The emergence of social networks and widespread use of smartphones and other mobile devices have transformed the way people communicate and consume information. For investors, this digital shift is empowering them to use social media sites to conduct research and validate investment decisions. Nearly 70 percent of all investors have taken some type of portfolio action based on content found through social media sites, according to research firm Market Strategies International.

Younger investors -- particularly millennials age 18 to 34 -- are fueling much of this behavior, but the fact is that people of all ages are becoming more Web savvy. More than two-thirds (68 percent) of adults online who own an investment account also maintain a profile on a social networking site, a Google/Ipsos MediaCT survey found. And the fastest-growing age demographic on both Facebook and Twitter falls between 45 and 64, says GlobalWebIndex.

What does this mean for advisors? In a business centered on relationships, having a strong social media presence today is essential to keeping existing clients and attracting new ones. While face-to-face interactions remain vital to building and maintaining trust, online connections can help foster additional opportunities with clients and initiate engagement that can build new long-term relationships. Yet nearly half of advisors (47 percent) do not use social media or are only using it for personal reasons -- and those that are using it devote only a small portion of their time to networking, according to a 2013 study by Natixis Global Asset Management.

Many advisors I talk to are skeptical that social media can drive new business, and they are concerned about compliance and risk. This is understandable. Social media is fragmented, complex and dynamic, and for advisors who are crunched for time, the effort to get up to speed can seem daunting. But as this shift deepens, and it will, the costs of not being active on social media will only mount.

Why You Need To Be There

Advisors who continue to shun or de-emphasize social media are essentially turning their backs on new business. A strong presence, for example, can help you:

  • Connect with younger clients. Advisor client bases are graying quickly. More than three-quarters are baby boomers, including a full third over age 67. Despite this concentration, four in 10 advisors are not actively pursuing younger clients, mostly because of time constraints and limited referral networks, the Natixis study found. Social media solves both problems. It can connect you with Generation X (clients age 35 to 50) and the millennials, who together stand to receive nearly $30 trillion in new assets between 2017 and 2050, according to an estimate by Accenture.
  • Improve communication. Advisors active on social media are seeing positive results. Nearly three-quarters (73 percent) say a strong presence has helped them communicate more frequently and effectively with clients, which can lead to more trusting relationships, Accenture says.
  • Grow. Yes, social media really can help you generate new business. Sixty-two percent of advisors have attracted new business through LinkedIn, and those who are gaining clients are also gaining assets. FTI Consulting says nearly one-third of advisors have generated $1 million or more in assets from new clients, while 12 percent have gained $5 million or more.

Focus First On The “Why”

The benefits of having a social media presence far outweigh the negatives, and a well-thought-out strategy can help you connect and build relationships with millennials. So what path do you take to find the fountain of youth?

The first step is to ask “why?” What do you hope to achieve? What is your expertise? Only you can answer these key questions. Once you know the “why,” the “how” becomes much easier.

In terms of specific sites, be selective at first. LinkedIn is the No. 1 professional social networking site, so start there with a business page and make sure it shows your certifications, networks, interests and personality. Hone your social media skills on LinkedIn before moving on to more social-oriented channels such as Twitter and Facebook.