The Real Facebook Investing Story: How Advisers and Investors Are Using Social Media


Investment adviser Mark Matson's firm manages more than $3 billion for thousands of investors, and he's a big believer in coaching those clients in the art of prudent financial planning.

But the CEO of Matson Money isn't doing the majority of that advising to people facing him across a mahogany desk or in a wainscoted boardroom at his Mason, Ohio, offices. He's spreading his message on Facebook, Twitter and LiveStream.

Matson is part of a growing trend, one that may make the age-old gripe that financial advisers aren't responsive enough a thing of the past: High-net-worth investors are increasingly connecting with their money managers on social media.

"Today's investor is inundated with so many messages from Wall Street pundits and it's most important for them to understand that prudent investing is rarely the message being offered," Matson said. "That is why each week I employ social media to explain complex investing issues with solid, down-to-earth values that simply make sense."

What Investors Want

Yes, a lot of investors may have put money into a certain lavishly-hyped IPO stock Friday, but plenty of them see Facebook less as a "buy" than as an investing tool.

They have recognized that there's a lot more to do on Facebook than just "liking" pictures of your friend's new baby or tending your livestock in Farmville.

Some 5 million affluent investors use social media to research financial decisions, according to a report by Cogent Research in partnership with LinkedIn. Of those, 73% use LinkedIn, 53% use topic-specific discussion boards and 26% use some combination of Facebook, Google+ and Twitter.

The most serious investors tend to be independent-minded: 79% of investors with over $5 million in investible assets do their own investment research, according to the survey. But that doesn't mean they want to disengage from the conversation and investment chatter. In fact, it's just the opposite.

"With high-net-worth investors, we see a clear indication that they are looking for advice, and counsel, and news online-real-time information," said Jonathan Lister, LinkedIn's VP of North American Sales and Marketing Solutions. "They're really craving this information."

And social media can provide that information with a degree of transparency, in real-time.

"The more money they had, the more they used financial advisers," Lister said. "They would like to be better advised and want more timely content online. People want more communication. High net worth investors are going to more sources to validate a lot of their assumptions."

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Susan Fulton, a founder and co-owner of FBB Capital Partners in Bethesda, Md., agrees that more investors are moving away from the in-person chat.

"We like to meet with people three times a year and I think that's a wonderful thing, but I'm very excited about how transparent the industry has become," Fulton said. "In 1981, it was like jumping into pudding. I think younger people are going to be involved online at the time they aggregate a substantial sum of money."

Even though only 4% of investors currently interact with financial advisers through social media, 52% would be up for the opportunity, according to the Cogent Survey.

Financial Advisers Get More Social

To accommodate this change, financial advisers are ramping up their social media presence. Three out of four use social media for business and by 2013, more than 50% expect it to play a significant role in their marketing, according to a survey by FTI Consulting and LinkedIn. Of those, 91% used LinkedIn, 32% used Facebook, 28% used Google+ and 22% used Twitter.

Ted Jenkin, who owns oXYGen Financial, an Alpharetta, Ga., financial services company that focuses on a Gen X and Gen Y clientele, is intensively online. His company's Facebook page has 11,000 subscribers, and he's using Pinterest and StumbleUpon as " lead generators." He routinely posts content on oXYGen's Facebook page to give personalized financial advice. He's also gone mobile, using the iZigg Mobile 90210 platform to send text updates and mobile videos to his clients.

Jenkin may gravitate toward hipper sites, but it's LinkedIn that most financial planners flock to, with 83% of advisers who use it doing so for business. On Facebook, by contrast, that number is only 29%. Advisers who prospected on LinkedIn achieved a 62% success rate, with 32% of those gaining $1 million in new assets, according to FTI Consulting.

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"I think people look much more seriously at LinkedIn as a 'business' site and Facebook as a 'personal' site," Jenkin said. "However, I believe that Facebook is becoming a more widely accepted method now to ask your personal community for help on finding referrals, best deals or other ideas from people that you can personally trust. Today, you are seeing more conversations around banking relationships being bandied about on Facebook, and you are beginning to see more discussions on individual companies that are both product and stock related."

Neal Frankle, a CFP for 28 years, has been on Blogspot for three years. He's used his blog to cement relationships with existing clients and meet new ones, and uses Twitter and Facebook to republish his posts.

"Twitter was very helpful at first to connect with the personal finance community, but later became a huge time-waster," he said. "Now that I have my community, we connect on private forums."

Despite some of the skepticism he harbors for social media, Frankle views it as an important component of the advising business. He thinks that Facebook and Twitter should "mainly be a support apparatus rather than the main marketing focus" -- a place where people can learn more about you. He focuses on his blog, rather than on more superficial social network interactions.

The New Challenges

Of course, there are darker sides to social media's intersection with the investing world. The capacity of such viral platforms to be used by the unscrupulous to hype investments or spread false information about companies is almost boundless.

And the question of how FINRA regulations will apply on sites like Facebook and Twitter is something that Jenkin calls "a little tricky."

"The predominate number of broker dealers in this industry will not allow you in any way, shape or form to get into a discussion on specific stocks [online], even if you have disclaimers that you don't own them or do own them," he said. "They won't even let you have discussions around specific mutual funds or ETFs."

Industry regulator FINRA is having a difficult time so far dealing with the Pandora's box social networks have opened, and compliance management software hasn't caught up with the magnitude of the issues either.

That leaves advisers walking a fine line.

"You must be very careful as a professional not to violate strict advertising rules governing the profession," Frankle said. "That's why I only use my blog to talk about general finance issues rather than provide investment advice."

But even in erring on the side of caution, executives in corner offices are taking part in this social media revolution.

"[Chief officers] are the most engaged members of LinkedIn," Lister said. "C-level investors are the most connected on LinkedIn."