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who do connect with their advisors through social media are generally satisfied with their interaction.

      Among the key findings:

      ▪ Investors age 44 or younger are more likely to connect with their advisors on social media than those over 45.

      ▪ Emerging affluent investors (more than $100,000 to under $1 million in assets) use social media more than mainstream and high net-worth investors do.

      ▪ Investors who connect with their advisors on social media tend to be satisfied with the level of access to their advisors.

      ▪ Female investors are 11.5 percent more likely than male investors to connect with their advisors on social media.

      ▪ Investors do not care about the details of their advisors' personal lives on social media – which is not to be confused with being personable.

      ▪ The most important social media interaction with advisors, according to investors, is sharing trending investments or personal finance news.

      ▪ The number of social media followers an advisor has is the least important feature for investors when choosing advisors through social media.

      ▪ An advisor's availability to answer questions is the most important feature for investors when choosing advisors through social media.

      The message is clear. Successful American industries have adapted when consumer preferences and behaviors change. Automobiles are safer to drive, restaurants serve healthier food, and home computers operate more quickly and with more sophisticated software. The financial industry now faces new demands from investors who are more empowered via social channels. As the survey underscores, younger investors already expect their advisors to interact with them in this medium. Clearly those advisors who do so will be the ones who thrive as the future inevitably closes in. The financial industry has adapted to paradigm shifts of this sort in the past, and will continue to do so. Advisors and other professionals who adapt to the trend will have a leg up on their competitors. What are you waiting for?

      Chapter 2

      What Are Social Media's Implications for the Financial Industry?

      At the end of Chapter 1, I alluded to examples of how different industries in the United States responded to changes in behavior by their customers – new safety features in automobiles, less sugar and salt in food, and so on. It also happens that many American industries also are au courant with developments in social media as well.

      Whether it's fashion or food, they not only have embraced social media, they've incorporated it into their businesses or built online communities around niche markets. Think of Yelp or Hotels.com for locally rated restaurants or overnight stays. Amazon.com has refashioned retail, not only by making it easier for consumers to buy what they want, but also by tracking customer interests and using that data to suggest other products their clients might enjoy. Even in our personal lives, places like Match.com have, for nearly a decade, transformed the way consumers can find their life partner.

Sitting Out the Game?

      And yet a good portion of the financial industry remains skeptical about this revolution. To be sure, there is a healthy and growing presence of financial advisors on professional networking site LinkedIn, yet participation in other key social media channels is still pretty thin. A 2013 survey by InvestmentNews showed that only one out of four advisors used Facebook, and participation in other channels was markedly lower.1

Industry experts say many firms are just tiptoeing into this new channel – testing tools to allow content distribution, piloting basic regulatory compliance through social media, and shaping their online voices. The goal is to build brand and awareness or increase engagement with investors, although many in the industry remain concerned about how strong the impact will be on revenue growth and the return on their investments (see Figure 2.1).

Figure 2.1 LinkedIn Leads Among Advisors

      Source: InvestmentNews' Advisers & Social Media Survey 2013

      And yet the pace is picking up, says Alan Maginn, an analyst at Corporate Insight, which follows developments in the retail financial services industry and conducted one of the industry's earliest studies on social media involvement.

      “In 2008, there were just a few early adopters of social [media] in the financial industry,” he says. “Now, the ship has sailed: most financial firms who are going to be involved in some capacity are…Those who do a good job are the ones that are able to effectively engage with their audience.”

      Still, the difference between social experience by investors and that of advisors is striking; it's almost like comparing a go-cart race to the Indianapolis 500. For example, the Pew Research Center found in 2011 that 70 percent of millionaires use social media; of those investors, 46 percent used Facebook, nearly double the 26 percent in 2010.2 By comparison, a recent survey by TD Ameritrade found that more than 90 percent of advisors have a social media profile of some sort, but only 5 percent of their referrals come from social media.3

So the good news is the financial world is moving – gradually – into the social media universe. The problem is, their customers are already there in large numbers, numbers that are growing at a far greater pace than that of the financial industry itself (see Figure 2.2).

Figure 2.2 Advisor Talk as They Begin to Think Social

      Source: Finect

Financial Advisory World in Flux

      And yet, while some advisors are hesitant about going more deeply into social media, their world already is being reshaped.

Take the wirehouse channel, for example. These top-of-the-food-chain brokerages have long had established ecosystems in which information and services were organized and the roles of brokerage, advisor, and investor client were fairly clear. Wirehouses could dictate products and fee structures, and their advisors and clients would get in line (see Figure 2.3).

Figure 2.3 Traditional Wirehouse Ecosystem

      But advisors increasingly are finding alternatives to toiling in the wirehouse world. They're moving toward independence, bolstered in their efforts by third-party providers of every service from technology needs to asset management. Indeed, the registered investment advisory channel alone grew from 34 percent of all financial industry advisors in 2007 to an expected 47 percent in 2013, according to the industry research firm Cerulli Associates.4

Through technology and social media, advisors are finding new communities and capabilities to build their business – capabilities that allow them to work with open architecture brokerage platforms that don't dictate what securities they must buy, for example. And there's change occurring at the bottom of the investor market as well. So-called robo-advisors– firms that offer automated financial advice to low-asset investors for cut-rate fees – are growing as demands grows for advice among the mass affluent and tech solutions proliferate in response (see Figure 2.4).

Figure 2.4 The New Ecosystem Provides Greater Access to Advisors and Investors

      Source: Finect

This shift is presenting both new opportunities and challenges. Financial professionals and firms face increasing pressure

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