Using social media in the financial services industry always challenged by the restrictions of internal risk and compliance processes and by external regulation.

How do you use social media in an environment where you can’t promote your services, advise people or identify customers? And where you need archives of your communications, long approval processes and where information may become out of date?

For many the answer is to not use social media. But Morgan Stanley has recently announced a different approach – actually encouraging their advisers to engage people on Twitter and LinkedIn.

The use of social media in financial services is always fraught with challenges. From the regulatory issues which guide what can and cannot be said by brands, to internal risk and compliance processes which feel at odds with the real-time nature of much communication online.

Different businesses have dealt with this in different ways and most can be placed on a four-point spectrum:

  1. Do nothing: Some have stayed away from social media altogether.
  2. Listen but don’t talk: Often quite detailed social media monitoring is in place across the business but no real engagement is taking place in response to this.

    The data from this listening may be being used in the business to getting a more rounded understanding of customers, the market, competitors and issues but it is not prompting engagement.

  3. Engage on a common interest: This is often a source of some great innovation in social media. Rather than engaging people about the brand, products or advice, firms have identified other, often more ‘lifestyle’ issues that they can engage their target audiences on.

    A good example would be the blogs on healthy eating and lifestyles from health insurers AXA PPP, or OPEN Forum from American Express which supports and engages small businesses about broader business and management issues.

  4. Engage on our products and expertise: This is an approach that many in the financial services industry are nervous of, and one that it is often discussed and debated within firms, with regulators and in the wider market.

    How do you engage people about your products and expertise in social media without falling foul of regulation or internal compliance issues?

For many financial services brands, they can get huge benefit from social media without having to engage people about your products and services.

If you are a general insurance firm you might get a lot of benefit from educating people about safer driving or how to look after their cars; you might also use social media to tell the market about exactly what you will cover and what you won’t, helping to reduce dissatisfaction when people do have to make claims.

If you provide business banking, you might create a peer-to-peer support and mentoring community so that you are seen by your customers (and potentially your targets) as the single place for their business support, so they get banking services from you, as well as wider business support.

For many there are huge opportunities in social media without needing to talk about or ‘promote’ your products, services and expertise. However, there are ways of doing this and Morgan Stanley has announced a social media strategy that does that.

From June, Morgan Stanley will launch a pilot programme allowing 600 of its financial advisers to market themselves and to share their ideas and expertise through social media – notably through Twitter and LinkedIn.

If this is a success, the programme will be rolled-out to the firm’s 17,800 employees by the end of the year. This is in part a great way for the firm to show that is embracing social media and new channels of communication.

Indeed, as Andy Saperstein who runs the brokerage’s US operations said of the programme:

This will be a significant competitive advantage. We are the first major wealth-management firm to announce a vendor solution for our advisers to use key social-networking sites to market themselves and share the firm’s intellectual content.

But as well as this kind of first-mover advantage, the firm is acknowledging that the ways people communicate has changed and that clients, and their own advisers are asking for engagement through these new channels. There may even be (already or a risk of) these advisers engaging in social media anyway.

What has made Morgan Stanley’s move possible is the growing emergence of social media management tools. It will be using one that is specifically built for compliance.

All interactions are archived and specific tweets and comments in LinkedIn may be quarantined for approval, with the internal compliance workflows built into the system.

Finally, some features are disabled. For instance, brokers will not be able to ‘recommend’ themselves or others in LinkedIn.

The Morgan Stanley experiment is about more than just being seen as a first-mover in social media for the industry. It is using social media management tools to create a safe and more controlled experience, and an environment for brokers to experiment with and use social media as part of their role and within the constrictions that are placed on them.

What will be interesting to observe is how these channels are actually used; how many of the tweets and comments will actually be about products, services and expertise, and how many of them will be more about pointing to interesting content, building brands online for the brokers and really engaging with people on common topics of interest.

My suspicion is that it will be more about the latter than the former, and that fewer issues than we expect will be subject to regulatory restrictions.

In the UK, the FSA guidelines on ‘new media’ assume that the main use of social media will be as another marketing channel. In reality, I suspect that firms and individuals in financial services are more likely to be using them to engage and have dialogue with people on common areas of interest, sharing and pointing to interesting comment that others have written, and building relationships online.

There is probably less to worry about than we think we might think.