Social Networking for Financial Advisors


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Identify how Financial Advisors can use social networking technology to supplement their existing professional networks. Includes the latest information on SEC and FINRA compliance. Please note that this is the first part of the presentation and Sheri Fitts did an extensive tour through LinkedIn.

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  • Your network of clients and personal relationships are one of the most valuable things you have. It can take years or even decades to grow and develop a strong network. Networks are so valuable because they help us get things done in our life. Everything from to meeting new friends, to recruiting new employees, to meeting a new partner. Recently a study from McKinsey 1 in 8 couples married last year met online. Are Social Networking websites just a fad or are they a longer lasting tool that can help us improve the way we do business? I would argue the latter despite that many of these tools didn’t exist 10 or even 5 years ago. To that point, don’t learn or be obsessed with the technology because it will change. The goal today is to help you understand how these tools can affect your relationships and your business and what you can do to get started with them today. According to report by Pew Internet and American Life Project, 46% of American adults who use the Internet logged onto a Social Networking site in 2009. Up for 8% in 2005. Roughly the same percentage of advisors, 43% now use networking or social media sites. 60% of those say they have generated at least 16 leads a year from their activities on these sites.   Social networks are powerful because we generally trust our peers. One study showed that while just 14% of people trust advertisements 78% of consumers trust peer recommendations. Let’s look at why these social networking sites are different than what has been done in the past.
  • The problem with social networks in the real world, is that most of the connections between people are hidden. Your network may have huge potential, but it is only as valuable as the connections that you can see. This problem is being solved by a type of website called a social networking website. It takes that same social network that you have maintained for years and brings all of those connections and personal information to the surface so that you (and everyone else) can see the connections. For instance, you and your client are pretty close and you have attended several dinner parties with him and some of his close friends. It usually stops there, and you see only the first layer of your clients social network. Now with these new social networking tools, you can see that that one of your clients close friends volunteers extensively at church and that he networks with many other people in your niche market. Because these connections are surfaced by the social networking websites, you can more readily see that it might be very beneficial to develop a closer relationship with the well connected friend. Like a map on the highway, viewing your people network can help you get where you need to go.
  • The process for setting up your social network is simple enough. Some of you might be intimidated Very easy to get started, but I think it is probably good to start slow. Create a profile sure, but it is good to observe the locals (often called lurking) before you jump in with both feet. Ask some of your peers and maybe even mingle awhile until you are comfortable with the environment. Once you’ve explored a number of social networking websites and are ready to proceed, add people to your network and let the fun begin The terms for each of these actions may be different for the different types of social networking websites. What is called a status update on one site, might be called a tweet on another. Again, don’t be bogged down with the terminology, the concepts are very similar for each tool.
  • My wife works at a company called Jive Software. It’s a small company that is growing quickly. So quickly that even in this tight job market they are offering referral bonus of between $1,000 for a regular employee to $3,000 for an engineer. My enterprising wife logs into her favorite social networking sites to find anyone she knows who has the specific experience Jive is looking for Through my connections she finds a person that I went to college with who lives in the Portland area He hasn’t been hired yet, but still working on it
  • I’ve always enjoyed eating at Burgerville, but the other day I had a bad experience and while I was sitting there complaining to myself, I figured I would let all of my friends know that I was disappointed as well. So I tweeted “Today was the first time I was ever disappointed by @ BurgervilleUSA . I'll be back, but next time I won't be getting the fish and chips ... “ within an hour someone from BV contacted me and asked how they could make it up to me. That level of service coming from a fast food restaurant is pretty impressive and only further endeared me to their brand and food. I had a similar passion for Tivo and after a long hiatus I recently purchased a new model Tivo with a lifetime subscription. Only to find out that just 2 months later they released a version with no upgrade path and very little support for my existing box. I complained (along with hundreds of others) on several social network websites, only to get no response and become further disappointed with their product.
  • You can actively You have a new client coming in and want to find out some more information about her prior to the meeting. You discover that she worked for the state of Oregon for 15 years, prior moving to the private sector so she probably has some PERS income that needs to be part of the plan. You may also find out that she really likes to travel and is planning a trip to Maui this spring. Simple things that may have been easily discovered in your initial interview, but it might also help to look up the name of that great seafood restaurant in Kehei before the meeting. You heard on the news that Bob Moore of Bob’s Red Mill decided to give away the entire business to his employees. You have a few clients that work there, and now you are going to need to brush up on your ESOP rules, so you get on LinkedIn and search for people in your network with ESOP experience and post a request for more information about the topic on our local chapters discussion board.
  • So lets learn a little bit more about these social networking websites. Prior to your registration, we sent out a survey to gauge your level of experience with social networking tools. We got a good response with almost 36 people Facebook has most experience, with about half of respondents categorizing themselves as competent, or higher.
  • status update - action you are taking - something you are thinking about - an event you are attending it is the in-between conversation we have with each other. it allows you to communicate with your friends and peers without interrupting them. i might update my status to say that my four month old baby just rolled over. Is this something that I want to send an email about? Well probably, but as cute as my baby is it would most likely bother recipients then enlighten them. With social networking they can look at my current and previous status to fill in the blanks since our last conversation. Company Figures More than 400 million active users 50% of our active users log on to Facebook in any given day More than 60 million status updates posted each day More than 3 billion photos uploaded to the site each month About 70% of Facebook users are outside the United States Average User Figures Average user has 130 friends on the site Average user sends 8 friend requests per month Average user spends more than 55 minutes per day on Facebook
  • LinkedIn is an interconnected network of experienced professionals from around the world, representing 150 industries and 200 countries. You can find, be introduced to, and collaborate with qualified professionals that you need to work with to accomplish your goals. When you join, you create a profile that summarizes your professional expertise and accomplishments. You can then form enduring connections by inviting trusted contacts to join LinkedIn and connect to you. Your network consists of your connections, your connections’ connections, and the people they know, linking you to a vast number of qualified professionals and experts. Through your network you can: When was LinkedIn formed? A: May 5, 2003 How many members are there? A: As of February 11, 2010 there are over 60 million LinkedIn members across the globe. How much does it cost? A: The service is free for everyone. We do offer business accounts for those who wish to expand their networks and take advantage of everything LinkedIn has to offer.
  • Yelp was founded in 2004 to help people find great local businesses like dentists, hair stylists and mechanics As of December 2009, more than 26 million people visited Yelp in the past 30 days Yelpers have written over 9 million local reviews, over 85% of them rating a business 3 stars or higher In addition to reviews, you can use Yelp to find events , special offers , lists and to talk with other Yelpers Every business owner (or manager) can setup a free account to post offers, photos and message her customers Yelp makes money by selling ads to local businesses - you'll see these yellow, clearly labeled " Sponsored Results " around the site Paying advertisers can also promote a favorite review at the top of their Yelp page, but can never change or re-order their other reviews Yelp has an automated filter that suppresses a small portion of reviews - it targets those suspicious ones you see on other sites You can Yelp on your phone at http:// , or use Yelp for iPhone , Yelp for BlackBerry , Yelp for Palm Pre , and Yelp for Android The Weekly Yelp is available in 30 city editions to bring you the latest business openings & other happenings
  • 2007 there were about 5,000 tweets a day 2008 – 300,000 2009 – 2,500,000 2010 – 5,000,000 ~75 million users but a lot of inactive accounts.
  • “ You have to find a way to supervise this activity ” - FINRA, 2009 Prepared to manage social
  • Perhaps it is obvious but just as with any advertising, the advisor must ensure that their posts or material “does not constitute a fraudulent, deceptive, or manipulative act, practice or course of business.” Debate and discussion regarding testimonials for RIA. Some say that endorsements (a LinkedIn specific term), are ok if they are regarding other events, perhaps you are a board member at a charitable organization or on the PTA. Unfortunately the SEC has not ruled either way, but I figure it is better to be safe than sorry. Beyond advisors control is allowed Angie’s List, language written very broadly, an aggressive examiner would site as Everyones linkedin profile says you need to have recommendations, to be successful. But should block them. Promissory language “give us your assets and you will sleep better at night” Unsubstantiated claims “leading investment advisor in Portland” Several things are in a more grey area and need to have disclosures Use of ratings – must disclose ranking sources and criteria Performance advertising – allowed on occasion but generally not easy to include disclosures Job titles, responsibilities and length of service
  • “Every firm that intends to communicate, or permit its associated persons to communicate through social media sites must first ensure that it can retain records of those communications.” – FINRA Regulatory Notice (January 2010) 204-2 details the types books and records an Advisor must make and keep true, current and accurate for their business. Email is specifically identified as a business record in the rule. Section (g) of 204-2 sets specific rules for retention, non-rewriteable storage, and ease of retrieval and viewing, including preservation “in an easily accessible place for a period of not less than five years, the first two years in an appropriate office of the investment adviser.” Section (h) allows any record compliant with SEC 17a-4 to also be deemed compliant with Rule 204-2. SEC 17a-4 demands the creation of policies for, and retention of, reviewable customer records and transaction data. Rule 204-2 requires investment advisors to arrange and index the records in a way that permits easy location, access, and retrieval of any particular record. The rule further requires advisors to promptly furnish to the SEC any records requested, electronic or otherwise. Maintain and preserve the records so as to reasonably safeguard them from loss, alteration or destruction. Arrange and index the records in a way that permits advisers to easily locate, access and retrieve any particular record. Promptly provide a legible, true and complete copy of the record in the medium and format in which it is stored (generally, the search and retrieval process should take no more than 24 hours to complete). Separately store, for the time required for preservation, the original and a duplicate copy of the record. Limit access to the records to properly authorized personnel. From last day it’s visible, posted in 2009 but viewable in 2015 until its taken down so you need to store it for the 5 years from the end of the fiscal year so until 2020.
  • First comment was regarding record retention which we just discovered, FINRAs second comment was about suitability requirements and making specific security recommendations. Must consider that FINRA regards any security recommendation on a social network to be like you are shouting from the rooftops. Conducting supervision, sampling it and applying “risk based principles” This rule permits FINRA-registered firms to recommend a securities transaction to a customer only if the recommendation suits the customer's investment portfolio, financial situation and needs. Post-use review is another option which requires the ability to do sampling and /or real-time lexicon-based searches Consider prohibiting or restricting associated person who has presented compliance risks in the past. Tread lightely
  • Must receive prior approval from registered principal if it is deemed an advertisement. Monitoring is acceptable if classified as interactive electronic forums. Under certain circumstances, however, third-party posts may become attributable to the firm. Becomes entangled if the firm (1) involved itself in the preparation of the content or (2) explicitly or implicitly endorsed or approved the content. • Republishing a comment from a third-party, such as retweeting, will likely be considered an endorsement by the firm. • “ Favoriting” a post on Twitter or “Liking” a comment on Facebook can also be seen as an endorsement by the firm.
  • I’ve heard estimates of 30-40% of advisors who use social networking tools are compliant with these regulations. While I don’t know if FINRA or the SEC is looking specifically to make an example out of somebody, but it seems like it would be a good time to do so. The rules aren’t always very clear and you need to be careful to not step over that line. as an advisor chief compliance officer you have to prepare yourself are you on social media - can you give me six months of your messages - how are you supervising messages
  • I’ve heard estimates of 30-40% of advisors who use social networking tools are compliant with these regulations. While I don’t know if FINRA or the SEC is looking specifically to make an example out of somebody, but it seems like it would be a good time to do so. The rules aren’t always very clear and you need to be careful to not step over that line. as an advisor chief compliance officer you have to prepare yourself are you on social media - can you give me six months of your messages - how are you supervising messages
  • Social Networking for Financial Advisors

    1. 1. Social Networking for Financial Advisors What you Can, Cannot and Should be Doing Ben Gilbert, CFP® March 17, 2010
    2. 2. Roadmap <ul><li>What is social networking and why does it matter? </li></ul><ul><li>Putting social networks to work </li></ul><ul><ul><li>Finding people </li></ul></ul><ul><ul><li>Sharing opinions </li></ul></ul><ul><ul><li>Research </li></ul></ul><ul><li>Social Networking tool survey </li></ul><ul><ul><li>Facebook, LinkedIn, Yelp andTwitter </li></ul></ul><ul><li>Getting started with LinkedIn </li></ul><ul><ul><li>Understanding the essentials </li></ul></ul><ul><li>Marketing yourself on LinkedIn </li></ul><ul><ul><li>Build a stronger profile </li></ul></ul><ul><ul><li>Get connected </li></ul></ul><ul><li>Compliance Overview </li></ul><ul><ul><li>Advertising </li></ul></ul><ul><ul><li>Record retention </li></ul></ul><ul><li>Questions and experimentation </li></ul>
    3. 3. Social Networking is Connecting with People <ul><li>Good businesses are built through strong relationships </li></ul><ul><li>Networks get things done </li></ul><ul><li>Are online social networks a fad? </li></ul>
    4. 4. Uncover Your Network
    5. 5. How it works <ul><li>Create a profile </li></ul><ul><li>Find people you know </li></ul><ul><ul><li>Observe </li></ul></ul><ul><ul><li>Mingle </li></ul></ul><ul><li>Add them to your network </li></ul><ul><li>Update your status and network </li></ul>
    6. 6. Putting Your Social Network to Work Finding People
    7. 7. Putting Your Social Network to Work Sharing Opinions vs. vs.
    8. 8. Putting Your Social Network to Work Research <ul><li>How she is connected in your network </li></ul><ul><li>Interests and hobbies </li></ul><ul><li>Previous employment </li></ul><ul><li>Find expertise in your network to help brush up on ESOP rules </li></ul>
    9. 9. Survey Results <ul><li>What level of experience do you have with social networking websites? </li></ul>1.75 Yelp 1.63 Twitter 1.67 MySpace 2.63 Facebook 2.43 LinkedIn
    10. 10. Social Networking Websites
    11. 15. Social Networking for Business <ul><li>Presented by Sheri Fitts </li></ul><ul><ul><li>LinkedIn: http:// </li></ul></ul><ul><ul><li>Email: [email_address] </li></ul></ul><ul><ul><li>Twitter: @missfitts </li></ul></ul>
    12. 16. Compliance <ul><li>Not an expert, use handouts </li></ul><ul><li>Regulators have been slow to adopt standards </li></ul><ul><li>Advertisements, sales literature, correspondence, public appearances </li></ul><ul><li>Different rules for different professionals </li></ul><ul><ul><li>RIA: No significant guidance from SEC </li></ul></ul><ul><ul><ul><li>Rule 206(4)-1 (advertising) </li></ul></ul></ul><ul><ul><ul><li>Rule 204-2 (record retention) </li></ul></ul></ul><ul><ul><li>Registered Rep: Regulatory Notice 10-06, Jan 2010 </li></ul></ul><ul><ul><ul><li>NASD 2210 (communications with the public), 2310 (suitability), 3010 (supervision), 3110 (books and records) </li></ul></ul></ul><ul><ul><ul><li>SEC 17a-3, 17a-4 (record retention) </li></ul></ul></ul>
    13. 17. Registered Investment Advisor 206(4)-1 - Advertising <ul><li>No fraud, deception or manipulation </li></ul><ul><li>Testimonials are prohibited </li></ul><ul><li>No untrue statements of material fact </li></ul><ul><ul><li>Promissory language </li></ul></ul><ul><ul><li>Unsubstantiated claims </li></ul></ul><ul><ul><li>Use of ratings </li></ul></ul><ul><ul><li>Performance advertising </li></ul></ul><ul><ul><li>Misleading biographies or profiles </li></ul></ul><ul><li>Supervision with policies and procedures </li></ul>
    14. 18. Record Retention Registered Investment Advisors and Registered Representatives <ul><li>Similar to email retention requirements </li></ul><ul><li>Should not rely on provider to retain records </li></ul><ul><li>Records stored in a safe, tamperproof way </li></ul><ul><li>Indexed properly </li></ul><ul><li>Archived in duplicate and stored in different locations </li></ul><ul><li>Must restrict access </li></ul><ul><li>Records must be retained for 3-5 years </li></ul>
    15. 19. Registered Representative NASD Rule 2310 – Suitability NASD Rule 3310 - Supervision <ul><li>Shouting from the rooftop </li></ul><ul><li>Associated persons are supervised, have necessary training, and don’t provide undue risk to investor </li></ul><ul><li>“Risk-based principles” to determine the appropriate amount of review </li></ul>
    16. 20. Registered Representative NASD Rule 2210 – Communication with the Public <ul><li>Prior approval (advertisements) </li></ul><ul><ul><li>Blog articles </li></ul></ul><ul><ul><li>“ Static content” (profiles from LinkedIn, Facebook, etc.) </li></ul></ul><ul><li>Monitoring (public appearance) </li></ul><ul><ul><li>Comments </li></ul></ul><ul><ul><li>“ Real-time communications” (twitter, Facebook status updates, etc.) </li></ul></ul><ul><li>Third-party posts are not firm’s communication if they are not “entangled” </li></ul>
    17. 21. Source: Registered Representative NASD Rule 2210 – Communication with the Public
    18. 22. Compliance Vendors <ul><li>Socialware – LinkedIn, Facebook and twitter </li></ul><ul><li>LiveOffice - LinkedIn, Facebook and twitter </li></ul><ul><li>smarsh – twitter (LinkedIn, Facebook soon) </li></ul><ul><li>Free tools </li></ul><ul><ul><li>Backupify – twitter, Facebook </li></ul></ul><ul><ul><li>Feed My Inbox – twitter </li></ul></ul>
    19. 23. Compliance Summary <ul><li>Not a time to push the limits of the regulators </li></ul><ul><li>Private isn’t always as private as you might think (or would like) </li></ul><ul><li>Not easy to separate personal and professional life </li></ul><ul><li>Get started on your policies and procedures now </li></ul>
    20. 24. Additional Questions & Experimentation <ul><li>Ben Gilbert, CFP® </li></ul><ul><ul><li>LinkedIn: </li></ul></ul><ul><ul><li>Email: [email_address] </li></ul></ul><ul><ul><li>Phone: 503-242-1715 </li></ul></ul>