Harnessing Social Networking In Financial Services

Whitepaper

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Why Financial Services Firms Need a Social Networking Strategy 3

Social Media Versus Social Networking 4

The Social Way to Communicate Externally 5

Five Stages of Social Engagement 6

Governance and Information Security 7

Regulatory Guidelines 8

Building a Social Business Strategy 8

Business Process and Information Technology 9

A Pragmatic Action Plan 10

Summary 10

Table of Contents

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the democratizing forces of web social networking are

transforming the way enterprises worldwide do business.

Online social networking has enabled individuals and

organizations to join communities of interest and share

information widely and easily. the ever-increasing adoption

of mobile oriented consumer technology permits people to

carry powerful, networked devices everywhere. this constant

connectivity is driving the expectation of an always-on, always-

available interaction with organizations. Countless brands

participate on networks such as twitter, Facebook, Linkedin

and other specialized web communities, where people have

come to expect, if not demand, organizations make themselves

available for multi-directional communications.

at Cisco Systems, 80% of visits to their Facebook Support

Community, with over 6,000 active monthly users, has

eliminated the need for support phone calls. the cost per

interaction with traditional customer support averages $162

per phone conversation versus $0.06 via Facebook.1 at Dell,

25,000 online conversations take place every day through

Facebook and twitter.2 Dell strengthens brand awareness,

enhances customer relationships, gains valuable feedback,

protects its reputation, and increases sales by fully utilizing

social networking. Both Cisco and Dell integrate social

networking fundamentally into their business processes and

reap the rewards accordingly.

in the financial services industry, social networking is here to

stay and demand to use social technologies by clients, financial

advisors, and business partners is out ahead of most firms’

ability to manage it. 85% of financial services professionals

under 50 years old are utilizing social networking for personal

use.3 More than 40% of financial services professionals under

50 years old say a social networking presence led to cultivating

current business relationships or helped identify new clients.4

a firm’s business ecosystem includes employees, clients,

prospective clients, business partners, suppliers, shareholders,

regulators, and competitors. they comprise the constituents

participating in and reachable through social networking.

Currently available technology can empower your firm to

engage, internally and externally, in ways that traditional

one-way communication cannot support. Successful financial

service firms need to embrace and manage social networking

and let it become part of the firm’s operational fabric. here

are the most common reasons motivating financial services

firms to build a social strategy:

• Measure sentiment.

• enhance awareness.

• increase assets under management.

• Build brand community.

• protect reputation.

• Facilitate relationship management.

• improve internal collaboration.

• assist fund portfolio design.

Social Business Ecosystems are the New Reality

Why Financial Services Firms Need a Social Networking Strategy

Successful financial services organizations need to embrace and manage social networking where it makes sense to do so.

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Currently, most businesses use social technologies for

external marketing communication purposes. the term “social

media” is most often linked to brand advertising and online

engagement with parties outside a firm. public relations and

digital marketing agencies have played a large role helping

many companies, across industries, with their external social

engagement messaging to date.

“Social networking” has a broader meaning which includes

and extends social media concepts to all internal and

external communications and processes utilizing social

technology platforms. these software platforms enable

virtual communities of interest to form around a topic, brand,

or organization. in a purely internal example, social networking

technology can permit virtual teams that include product

development, marketing, sales, and relationship management

to collaborate more effectively than using e-mail, conference

calls, and face-to-face meetings alone. enhanced internal

processes in turn deliver differentiated value back to business

partners and clients. Utilizing social networking in this broader

context is outside the core competence of public relations and

digital media agencies and requires a more holistic business

process and technology skill set.

the paradigm of an always on, streaming flow of tailored

information targeted to a community of interest made so

popular by Facebook, Linkedin, and twitter, is being demanded

by the employees of many organizations for internal use as

well. a complete social networking strategy must anticipate

the broad implications of how financial services firms will

communicate, both internally and externally, in the years ahead.

Social Media Versus Social Networking

Listening and Engagement

Vibrant Internal and External Communities

Social Innovation

User-influenced products and feedback, identify product enhancements and new requirements

Brand awareness, stimulate interest, measure sentiment, protect reputation, gain client

feedback, collaborate with internal colleagues

Keep track of financial advisors’ career changes,

understand client issues and sentiment, identify new

clients, shorten sales cycles

active outreach, resolve issue quickly, improve

efficiency, eliminate support phone calls, reduce costs

Collaborate with business partners, share thought leadership, build trust

Product Development Marketing Relationship Management Sales Customer Service

Figure 1. Broad impact of social networking across the organization.

H H H H H

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the focus of many current social networking initiatives in the financial

services industry is the use of social networking to help drive marketing

and sales. While the impact of social networking will be profound inside

organizations as well, the focus here is on financial services firms’

interaction with the outside world.

there has been a fundamental shift in the tools and techniques used.

The Social Way to Communicate Externally

Social Strategy Tips:• have a plan.

• Start Small. a successful plan will take on a life of its own.

• Be innovative. Get to know your community and find out what will inspire and motivate them to participate.

• Understand your employees and how they will respond to new ways of conducting business.

• tie the campaign into direct marketing and place information, invites to participate, and links in email, newsletters.

OLD WAY NEW WAY

Telemarketing

Trade Shows

Direct Mail

TV, Newspaper and, Radio Ads

Search Engine Optimization (SEO), Adwords, Social Engagement Applications

Blogs, Webinars, Tweets, Virtual Conferences

Facebook, LinkedIn, Twitter

YouTube, Google, and Facebook Ads

as target audiences increasingly spend time on social networking platforms

such as Facebook, Linkedin, and twitter, it becomes imperative for

financial services firms to effectively engage with them there. the power

of participating comes from the ability to communicate with large target

groups very efficiently.

Figure 2. Old marketing techniques replaced by new.

R

RRR

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Fully harnessing social networking initiatives requires clear

goals and measureable objectives to evaluate success. there

are five steps to an effective social engagement model:

• plan

• Listen

• engage

• Measure

• evaluate and revise

PLAN

a well conceived plan with executive commitment, clear goals,

measurable objectives and appropriate resources is necessary

for success of a social marketing program. having answers to

the following lays the proper foundation:

• What are the social initiatives’ goals and objectives?

• What are the risks and rewards?

• What will stimulate the desired target audience

engagement?

• are government regulation and corporate governance

considerations well understood?

• are all stakeholders appropriately involved?

(Distribution, Marketing, Legal, Compliance, it, hr )

• What marketing and technical personnel skills

are needed?

• What new technology needs to be implemented?

• Who in the organization will lead the initiative?

• how will success be measured?

• how much will it cost?

• What comes next?

LISTEN

Knowing what is being said about your firm and the

competition is an important early step. Finding out which social

networking platforms your online target audiences congregate

and collecting a thorough understanding of the dialog takes

technology and know-how. the quantity of both structured

(i.e. opinion surveys) and unstructured (i.e. tweets) data can

quickly grow so large, sophisticated software tools are needed

to identify trends and determine relevance. Numerous software

products are now on the market and the pace of leapfrog

advancement is rapid. a recent report, “Your Brand: at risk

or ready for Growth,” found that 75% of those surveyed said

it would have a positive impact on their experience as a client

if a firm took the time to find out more about their needs.5

Listening in effectively to the dialog taking place on the social

networking platforms can enhance and potentially replace the

need for traditional opinions surveys.

ENgAgE

Where and how does the firm participate in the social dialog?

What should be said that creates brand awareness, stimulates

interest and drives commitment? how is the firm’s reputation

protected and enhanced? What human capital resources are

required to handle the task? the social web is based on human

interaction and the target audiences you engage. if done well,

utilizing social networking will help your constituents develop

a closer affiliation with your firm over time. in most cases,

the best people to interact with your constituents are subject

matter knowledgeable and from your own staff. a successful

external social networking initiative should create something

of sufficient interest that the word spreads, more people join

the dialog, and the firm’s brand image is enhanced.

Five Stages of Social Engagement

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innovative technology plays an important role in managing how

your firm engages in the social web. Software can now assist

and control issues such as:

• Who within the firm is allowed to do what with

social engagement?

• how will all interactions be captured and cataloged

for audit, monitoring, and regulatory purposes?

• how can communications be produced once and

efficiently distributed to many social networking

platforms simultaneously?

• how can inbound traffic from multiple social

networking platforms be aggregated and

managed efficiently?

MEASuRE

Social data must be treated as any other corporate data asset

and therefore must be integrated into an organization’s reporting

and analytics strategy. Management considerations are:

• Selecting and implementing, monitoring, and analytic

tools to measure social initiatives effectiveness.

• Developing analytic and reporting requirements.

• Creating discovery and analytic rules from which

critical business information can be obtained.

• Designing and developing social reports and

dashboards consistent with the firm’s overall

reporting strategy.

again, software tools play a key role in making sense of an

external social networking initiative and give firm management

the information needed to make intelligent decisions. every

initiative requires metrics and reporting in order to determine

the extent to which it has met the business objectives. Social

networking monitoring tools aggregate conversations from all

social channels in one place making it possible to create high

level management reports. the sophistication of these tools is

improving rapidly and evolving from simplistic key word search

results to a deep understanding of social dialog relevance.

EVALuATE AND REVISE

reviewing the success of an initiative is essential for planning

future ones. Questions to consider are:

• What worked and what could have been

executed better?

• Did the initiative meet the business objectives set

at the outset?

• Was the effort worth the investment?

an effective social engagement strategy requires a firm be

committed for the long haul, continually learning, revising,

improving, and investing appropriate resources.

governance and Information Security

Strong corporate governance and information security helps

the organization establish the accountability necessary to align

behavior with corporate goals. it is important to understand

the implications social networking has on the organization

and the governance required to adopted it responsibly.

implementing the software tools and business processes

necessary to ensure control and manageability is vital. a firm’s

social networking engagement must be according to corporate

governance policy, information security standards, industry

guidelines, and government regulations. Before proceeding

past the planning stage, ensure the firm has the governance

and security infrastructure in place to satisfy the requirements

of the business.

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Financial industry regulatory authority (FiNra) regulatory

Notice 10-06 issued in January 2010 provides guidance on the

use of blogs and public social networking sites. FiNra 10-06,

in conjunction with SeC and NYSe rules, gives clarity to how

financial services firms must operate in the web social world.

According to FINRA:

• postings on publicly available social networking

web sites are considered advertisements.

• e-mail or instant messages sent to 25 or more

prospective customers are considered sales literature.

• e-mail or instant messages are considered

correspondence if sent to a single customer, an

unlimited number of existing retail customers,

and/or less than 25 prospective retail customers

within a 30-day period.

• postings on password-protected social web sites

are considered sales literature.

• Chat room discussions are considered public

appearances.

Software products are now generally available to address the

authorization, reporting, approval, auditing, and regulatory

requirements of FiNra 10-06 and the other SeC and NYSe rules.

Depending on the policy your firm defines, adopt a solution

that automatically routes social networking messages to a

registered principal to accelerate the review process while

providing a complete audit trail. adopt a solution that

enables configuration of supervisory rules based on the FiNra

guidelines as well as your firm’s own unique procedures and

policies. ensure the solution enables the firm to capture

and retain all social networking activity, with the associated

description about the content, and archive it in a structured

fashion enabling easy retrieval. Be able to selectively disable

social network platform functionality by role, user, and location.

tight control will protect the firm from harm and allow the

social networking investment’s impact to be well understood

by the firm’s management. Your compliance solution should

give real-time usage insights down to the individual level,

clarity of rule violations, and indications on the effectiveness

of employee social networking training.

Building a Social Business Strategy

a social business strategy involves a systematic approach

to ensure success. Social strategy needs to be designed and

not just implemented. an organization’s success is based on

the involvement of all critical stakeholders and must start

with education. as with anything new to an organization, the

possible must be explored but accomplishments are achieved

only by getting stakeholders on the same page about those

possibilities. Successful strategy eliminates ambiguity through

alignment and adaptation. in the case of harnessing social

networking, this can be a real challenge since new innovation is

being introduced to the market almost every day. Don’t hesitate

to evaluate your competition and the market in general. engage

in social networking to learn and help create your strategy.

Social business strategy involves 4 critical steps:

1. Prepare: align the organization on what is possible.

2. Visualize: evaluate current state, identify

opportunities, and document the plan.

3. Implement: build the solution and complete

the deployment.

4. Manage: use metrics to determine progress

and adjust to improve.

Regulatory guidelines

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EducateConnect the organization to social trends and opportunities.

AnalysisAssess current state and organizational readiness.

PlanDefine the business model, approach, and budget.

DesignDesign project approach and select technology options.

BuildSolution implementation and integration.

SustainBroaden scope of project, on-going operation, and monitoring.

PREPARE VISuALIZE IMPLEMENT MANAgE

Figure 3. A staged social business strategy.

it takes highly skilled business innovation, information

technology, sales and marketing professionals to build a first

class social networking strategy. Below is a series of best

practices steps:

• Define social networking goals, objectives, and return

on investment criteria.

• Create an overall social business innovation approach

and architecture blending business objectives with

appropriate technical solutions.

• Link your organization to the social web communities

where the various target constituents congregate.

• integrate internal sources such as customer service

databases and collaboration tools into the social

business ecosystem.

• implement software tools and processes that ensure

control and manageability according to corporate

governance, information security policy, and

government regulation.

• Select and implement software tools to listen,

understand, and engage in relevant internal and

external social dialogs.

• Select and implement monitoring and analytic tools

to measure social initiatives effectiveness.

• integrate with existing customer relationship

management systems.

• ensure organizational readiness to fully harness

social networking.

• Continually review and enhance the technology and

business processes to ensure maximum effectiveness.

• Stay current with the social technology changes and keep the organization informed of those offerings that have relevance.

Business Process Innovation and Information Technology

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1. Ensure that your organization wants to adopt social.

as with the introduction of any new technology, the

smart organization starts small. in the case of social

technologies, there is no guarantee that your organization

will embrace them. Carefully define the business issue

you want to address and work closely with business

leaders in a controlled pilot to ensure that your firm will

embrace social technologies. Do not underestimate the

change management efforts to drive adoption. Change

management should certainly include access to training

materials, but far more important is that users have a

strong understanding of the business goals and objectives

regarding the initiative.

2. Define success, avoid risk. Build on the pilot success.

expand the use of social technologies to include more

users and more business use cases. Look for business

cases that reflect the lessons learned earlier and

engage appropriate business leaders to support the

broad initiatives. particularly in financial services firms,

determine policy and governance to guide the emerging

social environment. Many firms have balked at wide-

scale use of social technologies because of challenges

related to security, privacy and compliance. these issues

are generally manageable, and a well-governed social

environment will lower risk because of transparency.

involve all stakeholders; marketing, sales, relationship

management, product development, customer service,

human resources, legal, and network security professionals

to build policy and governance models.

3. Treat social like a true enterprise asset. as your firm moves

social technologies into enterprise-wide deployment,

be prepared to harden the implementation. a social

business ecosystem should be capable of existing in a

mission-critical environment. Operationally, your social

applications should be highly available, integrated with

corporate authentication systems, and deployed widely to

drive critical mass of adoption. integration with adjacent

technologies, like line-of-business systems, should be

part of your long-term strategy and technology selection

should support those goals. Organizations currently moving

toward broad deployment are in the process of building out

strategies with core line-of-business systems like customer

relationship management (CrM).

Summary

Social networking combined with powerful, mobile, personal

communications devices is the most impactful information

technology trend of our time. it requires a new way of

thinking and a fresh look at your firm’s business process from

the outside in. While care needs to be taken to adopt social

networking prudently, not moving assertively forward carries

far more risk to the long-term viability of your firm. the use

of social networking globally is now so widespread, there is

simply no better new way for financial services firms to reach

targeted audiences efficiently. First movers have a competitive

advantage because they build experience and brand loyalty that

will be challenging for others to overcome.

Fully harnessing social networking requires expertise your firm

many not have internally. the pace of change is so rapid that it

is difficult for non-dedicated professionals to keep up. along

with stakeholder representatives from across the firm, get

help early on from trusted outside sources that are experts

in the field and technology vendor agnostic. taking the steps

described in this document will position your firm for social

networking success in the short and long term.

A Pragmatic Action Plan

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Sources:

1Cisco internal source. 2011.

2Dell internal source. 2011.

385% of financial services professionals under 50 are utilizing social networking for personal use. (Ledermark, 2010).

4 More than 40% of advisors under 50 said a social networking presence led to cultivating current business relationships or

helped identify new clients. (Ledermark, 2010).

5Your Brand: at risk or ready for Growth (alterian, 2011).

SoclWorx, LLC is an independent business process

innovation and information technology professional

services firm dedicated to helping organizations fully

harness the value of social networking.

We make Social Work.

CONTACT uS:

SoclWorx, LLC

240 New York Drive, Suite 6

Fort Washington, pa 19034

phone: 610-783-5350

e-mail: info@soclworx.com