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THE REAL BARRIER: REGULATORS OR INDUSTRY?

Who's to blame for this interpretational mess? Hamacher suggests the industry should look toward itself rather than at Washington rule-makers. The industry, she says, doesn't want to get caught with its social media pants down.

Remember, regulators' concerns are about preventing certain behaviors. But too many firms are saying: We don't want to do this because we don't want to get caught. In their view, if you post a bad tweet and it goes viral, you're in trouble.

In other words, while the industry should be focused on how to prevent underlying bad behavior – such as saying something they shouldn't on social media – they are more focused on a different issue: the concern that mistakes made on social media carry greater and more permanent exposure and damage. It's the consequences of the behavior and not the behavior itself.

Let me take this a step further. A broker might say something foolish in a phone call: “Mrs. James, I've got an investment that will double your retirement portfolio in three years.” But the odds of that broker getting caught are slim. “The industry has done a wink and a nod to that for many years,” Hamacher notes.

What if the broker behaved that way in the social media world? The behavior is easier to target. The penalties to his career are easy to imagine, to say nothing of what could happen to his firm. The industry has a clear opportunity for using social media to change firm behavior for the better, but many firms may choose to not change. “It's like sexual harassment: We instruct employees not to tell horrible jokes or touch people,” Hamacher says. “When the industry talks about social media, it's more focused on the fear of getting caught by the inappropriate behavior rather than using social [media] as a way to reinforce the right behaviors.”

SOME FINAL THOUGHTS

So what should firms do in the light of what's happening? First, they have to view social media as part of their entire compliance effort. Chief compliance officers (CCOs) are expected to prevent misbehavior on websites, but many in the industry would agree that part of their job is to take greater care that such misbehavior doesn't leave a trail that regulators can pick up. The alternative? CCOs could use social media as an opportunity to train employees on how to sell appropriately. You may not get extra credit from regulators, but you will be able to more comfortably and quickly leverage this critical channel.

Enlightened firms don't fear being toast with a badly crafted Web message that goes viral. They would tell you that you just have to be thoughtful about how you approach social media. These firms are open to social media because they aren't afraid of conducting their business in the light of day. They've trained their employees, and they know that anything their employees say can be repeated in public because it's the right message. They also know that every compliance program turns up mistakes, fixes them, and gets a bit better. Perfection is not the regulatory standard; active supervision is the standard.

In today's transparent day and age, that approach carries the day.

 
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