What Are the Risks Associated with Financial Social Media?

As a highly regulated industry that deals with sensitive personal information, financial services face some unique challenges in participating in social media. When considering a move into the social media arena, it is important to identify, evaluate and mitigate potential risks.

A common risk identified by financial service providers is the potential for exposure to additional liability by offering recommendations publicly. It is conceivable that well meaning advice targeted at a particular audience could be misinterpreted and used out of context by a social media user. While advisors can offer useful information about products such as investments, insurance and plans, as a professional service provider, advisors are responsible for performing due diligence when making recommendations. When offering opinions in the social media arena, it is important for advisors to seek to inform prospective clients rather than making a recommendation which could be used out of context.

Privacy is a major concern for financial advisors. Trusted relationships are the key to business success and any infringement on privacy could harm an advisor’s reputation. That said, a few rules of thumb can help to assuage privacy concerns. First, do not encourage clients to share confidential information via social media sites. Even direct messaging services offered by these platforms should not be considered confidential. While platforms such as Facebook and LinkedIn can be useful for initiating and building a relationship, advisory discussions should take place in a secure medium such as email, telephone or in person meetings.

Finally, some advisors perceive risks to their reputation through online attacks and complaints. Does participation in social media create an opportunity for competitors or disgruntled clients to malign your reputation? It’s important to remember that complaints can be shared online whether you have developed a presence for yourself or not. By participating in social media, you create an opportunity to engage and dispel misinformation or to demonstrate actions taken on past mistakes. Many clients satisfied with a job well done are happy to share their praise with a public audience – participating in social media allows you to receive and leverage these accolades.

By acknowledging and addressing some of the risks associated with social media, financial advisors can confidently pursue the multitude of benefits associated with these platforms.