Would you like to follow your investment advisor on Twitter or friend your stockbroker on Facebook?
More than likely, you can't do that just yet. But not because financial advisers and brokers aren't interested in social media. The financial services industry is pretty heavily regulated in the way that brokers and financial advisors can interact with their clients and advertise. The Financial Industry Regulatory Authority, or FINRA, issued some social media rules for firms in January 2010.
While it opened the door for advisers who want to put out nonstatic content such as Twitter posts, there will be a lot of record keeping for firms that jump on the social media bandwagon. FINRA regulates about 4,600 brokerage firms, and each firm must retain records of all their social media communications.
Despite the complex regulatory hurdles, two-thirds of financial institutions will use social media as a marketing tool by 2012, a study by the Aite Group found last year.
Good thing too, social media may be one of the only ways to reach the country's youngest investors, according to a story on Investmentnews.com on March 9, "Gen Y looks to Twitter, not advisers, for financial info."
The story reported on the Annual Investor Index survey from TD Ameritrade, which found that one-third of Gen Y prefers to get financial information from social media. The next highest cohort to rely on social media for financial news and advice was Gen X at 27 percent.
The survey, released in February, also reported that most of Gen Y is unconvinced about the value of professional investment advisers, with only 10 percent trusting them as the best source of financial news.
That's not entirely surprising, as Gen Y is still young, and most young people aren't rolling in the kind of dough advisors like to see. Maybe when financial institutions start invading their social media home turf in droves, Gen Y'ers will take a little more notice.
Not all financial service industry professionals are regulated by FINRA. Registered investment advisors are regulated by the Securities and Exchange Commission. In January, the SEC began a "sweep" of firms to understand how RIAs are using social media to see if more rule-making is necessary, according to a story on Investmentnews.com from February 14, "SEC said to 'sweep' advisory firms for social-media info."
With all the pondering of rules and compliance by regulators and financial services firms, it could be awhile before most of the industry joins the social media party.
In the meantime, if you love Twitter and want to know what financial advisors are thinking about, check out the site Advisortweets.com. They aggregate and curate the tweets from financial advisors using Twitter for business purposes.