Is Social Media "Worth It" For Asset Managers?

FINRA held its long-anticipated Webinar on social media guidance today. (A replay will be available in a few weeks, social media vendor Socialware has posted a summary and we wrote a brief AdvisorTweets blog post.)

When we commented on the release of the guidance last week, we characterized it as FINRA kicking the ball into Compliance’s court. Well…not so fast—there’s somewhere else the ball has to go first and that’s to management. Management needs to be on board that “social media” is an appropriate use of what will be significant resources. (Read the Socialware document for a sobering look at what compliance with FINRA’s recordkeeping and supervision requirements entails.)

What is the Return on Investment (ROI) of social media? It’s a question being asked across all industries, but it’s especially germane to the highly regulated investment industry. At companies in other industries, maybe, a skunk works can be formed for experimenting on the cheap. Or the work might be outsourced at first. But that wouldn't work in this industry. Before the first tweet can take flight, expensive resources have to be consumed, ideally developing strategy and certainly focusing on risk mitigation.

And, for what? What are the stated expectations of social media? Or are managements being asked to take a flier? (Good luck with that.)

I had just completed presenting a Social Media Overview Webinar Tuesday afternoon when a question came in from one of the participants: “I hate to be a Debbie Downer, but how does it make me more money?”

When that’s the question that’s being asked, it demonstrates that we haven’t been broad enough in our discussion. That we haven’t focused on the transformation that’s going on in communications, with many of the trends leading away from what asset management companies rely on today. Interruption advertising, vanity collateral and product-based email blasts are fast becoming passé.

We haven’t been sufficiently disciplined in measuring what we do to understand that the effectiveness of our traditional communications is declining.

Can you think of a time when more people were talking about investing and the markets? It's not that investment managers’ products, services and personnel aren't relevant—it's the communications that are static and stale.

The idea that “markets are conversations” was a thought first articulated more than 10 years ago in the Cluetrain Manifesto. Web site users began talking to one another years ago on message boards. The online sharing of words and pictures and videos started in the last millennium, too, and today social bookmarking buttons and RSS feeds are ubiquitous on most Web sites.

Investment companies’ digital communications (and maybe the systems underlying them?) have trailed behind. FINRA's social media guidance cited Pew Internet and American Life Project research that 46 percent of American adults who use the Internet logged onto a social networking site in 2009. And yet, investment management communications rarely figure into online conversations. Out of sight, out of mind.

Online, where marketers compete with content, the rich, well-substantiated (thank you, Compliance) commentaries, whitepapers and other research you and your colleagues produce are overlooked by search engines. Web searchers looking for the very information your company offers end up reading inferior, shallow content on SEO-optimized article submission sites.

Social media represents a full-on assault on the way communications are planned, processed, published and evaluated within many investment management companies today. Even setting aside the compliance parameters, there is a lot of work to do to figure out how asset managers can meaningfully interact online.

What's the ROI of social media? That's the right question for management to ask. But if you're asking for a social media budget, we encourage you to recast your question. You don't need funds to develop a Facebook application or invest in an archiving solution. You need support to disrupt current communications practices and seize cross-functional time and attention to focus on a more contemporary, more effective, better measured approach to communicating and marketing.

Does your company want to grow? Do you need to raise awareness of what you do and how you do it? Would you like to know your clients better and respond to them more quickly and more relevantly? How close are you to the market? How fresh is your product development? Could your organization stand to be more competitively alert?

Companies that are active on the social Web point to these as benefits, and that's where we'd start the conversation about the payback of a comprehensive social media strategy.