World's Largest Brokerage OKs Social Networking by Financial Advisors

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Memo heralds new media breakthrough

New York-based financial services powerhouse, Morgan Stanley, the world’s largest brokerage firm, announced, not in a tweet or a blog, but in an old-fashioned, internal memo, plans to “begin a staged, roll-out for Advisors to use Social Media.” 

Mincing no words about the implications of the announcement, the memo’s author, Andy Saperstein, who heads the brokerage’s U.S. operations, observed:

"This will be a significant competitive advantage."

Morgan Stanley’s decision to invest in social media by allowing, initially, a select group of about 600 of its financial advisors to use social media, will undoubtedly leave others in the highly-regulated financial services sector scrambling to follow the leader.

Regulatory Authority Guidelines Met with Industry Social Media Paralysis

Although the Financial Industry Regulatory Authority (FINRA) had provided the financial services industry with social media guidelines in January of 2010, the highly-regulated financial services sector largely greeted the Authority's invitation to participate in social media with paralysis.  Responding, nonetheless, to a keen, continued interest in social media by brokerages, FINRA even provided a session on social media compliance at its 2011 annual conference.

Technology Aids Compliance, Spurs Social Media Participation

A requirement of FINRA's guidelines is the archiving of social media communications, a particularly challenging compliance mandate.  To this requirement, Saperstein noted in his memo that:

In the coming weeks, Morgan Stanley will implement a technology solution that will capture and retain all communications on approved social networking sites to comply with regulatory requirements.

Although various archiving vendors exist, Saperstein's memo suggests a "technological solution" that may well be proprietary in nature.  Whatever it is, it will be closely scrutinized as an industry standard.

Limited Launch in Late June; Full Roll Out Within 6 Month

Announcing a tight timeline, Saperstein explained that the first 600 advisors would begin their social media participation in late June, "with access to LinkedIn and partial use of Twitter", with "the rest of the field" having access within six months.  (It is worth noting that Morgan Stanley reportedly reaped huge fees from recently underwriting LinkedIn's IPO.)

Firm to Provide Content for Sharing; Participation Preceded by Training and Profile Approval

Saperstein informed employees in his memo that the firm would provide "a tool for Advisors to distribute Firm approved research and content, providing you with a powerful way to share our unique intellectual content with clients and prospects."  Providing employees with content to share through social networks to clients and prospects could have a two-fold benefit:  it could ensure that the content shared was branded as well as scrutinized for regulatory compliance.

The lucky 600, who will become Morgan Stanley's social media pioneers, were also told that they would receive an e-mail "with more details on training and how to get started by getting your profiles approved."

No Mention of Facebook and Only "partial use of Twitter"

Interestingly, the memo makes no mention of the largest social network, Facebook, while stating that the financial advisors "will have access to LinkedIn and partial use of Twitter."

The glaring absence of any mention of Facebook may suggest that that particular social may not be part of the brokerage's initial social media roll out.  Like the risk-adverse pharmaceutical sector, another highly-regulated industry, wealth management may yet find too many unresolved compliance issues with Facebook.

Morgan Stanley An Early Student of "Significant Share Gains of Internet Traffic" by Social Networks

In 2008, Morgan Stanley noted the fast-growing role of social media in online communications, outlining "significant share gains of online traffic".

What are your thoughts?  Is social media a smart investment for the financial services?

Please make one small investment in social media - join me on Twitter!  GlenGilmore

For the text of the Morgan Stanley memo, see:  Tweet on the Street

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