Written by Duncan Jefferies
Twitter has been endlessly hyped, analysed and discussed by the media since its launch. It is a tool that has proven its ability to open up dialogue between the famous and the powerful and their supporters. Many companies have woven it into their communications strategy, along with other social media channels like Facebook, taking advantage of its power and hoping to foster closer relationships with their customers. Banks, however, have been more cautious in their approach.
"The majority of organisations we speak to are not yet properly equipped to embrace the potential that these tools offer," says Tom Coombes, CEO of Cognito, a financial industry PR and marketing firm. "The new kinds of behavior they require don't really exist at the moment."
In June last year the Financial Services Authority (FSA) issued a Financial Promotions Industry Update, designed to remind financial services providers exactly what can and can't be said in a 140-character tweet, or posted on the wall of a social networking site. Between 1-5 February 2010, they conducted a review of approximately 30 Twitter and Facebook pages using different search terms within the financial sector. A wide range of promotions and products, such as financial advice and investments, were analysed. Their conclusion was as follows: "Throughout the review we identified good and poor practice among firms who had adopted the use of new media to communicate financial promotions. Some promotions lacked risk warnings. Other promotions, while not very specific about products or services, nevertheless, went beyond the definition of 'image advertising' (the name of the firm, a logo or other image associated with the firm, or a contact point and a reference to
the types of regulated activities provided by the firm or to its fees or commissions)."
FSA rules generally apply in a media-neutral manner, focusing on the content of the promotion rather than the medium. Therefore, applying the rules to financial promotions made using new media is no different to financial promotions made using any other medium.
Code of conduct
Ian Hallam, CEO, 3i Infotech Western Europe, says the FSA is not trying to stop financial firms using social media. "They are simply bringing people's attention to the fact that there are certain code of conduct guidelines and rulings about the way one communicates or markets their own products."
Despite some banks' concerns over compliance, research carried out by Cognito in May last year showed Twitter was being used by over 40 per cent of companies, though less than ten per cent had a Facebook account. These numbers will likely increase in the next few years. In fact research from Gartner shows greater availability of social networking services, coupled with changing demographics and work styles, will lead 20 per cent of employees to use social networks as their business communications hub by 2014.
But at present social media tools are largely used for broadcast-type messages containing links back to a blog or website. "That way it is planned, it's not spontaneous, and it adheres to compliance issues," says Barrie Neill, banking consultant at SAS UK. "It's just another channel to get people onto the website." However, firms that continue to use social media channels purely to broadcast will ultimately not earn the following and community that they desire. "The firms that purely use it as a self-promotional, self-congratulatory channel have not grasped it and they won't get traction. It requires a fundamental change in what they communicate and the way they communicate it," says Coombes.
A few forward thinking banks appear to have realised this already. BNP Paribas launched its Facebook and Twitter sites more than a year ago and now has around 120,000 Facebook fans. In the US, Bank of America and Wells Fargo use Twitter to provide information to customers and answer queries, as does First Direct, the direct banking arm of HSBC, in the UK. Its customers can also share text, images and video across blogs and social networks.
The Benche, a global online community for treasury and finance professionals run by Swedish banking group SEB, has also demonstrated how financial firms can use social media effectively. This free, non-partisan platform provides a forum for discussion and networking, and is fully integrated with all major social media channels including Facebook, Twitter, Flickr, YouTube, Slideshare and Adobe Connect. It even has its own podcast on iTunes.
Annelie Gullström, head of digital media at SEB, says the benefits of embracing social media are manifold. "It's affordable, it's viral, it improves brand awareness and recognition, and it gives you the possibility to build traffic to your website. It's a good way to build credibility. When we interact and have a dialogue with the customers in these new arenas, they really appreciate it," she continues. "So it's not only about pushing out information; it's very important to start talking to the customers as well."
For some banks the use of social media tools is complicated by the fact that they will have different uses in different areas of the business. "PR sends a message that links to something that is on the website; product people want to do some sort of promotional activity; operations people want to respond to operational queries; and then there are those who are interested in the brand and looking at the bigger piece – i.e. what are people saying about our brand across all the networks?" says Neill.
With this in mind, how can banks ensure they have steps in place to adhere to the 'fair, clear and not misleading' rule while engaging in debate and discussion? Neill argues
they should make better use of analytics tools, examining the words that people are using at the point when they're about to make a post or tweet. "Could you break the process, or pause it, and get some escalation and agreement before it goes out?" he says. "Or could you look at it and say it's clearly not going to be fair, unclear or misleading and let it go ahead? Mining the text, and actually understanding the sentiment – whether it's a positive or negative one, what words are used, whether they could give the banks a compliance issue – are techniques that could be applied."
Cognito's Coombes says there are also ways for banks to measure how useful their social media strategy is proving to be. "With Twitter you can get prospects following you as well as industry influencers, so you can start to measure inbound inquiries about products that have come through the Twitter channel."
Hallam claims engagement with social media can even be a business differentiator in the current climate. "People will be having conversations about how to attract new business or retain new clients – that is absolutely key to their strategies at the moment. Whether that's achieved through product differentiation, disseminating information, or the way that they communicate with their clients, they can't really afford not to embrace social media.
What does the FSA say about social media?
1. New media may date more quickly than traditional media channels, so regular reviews to ensure that information is up-to-date may be required.
2. It is important to consider whether this channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used, which may be insufficient to provide balanced and sufficient information.
3. It is important to consider whether the risk information could be displayed prominently and clearly using this media channel.
4. Promotions and communications made using new media must meet the requirements for stand-alone compliance.
A view from the inside
But what is out there for the financial community? linkedFA, a compliant social networking site, has grown since March 2010 to host over 5,000 members, comprising financial advisors, registered representatives, registered investment advisors, insurance advisors, and CPAs across the US, Canada and UK. It offers all the social media and client relationship building benefits of social networking sites, while addressing the regulatory needs of the financial community in aspects of regulatory compliance, supervision and record keeping features. linkedFA's CEO, Jason Bishara, gives his take on the social media agenda:
There is increasing evidence that social networking is a valuable tool for financial professionals to interact and connect with clients. Following the global financial crisis over the past couple of years, increased visibility and communication between FA and client is critical to restore confidence back to the market. Social media is particularly important for independent FAs, of which there are over 16,000 in the UK, for whom each new personal connection is a significant business building block.
Yet, in the highly regulated and overly-cautious financial community, companies have been slow to leverage social networking tools preventing FA's from reaching out to investors due compliance and reputation concerns. Currently, mainstream social networking sites such as Facebook or Twitter are not conducive to engaging investors serious and confidential conversations about their money and do not comply with financial and insurance regulatory mandates around social networking and reputation management.
To address these regulatory concerns, we built linkedFA, a professional-focused site with best-in-breed social media tools including a unique compliance feature which captures and stores all correspondence for six years. All communications are fully reportable and exportable at any time as per FSA and FINRA compliance requirements. linkedFA also has reputation management in mind by enabling its users to approve or reject posts that they deem "non-compliant" or defamatory. Additionally, there are 4 tiers of communication that enables users to communicate socially or privately. Members can confidently, and compliantly, communicate with all social networking sites including LinkedIn, Twitter, Facebook; the entire linkedFA membership base; linkedFA private networks or direct private messaging.
Our unique business rules also prevent client poaching by keeping member's network details private. We recently polled our users and discovered that not only are they using the site to build their business and communicate with clients, but to communicate with other professionals. In this way, linkedFA is fostering an active community of education and awareness among professionals.
Social media in the financial industry is still very new and rapidly evolving, and the debate around how to utilize social networking to increase business is in constant flux. Financial professionals can, and should, make 2011 their social media breakout year. The winners will be those financial professionals who leverage social media as a way of strengthening existing client relationships and building new ones.