7 social media risks advisers should prepare for

Smart practice

Tuesday 27 June 2017

How to recognise and guard against social media’s hazards

Social media can be a great tool for helping financial advisers connect with clients and potential clients, build deeper relationships and ultimately grow their firm.

If you’ve decided to integrate social media into your marketing strategy, the first step is to select your channels carefully – Facebook or LinkedIn; Twitter or YouTube? Start by knowing who your audience is, and where to find them on social media.

Then you, and your staff, need to be aware of the risks as well as the benefits.

The financial advisers guide to social media

We explore seven common risks financial advisers face when using social media and how to overcome them.


1. The risk of a disgruntled client

Social media is an interactive environment which, by its very nature, encourages people to have their say. And, while a good review or a message of support for your services can be great marketing, there may be times when someone says something negative too. After all, studies show that people are more likely to report a bad experience than a good one.

How to manage it: If someone leaves a genuinely negative review, be prepared to interact. Social media is a two-way street, so you have the chance to have your say and address negative comments. Just do so politely and respectfully, or you could come off looking worse. Besides, if someone genuinely feels aggrieved often the worst thing you can do is ignore them. So if it is your fault, the best approach is to acknowledge their feedback publicly but avoid going into the detail. Instead, take any grievance off social media and onto the phone or another, less public forum. And remember, often people will say something negative online if they don’t feel as though they’ve been heard. So, if it starts becoming a pattern, maybe it’s a signal to look at your internal processes.


2. The risk of a rogue employee

Maintaining your company’s social media accounts properly requires a significant time investment, so it's likely you’ll need your employees to post on behalf of the company. And that immediately exposes you to risk. After all, your staff could post something negative about your business, your clients or their colleagues, even unintentionally. And the risk doesn’t start and end with your account - there’s also the chance they could post something from their personal account that connects their actions with your brand in a negative way.

How to manage it: The starting point for managing the risk of an employee damaging your brand should always be education: establish a good social media policy setting out each employee’s responsibilities when it comes to social media. Communicate this policy across your organisation and, if necessary, train your staff in proper social media use regardless of whether they have access to your company account.

Social media is not without risks. But by recognising and managing its downsides you can limit the chance that something will go wrong.


3. The risk of misleading advertising

ASIC's Regulatory Guide 234 sets limits on advisers’ ability to promote financial products and services, especially when it comes to making claims about their performance, benefits or risks. And it specifically calls out social media as a potential problem area. That’s because social media is a ‘high trust’ environment where the people you’re interacting with may find it hard to tell the difference between an advertisement and an opinion.

How to manage it: Be careful about promoting any product or service through your social media account. The same rules that apply to other media also apply to social. In other words, if you wouldn’t say something in a paper or on TV, don’t say it on social media. For instance, you should never promise that a particular investment will perform a particular way, nor should you pledge that you will save clients hundreds of dollars in tax. And never publicly endorse or recommend a product without recognising that vulnerable investors may read what you’ve said and take action.


4. The risk of giving advice

At times, someone may use social media to ask you a direct question about products or strategy. Even if you know them well, it’s often unwise to reply publicly, especially without a disclaimer about not taking individual circumstances into account. It’s difficult to tell how sophisticated someone’s investment knowledge is, or even to understand the fullness of their circumstances, through social media. After all, you’re not receiving the same verbal and visual clues you’d receive in a face-to-face meeting.

How to manage it: You would never give advice without knowing someone’s personal circumstances. That’s fundamental to being an adviser. And, while it can sometimes be hard to know where information ends and advice starts, always err on the side of caution when it comes to social media. Instead, let the person know that what they’re asking for constitutes advice and that they should contact you directly. That way you can set up a proper meeting and let them know the parameters of what you can and can’t say. 


5. The risk to your clients’ data

It’s no secret that cybercrime is on the rise. It’s also no secret that financial advisers and their clients are some of cybercriminals’ favourite targets. There is always a risk that hackers could take over your social media accounts and use your online identity to try to obtain your clients’ personal data.

How to manage it: Protecting your social media accounts - and your clients’ data - should be part of your business’s fraud prevention strategy. Be as vigilant on social media as you would in any other part of your practice. Audit the use of your social media accounts, restrict who has access, make your passwords difficult to compromise and change them regularly.


6. The risk to your privacy

It’s not just your clients’ privacy that can potentially be compromised via your social media accounts. Yours can be too. You can unwittingly reveal a lot about your business through social media: what’s happening at your workplace, who your employees are, what events are on and even your movements. This can all be fertile information for someone looking to compromise your privacy.

How to counter it: Don’t give away too much information about your staff or your business. Instead, use the same caution revealing personal information about your staff as you would on your individual account.

And finally...

Social media is not without risks. But by recognising and managing its downsides you can limit the chance that something will go wrong.

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Unless stated otherwise, this information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502 and does not take into account your client’s objectives, financial situation or needs. 

This information is provided for the use of licensed and accredited brokers and financial advisers only. In no circumstances is it to be used by a potential client for the purposes of making a decision about a financial product or class of products.