Social media: Evolving the client-wealth manager relationship
Social media refers to non-linear online communications that are created, published and widely distributed by individuals, companies and other groups. With little or no cost of entry, social media users create messages, share ideas and information, network with others, foster relationships, build reputation, and exchange user-generated content through social channels.
In general, social media refers to key sites like US-based Facebook, Twitter, LinkedIn and YouTube, and sites from other countries, which transcend international borders. Popular and business-focused blogs and public forums also can be purely regional, with for example, social sites like RenRen and SinaWeibo being the most influential in China.
Social Media can help achieve the following:
- Influence investment decisions
- Provide a route to market – expansion and network
- Produce insights into market and consumer behavior – advantage and early warning signals as well as relationship networks
- Influence market stability
- Enable financial inclusion
‘Wealth management’ and ‘social media’ initially don’t seem compatible or at all mutually beneficial from a layman’s perspective. However, social media is, in fact, becoming pervasive in virtually every industry. And whether they realize it or not, wealth management already is on the cusp of being surpassed by this highly disruptive technology. For the cautious wealth management industry, social media seems very cutting edge – maybe a little too cutting edge. The industry is still trying to decide how to best apply the technology to existing business models. As such, new approaches to engaging with customers and industry business models driven through social media are emerging.
For the wealth management consumer
Social media use today reflects the preferences and proclivities of the modern consumer. As in all other areas of their lives, consumers have rapidly evolving expectations about how they receive information and interact with organizations. Their ability to instantly receive research and information on-demand ‘like the experts’ is empowering wealth management customers to take greater charge of their portfolios and make financial decisions on their own – for better or for worse. They assume greater risks, and suffer unilaterally if social media-sourced investment advice doesn’t pan out. The profile of the consumer also is changing. It’s no longer a ‘luxury’ realm of high net worth individuals requiring customary levels of high-touch interaction with wealth managers. Instead, they are skewing younger as the general population ages and Gen Y surpasses Baby Boomers and even Gen X in terms of consumption. There is also an explosion in the middle class in developing countries, and they, too, are younger and more internet savvy, creating new marketplace opportunities for wealth managers.
For the wealth management industry
The technology-fueled evolution is rapidly creating both opportunities and challenges, as the traditional wealth management industry is forced to change – whether they like it or not. The disruption for the industry comes from new technologies, as well as from clients who are already adopting these technologies. The wealth management industry must learn to view social media with fresh eyes, casting aside their preconceptions based on outdated and often incorrect assumptions about the potential benefits of social media, and who uses these channels. With the added weight of maintaining their collective and individual reputations online, there is a real vulnerability that by not following suit, the industry faces disintermediation or even outright obsolescence.
For wealth managers
Wealth managers have reached a virtual crossroads: Embrace social media and all the accompanying uncertainties or risk losing some of their most valued – and valuable – clients. Leaders in the industry often ignore social media because of a misunderstanding that it’s purely a vanity marketing play, and they perceive it as too youth focused. The dangers lie in wealth managers struggling to accept the far-reaching impact of social media, and then sitting idle while their customers find their own way through the virtual cacophony of less experienced (albeit louder) social media voices. Very few will come out ahead in this scenario.
This piece is an except from “The New Inconvenient Truth, Social Media, too big for Wealth Managers to Ignore”. Please feel free to download.