriately and cost-effectively, I have no doubt that they will see similar success that other industries have achieved by using social media.