Bailyn's Web site, sporting the Premier Financial Advisors logo, posts a sophisticated video discussing his background, blog commentary and selected comments from readers. He thinks that in the future social media will be the most significant marketing tool for advisors.
Many agree. Social media has reportedly attracted major players-Morgan Stanley Smith Barney, Commonwealth Financial Network, LPL Financial, Vanguard Group and Fidelity-to name just a few.
Yet Bailyn is more active with social media than many other financial advisors. Perhaps that's because federal regulators, citing the misuse of these tools and fraudulent online investment schemes, have been cracking down on social media use by financial professionals. As Finra and the SEC have issued alerts and guidelines on social media compliance over the last three years, some advisors say broker-dealers and custodians have become more conservative. Given all the other financial regulatory changes lately-including those triggered by Dodd-Frank-many advisors are simply too busy to conquer all the hurdles involved in becoming more aggressive online.
"I do have a very small Facebook page, but I really don't maintain it," says Gregory M. Curry, a fee-only advisor and CPA at Pillar Financial Advisors LLC in Louisville, Ky. "The compliance issues are something I'm not ready to tackle at this point. I've got a small, pretty focused business. Most clients come through referrals and professional networks. I've not felt the need to expand marketing efforts."
To use social media, RIAs must comply with federal securities laws, including antifraud provisions, compliance provisions and record-keeping provisions, according to an SEC risk alert issued in January. According to the SEC, "Investment advisors that use or permit the use of social media by representatives, solicitors and/or third parties should consider periodically evaluating the effectiveness of their compliance program as it relates to social media." The agency prompts firms to create usage guidelines and content standards for their employees, as well as sufficiently monitor and approve the content and training. "Particular attention should be paid to third-party content, if permitted, and record-keeping responsibilities," the SEC alert says.
An SEC staff review indicates many firms' advertising, communications and electronic communications policies fail to clearly single out social media use. Many procedures do not specify which types of social networking activity are permitted or prohibited by each firm and many don't address the use of social media by solicitors.
Though the standards are believed to be looser in the insurance industry than they are in the brokerage and advisory worlds, the National Association of Insurance Commissioners has a social media group that has been drafting a working paper on social media and its use in insurance.
The chief problem, say compliance experts, is that it's hard for employers to monitor their employees' communications-particularly on fast-moving interactive Web sites like Twitter and inside chat rooms.
Thus, many have adopted a policy that prohibits their employees from doing any social media business communication whatsoever, says Gary C. Watkins, a partner in the New York-based ACA Compliance Group LLC. "Larger institutions are embracing this technology," he says. "They have deep pockets to put the resources in place to ensure compliance with the regulatory requirements. But smaller to medium-size firms are taking the position of not using social media Web sites because of the cost and time needed to monitor compliance."