This is an older article but it’s a great one…
Review: Greed feels good, so watch out – USATODAY.com http://ow.ly/2Qebf
While the investment industry virtually invented the online networking world, security and compliance issues have made it slower to adapt to the alternative social media. In no other industry do individuals work harder at following the crowd, or top traders. The meteoric rise of Yahoo stock during the Internet boom showed us the power of online aggregation.
Today, social media such as Twitter and Facebook is quickly eclipsing Yahoo’s online boards, which once reigned as the place where online gossip could make or break a company in a click of a mouse. Companies quickly learned how to play the online messaging board game with damage control and management of reputations.
Given the high risks, the question is, do you want to play the online social networking game? Social networks that allow contacts to mirror your trades are among the higher risk services being offered. An unhappy investor can infect many people in a short amount of time with very little effort. At the same time, wrong investment advice is more quickly disseminated and it can be a full time job screening who is contributing to your site. You must choose your social networking vehicles carefully.
Undoubtedly, there are risks and a significant investment of time. This investment is not without its returns however, and one might ask instead, can you afford not to play? Leading investment advisors report that they are driving more sales and traffic through social networking than traditional online sites. Investment services and social networking sites are adding a plethora of new social media tools to enhance the investment experience. A big plus of setting up your own network is that you have more control over the user experience and what type of people you network with online.
Clearly, you need to have a social media presence. You just need to focus on how to protect your online reputation and ensure compliance. The best advice the experts have to offer is to add contacts and accept recommendations only from those you know and trust. Ensure the forums on your social networking site are well monitored and maintained at a professional level. Leading networking sites, for example, have recently been maligned for allowing the quality of discussions to deteriorate and for allowing too much infighting.
The competition to be the next Facebook of mutual funds is intense and a lot of new players are emerging. A number of leading sites have faced their own reputation issues as they have struggled to maintain the quality of information on their sites.
Following the crowd does not always work in the social media world. These fallen social media darlings are a reminder of how important it is to invest BIG in managing your online reputation.
Social media not only provides an opportunity to promote your investment expertise but it is also provides a forum for a lot of upstarts. SocialPick.com, the Facebook of stock brokerage, is ranking members based on their stock picking prowess. In other words, your plumber could out-pick you when it comes to buying and trading stocks… and in front of the whole world! It is never too late to start managing your online reputation. Following is some sage advice from investment and social media professionals.
1. Develop tight security standards. It is easy to wander off your company’s broker site and onto one of the many investor social networks that are aggregating millions of investors seeking investment advice and vehicles. Ensure high security standards protect investor information and confidentiality.
2. Use sites that make regulatory compliance easy. Securities regulations apply to social media sites. Your compliance officers should draw up guidelines to ensure your investment professionals comply with investment rules. Some sites are touting their compliance friendly features, including storing all investment interaction for the requisite time period.
3. Provide value-added information. To compete with the zillions of bytes in free investment information on social media sites, ensure your investment analysis adds real value.
4. Your five minutes is a nanosecond on social media. Ensure your blurbs – brief write-ups on you and your company that typically accompany your photo – differentiate you and communicate value.
5. Network wisely. Add contacts you know or are recommended by people you know. If your new buddy prompts one million investors to sell a stock that then breaks out of the bull pen, your credibility is sunk.
6. Avoid too much twittering. Do not inundate your clients with Tweets. The Tweets that you send should add value and be timely. Do not use Twitter to make cold, or even warm, sales calls.
7. Do due diligence on your new friends. Large firms should not hesitate to put a full time due diligence officer on social networks. Reputation management systems and protocols are essential for effectively using social media.
8. Thoroughly research social media offerings. Social media networks are providing a broad range of services to attract investors. Not all features and functionality will be in your best interest. Services such as rankings, transparent trading and a history of your trades and opinions may be available to your potential clients. If you do not become a “certified” and transparent investor, will you rank low among potential investment advisors?
9. Do not make fast friends on Facebook. Imagine this: I am about to invest in XYZ stock based on your recommendations on a social networking site. First, I Google the company for more information and your mug shot pops up on the Facebook site of the CEO of XYZ company. Your professional recommendation now appears biased. Is XYZ CEO your brother-in-law?
10. Follow the rules: The Financial Industry Regulatory Authority (FINRA) has provided guidance for securities firms and investors on how to use social networking while remaining compliant. You can access a webinar here.