(Dow Jones) Many financial advisors are using social-networking Web sites despite company directives that prohibit the practice, a recent survey has revealed.
More than 60% of financial advisors agreed there is a business value in using social-networking sites, according to a survey conducted by Austin, Texas-based Socialware Inc. Nearly 40% of all advisors surveyed, however, said they violate their firms' policies against using sites such as LinkedIn, Facebook and Twitter, according to the survey.
"I'm not surprised to hear there's a high degree of non-compliance," said Mark Egert, a lawyer for Crowell & Moring LLP in New York who specializes in financial-industry regulatory and compliance issues.
"People want to use social media [websites] and firms say you can't," he said.
Rules that require brokerages to retain email communications are a significant concern, Egert said. Most firms don't have the ability to separate personal emails that can appear on social-networking sites from legitimate business emails, so they often prohibit using such sites, he said.
Greater freedom to use social media in other industries often frustrates advisors, said Egert, former chief compliance officer for Cowen and Co. LLC, a New York-based brokerage and unit of Cowen Group Inc. (COWN). "The reason why it keeps coming up is that people are vehement about it," he said.
The Financial Industry Regulatory Authority, or Finra, issued guidance in January to help firms establish procedures for communicating with the public through blogs and social-networking websites. The guidelines clarify recordkeeping, supervisory and suitability responsibilities of firms and brokers when using social-media sites for business purposes.
Many compliance professionals, however, remain concerned about the obligations of brokerage firms to retain information not kept on their internal servers.
A total of 196 financial advisors completed the 30-question survey, according to Socialware, a technology company that helps businesses manage their use of social-networking sites. More than half of the advisors said they had more than 100 clients.
Half of respondents acknowledged there are significant hurdles for adopting social media, such as archiving data and dealing with compliance issues. Around two-thirds of respondents said they don't archive social-media data.