Compared to five years ago, social media has evolved into a critical tool for business development and client service among financial advisors.
According to the 6th edition of the Putnam Investments Social Advisor Study, 92% of advisors who use social media for business say it has helped them gain new clients, up from 86% in 2017. In addition, the average AUM increase from social media initiatives is $4.9 million, including $1.4 million in the past 12 months.
The study notes that it’s no longer a question of whether a financial advisor uses social media, but rather how they make use of it. Nearly all U.S. financial advisors (98%) are using social media for business and/or personal use at this point, with 83% using it for business purposes.
As such, advisors report using their social media expertise to:
- make initial contact with referrals from existing clients (57% compared with 52% last year);
- acquire new clients (92% versus 86% last year); and
- increase assets under management.
Additionally, the advisor community self-reports a high level of proficiency when it comes to their social media knowledge, with 61% now describing their skill level as “expert,” up from 46% last year.
“The use of social media for business purposes by financial advisors has matured during the six years we have conducted this study, evolving from the periphery of the advisor experience into a critical tool for business development and client service,” notes Mark McKenna, Putnam Investments’ Head of Global Marketing.
Among advisors not currently using social media for business, 28% said they were “absolutely certain” that they would start using it in the next three years, up from just 9% last year.
Putnam also found that nearly half of advisors (48%) strongly agree that social media has changed the nature of their relationship with their clients, up from 39% last year. Of those who agree:
- 67% say they have more frequent communication with clients as a result of social media, yet 44% note that they connect with their clients less often by phone or in person than before;
- 70% say it is easier to share information with their clients; and
- 57% say decisionmaking is faster and easier.
AUM Gains
The study also provides a profile of advisors gaining the most assets from social media use, relative to their total AUM. Of the 14% of advisors whose assets gained through social media represent 10% or more of their total AUM:
- nearly half (46%) are between the ages of 30 and 39 (versus 35% of all advisors in the study);
- their average AUM gained through social media is three times the average for all advisors in the study ($15.3 million versus $4.9 million overall);
- nearly 6 in 10 (58%) say social media plays a very significant role in their practice (compared with 47% of all advisors in the study);
- they are more likely to pay for enhanced services from LinkedIn (80% versus 62% overall);
- they are more likely to have been trained on social media by a firm colleague (50% versus 39% overall) or by a wholesaler or representative from an investment partner firm (42% versus 37% overall); and
- their next step to growing social media is to integrate the data into their CRM system (57% versus 45% overall).
LinkedIn Still Dominant
When it comes business usage, LinkedIn, not surprisingly, continues to be the preferred platform for advisors for following companies, commenting on or sharing others’ updates, requesting recommendations, and posting to groups or pages. Advisors are also increasing their use of the platform to connect with other financial professionals, enhance current client relationships, cultivate prospective clients, and expand their professional knowledge.
“Each of the major social media networks is preferred for different reasons, with LinkedIn favored for improving referral networks, Facebook for enhancing current client relationships and Twitter for business development initiatives such as thought leadership,” McKenna says. “Additionally, advisors are increasing their use of YouTube, Instagram and Snapchat, often using them at rates approaching those of the more established social networks.”
Overall, business use of various social platforms by advisors breaks down as follows:
- LinkedIn: 72%
- Facebook: 62%
- Twitter: 52%
- YouTube: 41%
- Instagram: 38%
- Snapchat: 22%
Conducted online in late 2018 in conjunction with NMG Consulting, the study included participation by 1,021 financial advisors across the U.S. who have advised retail clients for more than two years. The sample includes a mix of newer and more established advisors who work across a range of intermediary channels, including independent and regional broker-dealers, nationwide planning firms, wirehouses, insurance firms and RIAs.
For a look at how LinkedIn and Facebook can help grow your practice, click here for our report on Spencer X Smith’s presentation at the 2019 NAPA 401(k) Summit last week.
