FreshNetworks Blog

The financial services industry feels like it’s not ready for social media. You may think that this is due to regulatory restrictions, but there is more to it than that – and there are opportunities for the brands that overcome these misconceptions:

1. Financial services companies are worried about the risk of brand damage if they start talking with people online, because the industry’s public image is seriously wounded.

It’s easier to pretend a relationship hasn’t been hurt than to talk about the awkward feelings, but the current fraught market offers a big opportunity to re-invent the relationship financial services firms have with customers. The public increasingly favours honesty & transparency. Who dares wins.

2. Consumer banking isn’t where financial services firms make their money, so the compliance & customer service burden of “switching on” social media doesn’t feel worth the investment.

This is a false economy, because the thing that makes social media so powerful is the way it enables small groups of motivated people to influence many people, very quickly. Financial services organisations put themselves at risk by failing to establish ways to connect meaningfully with customers online as well as in branches and over the phone.

3. Senior decision makers in the financial services sector still believe that social media effort will create the burden of monitoring new KPIs based on engagement metrics and Facebook likes.

The reality is different: these metrics are meaningless for senior people in organisations of all kinds. However, low-level social media metrics can be aligned with existing business metrics, like those normally used to measure customer acquisition and retention. If social media effort is to be useful, it should contribute to existing business aims and measures, not create new ones.

4. Of all industries, the financial services sector has been the slowest to catch on that social media isn’t just a marketing channel (see: social business).

Strategic uses of social media can include improving recruitment & internal career development; enabling teams working in different parts of the world to collaborate effectively or customer-led product innovation. The key to understanding the strategic importance of social media to an organisation is to understand what separates a business strategy from a plan for implementation. A business strategy describes a way to win in the marketplace given the competition and any external forces such as regulation. In an organisation of thousands, the strategic opportunity with social media may not involve marketing at all.

It may involve discovering how many hours are wasted per working week per capita on ineffective document collaboration or customer relationship management. Let’s assume replacing MS Word or Excel document control with a collaboration tool could save an average employee 1 hour per week for 48 weeks a year. An organisation of 5,000 employees paying £15/hour would save £3.6M pa .This would be a strategic use of social media which could give an organisation a genuine competitive advantage.

5. The financial services sector is concerned about the ROI of social media investment.

I heard a great story from @benjaminellis at a conference last year:

When the telephone came into popular use by the 1930s, salesmen knocked on the doors of big businesses and said: “You’re going to need phones to talk with your customers. To enable this new kind of connection, you’ll also need a room in your office filled with expensive equipment and new secretaries to route calls. You’ll also need to create a new role for an electricity manager, because the telephone system uses a lot power.”

That must have been a tough sales job. Decision makers would have asked “We’ve managed with face to face meetings and letters for decades – what’s the ROI of this investment? Are our customers even going to want to call us?”

10 years later, nobody was asking the ROI of the telephone. I doubt any organisation in the world now works out the ROI of having telephones on the desks of its employees. It’s just the way we do business. In 2021, every organisation will use social media to talk with their existing customers and to talk with prospects, whether they work in retail, financial services or FMCG.

Which means that right now in the financial services industry, there is a significant strategic opportunity to win in the marketplace by being the first to make the move.

Photo by Richard Fisher

Social media use in the financial service industry is a tricky area given the issues around compliance with regulations and risk.

This is why I was interested to read that Wedbush Securities, a privately held financial services and investment firm based in USA,  has announced that they will give the “green light” for firm-wide adoption of social media.

With 100 offices across the United States, employees at Wedbush Securities are now free to craft their own networks and conversations,  and so can move away from “canned responses”.

It’s certainly a bold move – but one that I’m sure will be viewed closely by those in the financial sector. Handing over the brand’s reputation to the entire firm could be a very problematic move, but Wedbush Securities has clearly thought about their overarching social media strategy and are taking a variety of precautions:

• Staff will be trained on appropriate use of social media in a financial context, and have a social media policy to follow.
• Initially, the channels permitted will just be the “Big 3″ networks (Facebook, Twitter, LinkedIn).
• Staff will have to create separate, professional accounts for all their Wedbush activities.

These steps will simplify Wedbush’s ability to monitor the accounts, which will undoubtedly aid with compliance. Having separate accounts for personal and professional use means that staff can be clear who they are representing at any given time (although it pays to be prepared for mistakes such as tweeting from the wrong account).

Personally, I wonder if Google+ would have been a better choice than Facebook at this stage – while Facebook is of course the larger network, I would consider the social search benefits of Google+ and benefits of separating contacts into Circles to be better suited to a professional social networking. While the Wedbush Securities accounts will clearly be professional, presumably the accounts they interact with will be personal, and perhaps Facebook is not the environment where investment decisions are influenced.

However, as a starting point, Facebook certainly offers the largest audience and an already familiar interface for many, if not all, of the 1,000 Wedbush Securities employees.

At 3pm GMT on 17th Feburary, Charlie Osmond will be giving a webinar about social media and the financial services sector.

Hosted by Val-Pierre Genton from BrightTALK, Charlie will speak about developing a social media strategy and will give tips and advice on measuring and tracking ROI.

If you would like to attend the webinar visit this blog post and click on the “Attend” button at 3pm GMT on 17th Feb.

While  niche communities, customer driven markets and transparency are all areas in need of exploration, when it comes to social media for financial services the main concerns highlighted during our financial services round table event were  risk and regulation and resourcing.

The current situation

From our round table discussion it became apparent that some financial services brands don’t see a place for social media within their organisation, therefore they don’t see the need to resource it.

One of the discussion points raised at the event was that internal staff, from the top level down, often see social media as something they use to interact with people outside of work in their private life – it has no place in the office. This makes it difficult to get both resource and budget to implement an effective social media strategy as often senior level staff do not see the value for their business.

However, on the flip side, several budget holders in the room argued that it is possible to get both money and resource for social media – you just have to prove it has value. Take Aviva’s “you are the big picture” campaign, or one of our clients, LV= and their online community.  These companies both allocated funding and resource to social media.

Delegates at our round table event felt that the best approach to getting sign-off for social media is to pick out a single key business aim– perhaps the lowest hanging fruit- and test how well social media can achieve this goal. Prove one basic goal and then move on from there.

If social media is really here to stay then going slow now won’t make a difference in the long run, and it will prove to seniors and budget holders that time and resource is needed to achieve real success from social media.

To a lot of key decision makers social media is still the unknown. By breaking it down into bite size pieces you can prove its value.

The future direction

An interesting thing to note about our roundtable discussion is that the conversation focused largely around social media tools – namely Twitter and Facebook.

Perhaps it’s time for financial services brands need to think outside of these tools and to look at resourcing a more long-term sustainable social media strategy that engages the business at all levels. Organisations need to learn not to rely on the current, most popular or commonly used social media tools; they may not be around in five years time.

In order for social media to succeed it must be driven from the top down, not from a single resource within the business. Rather than using social media just as part of marketing, or customer service, or product innovation, it needs to be integrated throughout the whole business. In the future, staff and employees in all departments will need to be trained on how to use social media to ensure that rules and regulations are not broken and that social media becomes a seamless, intrinsic part of business.

Aside from niche communities,  customer driven markets and transparency, risk and regulation was one of the key discussion points at our social media in financial services round table event.

The current situation

Initially financial services brands and institutions were reluctant to use the various social media tools and technologies available on the market, largely because of the stringent rules and regulations that govern the industry.

Financial services brands have strict codes of conduct when it comes to data sharing. It’s often the case that external sites like Facebook and Twitter simply cannot be used or accessed within the firewall of a business for fear of information inadvertently being leaked out.

With the Financial Services Authority (FSA)  asking firms to apply strict advertising rules to more informal communications like Twitter, forums and blog posts in order to stay compliant, it’s no wonder financial services brands are less keen to adopt new technologies – it’s just another area they can fall down on.

However, with large banks and institutions like  American Express, ING Direct,  Bank of America and HSBC all using social media in one way or another, it seems that financial services brands are starting to  realise they can use social media as long as the activity is well planned and uses a pre-defined, fully developed social media strategy to ensure that risk is managed effectively and that regulations are adhered to.

What does the future hold?

With more and more financial services organisations adopting social media it will become an inherent part of the industry’s online infrastructure. As long as businesses have a pre-defined, robust social media strategy, with clear processes in place, then both FSA regulations and other guidelines will remain intact.

Proactive identification of compliance and the possible business risks from online conversations will also help financial services brands use social media in a way that aligns with industry standards.

Similarly, each business should develop a social media policy for employees. The policy should form a  standard part of all employment charters and contracts and should determine social media activity  both internally and when representing the company externally. Again, this will ensure that rules and regulations are not broken. This policy should be updated on a regular basis to keep in-line with changes to the social media landscape.

Our next post will look at resourcing social media in financial services businesses.