The Risks & Rewards of Social Networking

By: Lisa Schneider

Social media is all the rage – and conventional wisdom would have us all believe that social networking is an absolute must for business development and building customer loyalty. But for financial services companies and advisors, social networking is still largely uncharted territory – and because of financial regulation and compliance rules, tricky to maneuver.  New research by Greenwald & Associates has identified key issues to consider before adding social networking to your marketing plan.

Findings from two Greenwald & Associates surveys – its Gen XY Use of Tech in Financial Decision-Making, a follow-up Consumer Reaction to Advisor Use of Social Networking, and a third study, Media Puff or Real Stuff, conducted for Northwestern Mutual’s Granum Center for Financial Security at The American College – indicate that privacy concerns cause consumers in every age group to view financial services firms and advisors differently from other businesses operating in the social media realm. At this point in time, at least, they prefer traditional forms of communication by large margins.

What consumers do want to see from financial services companies and advisors in social media is educational material and financial tips. But even among members of Gen X and Gen Y – 68 percent of whom are daily users of social media sites – there is little desire to actually network or have any type of individual, back-and-forth communication with financial services companies or advisors there. In fact, 86 percent of Gen X and Gen Y respondents said it’s important to deal with financial services company representatives by phone.  Half indicated that they would like online chat capabilities on the company’s website. Only 18 percent said they think interacting via social networking sites is important.

The surveys show that social networking is not, at least for now, critically important at the advisor level, either. Traditional forms of communication are still the overwhelming favorites: by phone (83 percent), by email (79 percent) and in person (76 percent). 

More findings from Gen XY Use of Tech in Financial Decision-Making and its follow-up survey Consumer Reaction to Advisor Use of Social Networking are available here, while a video describing Media Puff or Real Stuff can be viewed here.

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