Social media is creating both opportunities and risks for wealth managers and we believe the positives outweigh the negatives, particularly if wealth management firms use the channel to advance client conversations and learn to apply social media risk management.
While there is much evidence of wealth growing exponentially on a global scale, the conservative nature of the wealth management industry makes it slow to address lurking reputational vulnerabilities and embrace the new level of communications and social media risk management required today.
The disruptive nature of social media is helping to evolve client expectations on how they receive information and interact with wealth managers. Clients already embrace social media in their daily lives and the industry must shift focus to social media to take better control of its reputation – or else risk disintermediation.
Wealth managers must also come to a new understanding about who is responsible for handling social media risk. Social media is not strictly a function of marketing but must also involve the chief risk officer and head of public affairs. Many wealth managers are still in the early stages of social media planning, despite the urgent need to more quickly get up to speed.
It is always helpful to understand which way the wind is blowing within the wealth management industry, and social media analytics provide deep insights, and are vital tools for handling risk.
In the context of social media, ‘sentiment’ has become both measurable and meaningful (and potentially profitable). In wealth management, social media analytics help uncover customer attitudes from a range of online sources and can put your social media data to work for you to better understand your markets, manage your brand and improve the experience of your clients.
A rise in social media activism is adding pressure on investment funds, particularly when it comes to the areas in which they invest. In the world of wealth management, social media activists target clients to help dissuade investment in what they perceive as immoral or unethical assets, or encourage investments in more ‘virtuous’ funds. In these cases, ‘word of mouth’ can drastically hinder wealth management fund success.
To turn social media into effective tools to build competitive advantage:
Clearly, social media is a disruptive technology in the wealth management industry with the potential to keep connected firms one step ahead of nascent trends. By building a team of executives who understand social media, accompanied by a systemic shift in attitudes toward this channel, smart firms will gain strategic advantage over less tech-capable competitors.