Social media a trap for unwary financial planners
Social media such as Facebook, Twitter and LinkedIn are more about marketing the services of financial planners than about advice delivery.
That is the assessment of industry experts, who have warned of the dangers of financial planners moving beyond the legal and regulatory confines applying to such media.
They say that despite the benefits, financial advisers run the risk of using social media as an "education point" for general financial information - and clients may feel that they have the knowledge to potentially engage in an investment strategy prematurely, according to Synchron director Don Trapnell.
"I think the law is quite clear - you can't produce statements of advice online. In saying that, you have to try and balance the information you are pushing to clients with the advice you are giving."
Synchron independent chair Michael Harrison said most licensees have strict guidelines in place when financial advisers engage in web-based or mobile communication with clients.
But the other potential problem with social media is that new communications technologies can be a significant time-waster for financial planners who do not understand how to manage it effectively.
The negative effects of social media occur because many financial planners are not asking themselves fundamental marketing strategy questions, Harrison said.
"I think a lot of advisers are getting hooked on social media and they haven't got a lot to talk about. If you're going to promote your brand, get to the point," said The Humble Investor director Colin Williams.
While social media is not designed to capture a lot of information, it is a key component in beginning the financial planning process with clients. Planners can face a significant cost to reputation if they are not engaged correctly.
"The mistakes I see advisers making with social media are that they're forever pushing their stories in the face of their clients. It's the ultimate turn-off," Williams said.
According to Experience Wealth Advice director Steve Crawford, it is important for practices employing social media to communicate with clients in mediums that they are familiar with.
"Just because you can populate the same message on multiple sites, doesn't mean the end-user is going to use it in the same way," he said.
Crawford said he believed that by following what clients were following on websites like Facebook and Twitter, the financial adviser is able to focus more on what matters to their target market.
Social media is not about "pushing" but "pulling" clients towards your website, and eventually towards a financial planner, he said.
"The whole premise around web-based communication tools is client referrals. If you're going to use it as a soapbox, this can potentially turn customers away from the practice because they'll think that the adviser is arrogant or over-confident," he said.
"Out of the 10 things you post, only one of them should be a sales pitch - nine of them should be promoting things that a client may be interested in - and that doesn't necessarily equate back to financial services," Crawford said.
Recommended for you
The Australian financial advice industry has risen by more than 20 advisers this week, with nearly half joining WT Financial and Sequoia.
Two financial advice professionals have shared their tips for success when building an effective Professional Year program as more advisers look to bring on junior staff to their practices.
Numbers are in for 2024, with Wealth Data confirming how many advisers left during the calendar year and which business models saw the largest growth in terms of new licensees.
Praemium has seen its highest net inflows in over two years for Q2 FY25 as its Powerwrap platform returns to inflows after five consecutive quarterly outflows.
