Social media: More than just a like
Social media has become a hot topic in almost all industries. Troy Bankhead, Head of Marketing and Communication at KNEIP, discusses the opportunities of social media for the financial industry.
For what purpose do financial companies use social media?
In 2011, a Fidelity Investments survey of high net worth investors revealed that 85% of respondents used social media, and a third of them professionally. More interesting was the fact that the average age of the respondents was 56. Companies have started to learn that they have to be where their audience is, and that their audience is online, and active in social media. In fact last year, a McKinsey study showed that there is $1.3 trillion in potential value that can be claimed by companies who effectively use social media and digital technology. Companies are also learning that they have to adapt to their customers’ expectations by bringing them something of value from the very first contact, and connect in a more intimate way. In this respect, social media provides a wealth of tools to connect more directly and authentically with investors, employees and stakeholders. It is a powerful listening device, which enables you to be more open to business, detect market trends in the industry, and keep up with your competitors’ activity.
Companies use social media for sales and marketing purposes by expanding the obsolete traditional sales funnel in favour of a model based on multiple touch points, for client engagement, internal crowd sourcing, vetting, recruitment, and customer support as it offers quicker interaction without being put on hold for 10 minutes. One of the most promising areas where asset managers should be not just active, but proactive, is in serving and engaging with their clients. Morgan Stanley recently empowered 18,000 of their advisers with the possibility to use LinkedIn and Twitter to engage with their customers.
Close relationships between an adviser and its clients are very important in the financial world, as it is not so much the product that they are buying but the people and brand behind that they come in contact with. People want to connect with individuals, not advertisements. They want knowledge and service, not a sales pitch.
Moreover, getting involved in social media takes a long-term commitment to changing the way companies communicate. The traditional metrics of ROI are based on short-term returns on campaigns, but aren’t always adapted. ROE (Return On Engagement) is a starting point in revisiting one’s goals for social media.
What is the current state of social media within the financial industry?
The United States are definitely the most advanced in terms of social media. However, there are still a lot of hurdles to overcome as 49% of US fund managers advisers still don’t allow employees to use personal social media networks for business purposes (although this number declines every year). One of the main reasons is that companies in the financial sector, especially asset managers are dealing with a number of compliance issues that present a daunting barrier to entry when starting a social media presence.
How would you describe the attitude of the Luxembourg financial sector towards social media?
Luxembourg businesses have not yet fully embraced social media, and as a whole have a rather conservative attitude towards social media trends. This however doesn't mean that they don’t want to or will never embrace it. Luxembourg has shown that it is very progressive: its ambition for becoming the IT and gaming hub of Europe is a perfect example of its forward-thinking attitude.
In fact, Luxembourg is already very present in the digital realm. One of the voting questions asked during the panel at the ALFI Global distribution Conference revealed that the average number of digital devices (laptop, smartphone, tablet, …) regularly used by the audience was 5. Luxembourg’s conservative attitude reflects its responsibility rather than a non-willingness to embrace social media. It is a question of learning about it, documenting about it and then providing training to employees in order to lay solid foundations in social media internally. Given the stakes involved in financial products, it goes without saying that the financial industry must be much more careful when adopting social media. Before jumping on the digital bandwagon, firms and their executives must define processes that an effective compliance strategy and establish guidelines to provide employees training on the use of social media.
Did social media change the image of the industry after the financial crisis?
Social media was present before the financial crisis. However what the crisis revealed about the industry demolished the blind confidence that the industry had benefitted from up until that point. Today more than ever, investors want to know what they’re investing in, how it works, and especially, the people behind the products they buy. Social media is nothing more (and nothing less) than the enabler that allows the consumer to interact with the brand, and with other consumers. By enabling clients to express themselves, social media has facilitated a fundamental change in the way that companies must do business, as it forces them to be more transparent and authentic, to implement better governance, and to be more present if things go awry.
At the end of the day, social media is more than a website or an app, or a like. It’s about embracing a change in the way we do business, and the way we interact with our stakeholders. Its success is tied to making good products, having good corporate governance, creating good procedures, and training good people throughout our organisations. Our stakeholders want the very things that social media brings. It’s up to us to make it happen.