Social risk and regulations

Social risk and regulations

Social media outreach and standards will fall under wealth management regulations


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Social media activism

A rise in social media activism is adding pressure on wealth managers and investment funds, particularly on areas in which they invest. Social media activists affect change by posting to social sites, creating video, blogging, and reporting information (right or wrong) to personal and professional groups.

The first rule of social media activism? There are no rules. The enforced standards of traditional media do not apply. There is no fact-checking and no approval process in the modern equivalent of ‘I heard it through the grapevine,’ which can be dangerous. Wealth management social activists target consumers to help dissuade investment in what they perceive as immoral or unethical assets, or encourage investments in more virtuous funds. Organizational reputation is at stake here. Companies need to read signals about predictable future trends emerging on social media.

Regulating the shift

Regulators have taken a muted view in wealth management. Previously scattered attempts at regulation are becoming more focused. The U.S. Securities & Exchange Commission is clarifying its guidelines on advertising and communications, and now includes specific industry regulations for social media1, as well as specific guidance for investors on social media fraud.

Like traditional communications and industry conduct, social media outreach and standards will fall squarely under the purview of regulatory bodies.Wealth managers must still adhere to existing norms, no matter what the medium. And as the regulatory environment evolves, the industry should strive to anticipate future regulatory challenges. Online social media compliance tools for regulated companies already exist. These include:

  • Actiance (provides security, compliance, eDiscovery, archiving and governance services)
  • Gremln (social archiving tool that filters phrases that violate regulations)
  • Hootsuite (its social compliance tool simulates social media emergencies to help develop policy guidelines)
  • RedEd Arkovi (archiving, monitoring and analyzing content to improve social media marketing)2

The industry shifts – or does it?

Corporate boards should be holding strategy sessions to address. There is often confusion over who is responsible for online brand reputation. Is it the Chief Marketing Officer or the Chief Information Officer or the Chief Risk Officer or a combination of all three? Is effective use of social media an issue of better public relations, or more information technology capabilities? Is managing social media effectively a so-called ‘news spin,’ or is it a data-driven technical effort?

Social media risk is established, and proactive social media programs have been lacking across financial institutions. Businesses that prioritize best practice in the management of ethical investment will stand to strengthen their brand, make gains in the long term, and conversely, those that don’t will suffer losses. As the demographic shift in active investors changes to include a majority of those who consume and use social media on a daily basis, the importance of managing and understanding the medium only increases.

Where can social media go wrong…and right?

It is too easy to lose control of a firm’s reputation. Today, wealth management firms no longer fully control their reputations via traditional channels. Recently, online ad spending exceeded print advertising for the first time. Managing client expectations and delivering what you promise are the keys to success. In the insurance industry, for example, social media offer companies an unprecedented opportunity to interact with customers during natural disasters or other crises. Done correctly, this can lead to improved service levels and the retaining of customers at a lower cost and at scale.

The potential downsides are real, but the expanded ability to access current and potential clients one-on-one helps overshadow these risks. Some organizations are embracing the potential of social media

  • CBA, the largest wealth management firm in Australia, is at the cutting edge when it comes to engaging clients via social media channels. CVA is taking advantage of such potentially disruptive trends as social media and thrives in the virtual rise of online communities.
  • In China, Alibaba (and many other companies) waged a virtual ‘red envelope’ gift campaign to ring in the Chinese Lunar New Year, opening the virtual wallets of hundreds of millions of revelers (read: potential clients) in the process.3

© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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