Over the past decade, social media has taken the world by storm. Frightened by the specter of regulatory oversight, it’s taken financial services longer to adopt. That said, there has been a fundamental shift in our industry. From digital currencies and robo-advisors to real-time communication with clients via social media, the way we now do business has changed. With our industry finally embracing this social revolution, the pace is quickening. Here’s some food for thought:
- 81% of high-net-worth investors are now using social media
- 73% of Millennials find new financial services from Google, Amazon, PayPal or Square more exciting than their own banks
- 1 in 5 millennials believe social networks will be the hub of all their financial information in the future
- 3 out of 4 financial advisors use social media for business
- There are now over 200 robo-advisors and together, these disruptive financial technology (#FinTech) services are projected to manage $2.2 trillion in the U.S. by 2020
Just a few years ago financial services (#FinServ) was extremely nervous about the risks associated with social media – opening themselves up to FINRA and SEC scrutiny. Advisors didn’t have a huge interest because their clients weren’t using it. But that’s all changing. A recent survey by Pew Research Center found:
“While (social media) usage among young adults started to level off as early as 2010, since then there has been a surge in usership among those 65 and older. In 2005, 2% of seniors used social media, compared with 35% today.”
In the same survey they found that those living in affluent households are more likely to be social media users.
Social media has been a scary idea for such a highly regulated industry. The SEC and FINRA have been struggling to keep up. In 2013, a Twitter rumor claiming explosions at the White House injured President Obama made the DJIA temporarily drop about 150 points. While the markets quickly recovered, this was a nightmare scenario for regulators who seek to maintain fair and orderly markets. In the past three years SEC and FINRA have made great strides updating their regulations. They now include social media use in their policies rather than just saying ‘it’s not allowed.’
The use of social media goes beyond direct communication with clients, it also includes being able to gather relevant information about clients. With social media now offering new customer information such as hobbies, family celebrations and life events, this is a tool financial services should not ignore. Customer insight and intimacy can go to a whole new level allowing sales and marketing to personalize their outreach strategies. Marketing automation can enhance this process with cross selling campaigns. Social media is also a place where financial services can prove themselves a thought-leader in the industry, building trust and educating clients.
Business intelligence tools have been designed specifically for social media, giving sales and marketing teams unlimited access to all social conversations and blogs. One example is computer software company Sysomos, which uses contextual text analytics and data mining technology to collect and display all relevant online conversations. By knowing more about a prospective client, you can have a more relevant conversation with them and increase your chances for engagement and ultimately a sales conversion.
I asked Peter Hans, co-founder of HVST.com, what he thinks is next for FinServ in the social share economy.
“If you look at the evolution of the technology in general, you went from one-on-one communication to email and IM. Then when you had the proliferation of social media it broke down barriers of connection and people really tried to figure out how this could be used for commerce and business purposes, but I think the advantages of that are digital. The friction of communication is now zero, anyone can communicate with anyone across the world and do it in scale. The positives are that, the larger firms can post their pre-approved materials out to the public.”
But the problem with that is…
“With this reduced friction and increased velocity of information you get a lot of noise.”
The pace of change in all likelihood, won’t slow down. If you’re in the financial services industry, it’s going to be incumbent upon you to stay up-to-date and grasp the importance of new technologies, trying to understand how to put them to work to improve your business and maintain your competitive edge. How can you do that you ask? Here’s a list of my top six favorite sources:
- Andreessen Horowitz’s blog a16z.com
- Mary Meeker’s annual Internet Trends report
- Search #FinTech on Twitter or, for a consolidated view check out tweetedtimes.com
And of course don’t forget to read our blog where we will keep you abreast of all the latest and greatest in #FinTech.