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Why Social Media is Complex for Financial Services

Here’s an interesting question, with apologies if you’re not familiar with the red/blue pill reference: strategically, is it better to take the red pill and accept risk, sometimes in large amounts, to be relevant and available to customers in the spaces where they’re spending time, or take the blue pill and remain safe and risk-free and miss the opportunity to strengthen customer connections?

It’s a tough choice, to be honest, and one that many brands in regulated spaces face. If one chooses not to accept the risk, another brand may jump in. There isn’t a clear answer, but there are variables that shape why it’s hard for some industries – we’ll look at financial services in this post – to overcome the regulatory, privacy and legal challenges and say yes to the opportunity. These are insights we’ve compiled from years of working with top brands in the financial services industry, specifically in personal banking, retirement and equity compensation plans.

What makes social media marketing and governance more complex for financial services?

There are five key variables that make social media marketing and governance more complex for financial services marketers.

1.  Not always a direct customer relationship

When an employee signs up for an employer-sponsored retirement plan, their information is of course shared with the service provider. But the data and information shared might not include any non-essential contact information, including personal phone or e-mail addresses. As the importance of first-party data continues to grow, this is a blind spot for a social media program and can leave strategic plans hamstrung.

A survey conducted by KPMG found that 46% of financial services executives see data privacy and security as the biggest challenge when it comes to social media. With the amount of sensitive financial information that is shared on social media, data breaches can have serious consequences for financial services companies and their customers. 

46% of financial services executives see data privacy and security as the biggest challenge when it comes to social media.
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2.  Intermediaries, often in the form of an employer

This should perhaps be positioned as a cause/effect relationship. Contractually, many times retirement plans are only permitted limited direct contact with plan members. Instead, employers require communication to be routed through their own internal benefits or HR communications teams. This can mean that social media programs on public social networks – like TikTok or LinkedIn – need close coordination with employers. Targeting ads on LinkedIn, for example, to employees of a specific company could be considered off-limits And given the need for depth of knowledge in a lot of financial services content, being able to target the right content to the right audience is not just about contextual relevance. It’s also about regulatory compliance. 

3.  Regulatory oversight

According to a survey conducted by Hootsuite, 42% of financial services marketers cited regulatory compliance as their biggest challenge when it comes to social media. This is not surprising given the strict regulations and guidelines that govern the financial services industry.

In all cases, whether a customer is part of an employer-sponsored plan or not, the providers are still held accountable to regulatory standards and compliance. 

There are variables that affect how much this impacts social media strategy, but in some cases it might mean a regulatory body (like the U.S. Securities and Exchange Commission, aka SEC) needs to review and approve content and copy prior to it being used in a campaign. This can certainly make community-building and engagement less personal and proactive.

The two main regulatory bodies that provide guidance on the use of social media in the financial services industry are:

  • FINRA: The financial services watchdog still describes social media as a “new medium.” Many of its recommendations were first published in 2011 and do not reflect the reality of today’s platforms and needs.
  • SEC: Most of the SEC’s regulatory oversight in social media is aimed at registered investment advisors and retirement planners.

In addition to these regulatory bodies, individual states may also have their own regulations related to the use of social media by financial services firms. It is important for financial services firms to be aware of these regulations and to comply with them in order to avoid potential fines, penalties, or legal issues.

42% of financial services marketers cited regulatory compliance as their biggest challenge when it comes to social media
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4.  Retention requirements

 When a health plan or retirement plan provider does engagement with a member online, just as in any other channel, there are often requirements for retaining the communication. There are tools that automate this like ArchiveSocial. But no financial services provider should embark on a social media strategy without first establishing the need for retention, as it can be impossible to fill in gaps after the fact.

5.  Education vs. direct response

The result of this constellation of issues means that, for many financial services institutions, their social media programs focus more on general education than direct response. Their channels are mainly focused on sharing educational content that helps their audience learn about financial concepts, such as investing, retirement planning, and budgeting. 

Financial services companies may also share information about market trends, including commentary on stock performance, economic news, and analysis of financial data. Additionally, company updates and simply establishing themselves as thought leaders are less risky forms of posting.

Forging Ahead in the Financial Services Space

For financial services, social media success can be hard won. It can require deep integration among divisions and deployment of specific tools meant to protect the consumer and their information. 

If you are in the financial services industry, how are you managing to drive your social programs forward and pursue your goals? Are you a red pill brand or a blue pill brand? Share your thoughts with us on Twitter.

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