Mutual fund marketers and compliance officers are cautiously cheering the social media guidelines from the Financial Industry Regulatory Authority (FINRA).

D. Bruce Johnston, distribution media consultant for DBJ Associates, and Advisolocity, a new social media forum for advisors, said this week, “The financial professionals I’ve been speaking with are feeling good about FINRA’s hard work.”

He cited two areas he termed positive for advisors and money managers looking to expand their social media presence.  “Archiving technology, for one, is here today to meet the FINRA rules requiring record retention.”

The requirement for in-house development of social media policies is a big plus, too, Mr. Johnston added. “It’s more work in the beginning for a firm, but it will allow a lot of smart flexibility. Some firms have already said that they want to use interactive blogs  to emphasize thought leadership and subject matter expertise only — and leave investment marketing to their web site. Why not make that the official policy?”

Mr. Johnston invited interested professionals to register and download their complimentary copy of  One-2-One, How Social Media Lets You Have 1000 Conversations at Once, directly from the Advisolocity blog.

Being a thought leader may be easier than you think when you identify your unique characteristics and articulate them to your constituency.

In preparing an investment policy statement or proposal, how much would it be worth to you to have access to a reliable record of a prospective client’s likes, dislikes and goals?

It only takes minutes to sign up for social networking

In a similar vein, when an advisor knows a prospective client’s social networking interests, they will likely uncover a rich source of voluntary, accurate and timely information at their fingertips — market intelligence that may well have a place in a closing presentation.

Advisors who wish to untap the market intelligence in their prospect’s social networking habits should consider trying four steps to testing the social media marketing waters for themselves.

1. Engaging your audience It takes only a few minutes to sign up and gain access to most social networking sites. Whether you are preparing for a family office meeting or an institutional presentation, knowing more about the influencers and decision-makers in your proposal approval process can prove invaluable.

2. Identify and articulate your areas of thought leadership What are the particular challenges your prospect is confronting that can be met by your professional expertise? Establishing thought leadership expands an advisor’s presence, while accelerating client qualification. After drafting an article about the refundable AMT credit that was mostly overlooked in last year’s stimulus bill, one advisor we know posted the article through a number of blogs dedicated to financial social media marketing. The effort resulted in many repeat visits to his web site, requests for more information and increased business.”

3. Expand your presence Many financial advisors are turning to public domain blogging tools like WordPress.com and BlogSpot.com to establish their own thought leadership networks. Here, an advisor can post articles, as well as third-party information feeds. We’re also hearing from advisors who are keeping their thought leadership expertise separate from their product and services. This facilitates the compliance review process as well.

4. Distinguish yourself By taking the time to learn more about your clients through their social media preferences, you show them a new type of earned respect for their interests, challenges and communications preferences.

While many of your competitors rush to catch up with the promise of financial social media marketing, you can solidify your advantages now with the occasional tweet that suggests ‘FYI, I thought you would like to see this recent article… I would welcome a comment from you on my blog.’

John Drachman is a creative social media professional, who specializes in investment marketing, social media, writing, web design and development.

According to AdvisorTweets, Financial Industry Regulatory Authority Inc. (FINRA) says the delay is needed to reconcile comments from their membership.

As reported in DBJ Associates, the industry is taking a closer look at social media as sales literature because advisors and investors want to have a hand choosing the communications forms they prefer. “The cost of not communicating to advisors and clients through their preferred vehicles (social media) does not make a lot of long-term business sense.” Mr. Johnston said recently.

You can download your copies of Proposed New FINRA rules and Comment on Notice here.

Mutual fund marketers want to use social media

FINRA has no intention of addressing  the social media question directly.  In fact, the term “social media” appears nowhere in both the text of the new rule, nor Regulatory Notice 09-55, the comment notice.

The notice invites interested readers to call Joseph P. Savage, Vice President and Counsel, Investment Companies Regulation, at (240) 386-4534; or Thomas A. Pappas, Vice President and Director, Advertising Regulation, at (240) 386-4553 and state opinions.

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Following the success of a social media campaign last summer in raising assets under management, Chuck Steege, a Registered Investment Advisor from Bucks County, Pennsylvania, recently explained what motivated him to experiment with the Internet’s newest marketing tools.

Mr. Steege’s sense of experimentation, in fact, flew in the face of a recently released report from Equation Research that stated that  ”not knowing enough about social media” was given as the #1 reason for not trying it. Mr. Steege readily admitted he knew little about keywords and third party blogging when he started and yet he continues to hold his own today on Google page 1 for keywords AMT+credit+refund, a business emphasis of Mr. Steege’s, as recently as November 11.

“ The primary driver,” Mr. Steege said, “was to do the complete opposite of what everyone else is doing. Furthermore, the only way to understand something is to try it yourself!  Nothing gained nothing lost.”

Equation Research also named compliance constraints as a frequently cited reason by financial professionals to avoid blogging, twittering, LinkedIn and other social media vehicles and techniques. Regulatory compliance was not difficult, Mr. Steege said for a couple of reasons. First, the content was educational in nature and not product driven. Secondly, he said the combined efforts of his “marketing team — Paula David, Bruce Johnston and John Drachman — was important because they look at marketing through the compliance lens.”  

Of all of the tools employed in his summer campaign, the one which contributed the most to business building was the access Mr. Steege had to the e-mail list of a regional center of influence, an estate attorney, who participated in the three-part series with him. For more details on how the program generated $40,000 in commissions and fees on an investment of less than $10,000, see Financial Advisor’s Small Media Effort Pays off Big.

Could all of the educational efforts mutual funds and trade associations like the ICI have put into educating the public on mutual funds be insufficient?

You could certainly wish for more funding for education after viewing CNBC’s squawk box confusion over the difference between stocks and derivatives.

Before stepping into a recent Senate Finance Committee vote, Barney Frank was interviewed by a CNBC trio about the merits of letting shareholders set pay limits for TARP Fund recipients. The first dude came back with an off-handed statement about just letting the board of directors and senior executives of a TARP company sort things out.

Why get the shareholders involved? According to the ICI Fact Book, a shareholder is “An investor who owns shares of a mutual fund or other company.” Barney had to remind the fellow that shareholders are, literally, owners of a company; and, as such, are obligated to play a role in corporate governance.

The best was saved for last, when a squawk-boxer, said to Barney, “It seems to me that you’re dealing with a model (shareholder voting) that no longer works. We don’t have mom and pop sitting at home holding these shares. These shares are primarily in mutual funds and the ownership is a derivative instrument.”

Of course, without broad-based common stock shareholder participation, a good chunk of the equity markets — and still another $12 trillion — can vanish over night. Well, even if mom and pop are sitting at homing holding the shares, they still have ownership rights; even if they own shares of mutual funds only, they have the right to pressure the Fund board on matters of equity investment policy. This right, ensures, for example, that company selections have robust shareholder participation on stuff like, I don’t know, executive comp.

“These shares” confuses traditional equity investing with credit default swaps, options, and other derivatives. Whether it goes up or down, a stock is a real, tangible asset — unlike the derivative.

Squawkbox, heal theyself. You can download your free copy of the ICI Fact Book here.