We may joke about our US neighbours not understanding cricket or football but when it comes to social media technology, it strikes me that there is a great deal we can learn from our US counterparts.
Speaking at a recent adviser conference on social media, I was once again dismayed at the polarity of reactions displayed by advisers, usually correlated to their status. Directly regulated firms left super-enthused and positive but network and national members, albeit initially excited by the topic, ended up frustrated and disillusioned when they realised the compliance connotations.
As social media is one of the most accessible and cost-effective forms of promotional activity available to advisers, it strikes me that there surely has to be a way to correct this imbalance. The current situation is not only resulting in advisers leaving networks but also putting a burden and anxiety in to the network model that frankly seems unnecessary.
Perhaps it is about time that we looked for guidance across the pond – which Money Marketing technology columnist Ian McKenna has often cited as being a territory with enormous technological advancement.
Simple research reveals the US understanding and appreciation of social media compliance is already considerably more advanced and maturely managed than anything we have yet seen in the UK. And while the regulations are more comprehensive, the attitude to social media usage is far more open-minded and pro-active. Most importantly, despite the much larger comparative numbers of advisers and volume of social media based communications, the number of social media related regulatory reprimands is less than a handful.
Like the FCA here, US regulators such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority also laid down rules in 2010 governing the use of social media. Unlike in the UK, however, these rules went much further and laid out not just how firms should use social media to communicate but how firms would have to be vigilant with record-keeping – retaining copies of every business-related social media tweet, status update or indeed any online content that a firm uses.
In August 2011, FINRA’s regulatory notice 11-39 put the focus on technology as it became obvious that mandatory record-keeping of all social media messages – to be retained for up to three years – would present a huge challenge for many adviser firms. In particular, the big ‘parent’ distributors – similar to our UK network and national models.
At present in the UK most networks and nationals have their own social media policy requiring that each member firm or adviser under their regulatory control should submit business-related social media profiles, messages and social media updates or tweets to a central compliance unit for approval.
Of course some networks’ policies are more onerous than others. But virtually without exception the process is ultimately a manual one, relying on every member of every network to submit every single profile, tweet or status update which may require compliance approval before they can go ahead and post it live.
Imagine a network with several hundred firms having to vet all these emails, respond to them, record them manually in a database and do all this quickly enough that the messages are not completely out of date and useless by the time this process has been completed.
The burden on the network is great and sadly often driven by fear of the unknown, overly onerous and draconian. Is it any wonder that advisers with vision who feel passionately about the benefits social media brings are already responding with their feet.
In the UK keeping audits of social media data is not yet mandatory, but judging by the sweaty brows of many compliance officers and the anxious expressions of some network directors when social media is mentioned, the situation is likely to get a lot worse before it gets better.
It is hardly surprising that the evolution of compliance technology began in the US with the banking sector as regulators became consumed with online fraud, phishing and cloned websites causing many private investors to suffer losses.
Companies like Trinovus – now part of Temenos – realised early on that there was a gap in the market for an automated social media management tool.
Trinovus’s decision in May 2012 to launch Social Comply – essentially an aggregator and management tool for social media content – proved an exceptionally timely one. The regulations which began in banking were then essentially extended to wealth managers, registered investment advisers and financial planners across the continent.
With over 900 firms already using the solution in the US it is clear that there is a good argument for something similar to be deployed in the UK, particularly if it can lessen the compliance burden while allowing advisers to have more freedom to exploit the benefits of social media.
Fortunately, there are UK advisers who are already gaining knowledge from our US counterparts. Pete Matthew, an established leader in the use of online marketing with his own adviser business, was kind enough to put me in touch with Blane Warrene, senior vice president of customer communications at RegEd, whose wise words gave me a fascinating insight into the key issues and potential solutions.
Back in 2009, Warrene formed Arkovi, a social media archiving platform subsequently acquired by RegEd in October 2012. From what Blane says, the success of Arkovi has been in helping the equivalents to our networks manage vast quantities of social media data across multiple firms in an automated and easily manageable way.
Rather than having to approve social media messages individually by email, the technology allows just one user at a central point to have remote or dual-control access to one-window viewing of all communications needing approval.
Once set up to meet your firm’s guidelines, social media messages are logged, queued and can be viewed on their respective social media platforms with just one click and no need for any passwords.
Automated messages are relayed to hundreds of users in real time, allowing a major bank or financial institution to control every aspect of their social media messaging on a huge scale but with minimal human resource. Importantly, if the regulator visits the entire activity report can be viewed on demand.
When we spoke about the topic of networks and social media policies in the UK, Blane described the ‘exodus of break-away brokers’ in the US which resulted from the lack of ‘digital freedom’ as a real crisis point for firms like Morgan Stanley, UBS and Merrill Lynch. He said they all lost large numbers of advisers as a result of overly onerous social media policies which simply drove firms away.
FCA rules for social media compliance
The last update on social media was issued by the FSA back in June 2010.
The guidance covers communications over social networking sites, such as Twitter and Facebook, as well as forums, blogs and smartphone applications.
The guidance covers all communications, not just financial promotions, and advisers are warned that communications via social media can not automatically be assumed to be image advertisements and therefore outside the financial promotion rules.
The guidance suggests that advisers should be particularly aware of four points:
- New media may date more quickly than traditional media channels, so regular reviews to ensure that information is up-to-date may be required.
- It is important to consider whether this channel is a suitable method for the type of communication. For example, Twitter limits the number of characters that can be used, which may be insufficient to provide balanced and sufficient information.
- It is important to consider whether the risk information could be displayed prominently and clearly using this media channel.
- Promotions and communications made using new media must meet the requirements for stand-alone compliance.
Nicola Mitchell is managing director at Mitchell Moneypenny