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What Are Social Media's Implications for the Financial Industry?
At the end of Chapter 1,1 alluded to examples of how different industries in the United States responded to changes in behavior by their customers – new safety features in automobiles, less sugar and salt in food, and so on. It also happens that many American industries also are au courant with developments in social media as well.
Whether it's fashion or food, they not only have embraced social media, they've incorporated it into their businesses or built online communities around niche markets. Think of Yelp or Hotels.com for locally rated restaurants or overnight stays. Amazon.com has refashioned retail, not only by making it easier for consumers to buy what they want, but also by tracking customer interests and using that data to suggest other products their clients might enjoy. Even in our personal lives, places like Match.com have, for nearly a decade, transformed the way consumers can find their life partner.
SITTING OUT THE GAME?
And yet a good portion of the financial industry remains skeptical about this revolution. To be sure, there is a healthy and growing presence of financial advisors on professional networking site LinkedIn, yet participation in other key social media channels is still pretty thin. A 2013 survey by InvestmentNews showed that only one out of four advisors used Facebook, and participation in other channels was markedly lower.
FIGURE 2.1 LinkedIn Leads Among Advisors
Source: Investment News' Advisers & Social Media Survey 2013
Industry experts say many firms are just tiptoeing into this new channel – testing tools to allow content distribution, piloting basic regulatory compliance through social media, and shaping their online voices. The goal is to build brand and awareness or increase engagement with investors, although many in the industry remain concerned about how strong the impact will be on revenue growth and the return on their investments (see Figure 2.1).
And yet the pace is picking up, says Alan Maginn, an analyst at Corporate Insight, which follows developments in the retail financial services industry and conducted one of the industry's earliest studies on social media involvement.
“In 2008, there were just a few early adopters of social [media] in the financial industry,” he says. “Now, the ship has sailed: most financial firms who are going to be involved in some capacity are. . . . Those who do a good job are the ones that are able to effectively engage with their audience.”
Still, the difference between social experience by investors and that of advisors is striking; it's almost like comparing a go-cart race to the Indianapolis 500. For example, the Pew Research Center found in 2011 that 70 percent of millionaires use social media; of those investors, 46 percent used
FIGURE 2.2 Advisor Talk as They Begin to Think Social
Facebook, nearly double the 26 percent in 2010. By comparison, a recent survey by TD Ameritrade found that more than 90 percent of advisors have a social media profile of some sort, but only 5 percent of their referrals come from social media.
So the good news is the financial world is moving – gradually – into the social media universe. The problem is, their customers are already there in large numbers, numbers that are growing at a far greater pace than that of the financial industry itself (see Figure 2.2).
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