Financial Companies CAN Get Leads from Social Media!

Financial companies out there, listen up.


With one third of professionals on planet Earth using LinkedIn, and almost 30 billion LinkedIn profile views in Q3 of 2014, it’s pretty clear what the most powerful business website in the world is.[1] Yet hedge funds, broker-dealers, financial advisors, and investment managers insist that their clients are not using these websites, so trying to generate leads on LinkedIn, Facebook, and Twitter is useless.

(Pause). So while it’s obvious that this is not a true statement, the more interesting question to ponder is why are they attesting to its veracity? There are a few reasons.

First of all, hedge funds, broker dealers, and investment managers are heavily regulated entities that must have marketing materials compliance approved, for the most part, before dissemination. Adding another layer of administrative burden, they must submit all public advertisements (over a certain amount of people solicited) to the regulators. What this means is that software like Global Relay must be used to archive and record these communications, and marketers must work with the Chief Compliance Officer before anything goes out. So it is perhaps this additional workload that takes the fun out of tweeting. Annoying, but not impossible to overcome.

The second reason that many financial companies are ineffective at social media lies within the very definition of the word social. Let’s face it, everyone. There are exceptions, but the financial industry on the whole ranks typically a 9.5 on the arrogance scale (10 being the highest possible score.) So to ask a financial company to interact pleasantly with people, in writing nonetheless, where tone can be easily misconstrued, is like inviting the bull to dance in the china shop. Some of the bigger hedge funds hire a marketing person to handle the task of socializing with the public. This marketing person does usually have good manners, unlike the analysts who work at the firm (see folks, I keep it real), but that person might not have an analytical background. People with true marketing skill and financial knowledge are really hard to come by – these are two completely different skill sets. So often the marketing content becomes diluted and the hedge fund can’t differentiate itself to a sophisticated investor. For many of the smaller funds, broker dealers, and RIA firms, there is no marketing support and the analytical people have to write their own materials. This tendency for smaller shops to wing it has lowered the level of marketing skill in the industry as a whole. High net worth investors have become accustomed to dull, dry, stale, deceptive, and overly theoretical 40 page pitch books which is why they’ve tuned out.

If hedge funds were to use social media, they’d have to step their game up and find something creative, engaging, and relevant to say. But right now, they all say the same thing and it’s this inane line “our fund exhibits stock like returns with bond like volatility.” The statement is too stupid for words. What does that even mean, anyways? What number exactly does stock-like return represent? What standard deviation qualifies as bond like volatility? And the worst thing about this statement is that none of the hedge funds did this in the year 2008! Almost all of them acted like stocks when they were supposed to act like bonds and due to leverage they in fact exhibited volatility higher than the stock market itself! You’re not fooling any of us, you hedge funds, we saw your true colors the last time that market crashed and you all went down with it (and then some)! So stop trying to deceive us and you’ll probably get more credibility.

Most of those hedge funds were casualties of the 2008 market collapse and the people who used to sell them are now selling portfolio analysis software at Morningstar or MSCI index data subscriptions to put their kids through college. Rightfully so. Maybe it is a good thing because clearing out all the junk might enable hedge funds to start saying something worth listening to. And when they do, they’ll get the massive following and the leads on social media that they aren’t right now.

Listen up, hedge funds, broker-dealers, and investment managers; if 41% of millionaires use LinkedIn and 57% are on Facebook[2], the high net worth investors are out there.

They ARE on social media and they are ripe for the taking, but you’ve got to swallow the compliance regulation pill, get creative, and step your game up.


[1] Bullas, Jeff. “25 LinkedIn Facts and Statistics You Need to Share.” December 2, 2014. http://www.jeffbullas.com/2014/12/02/25-linkedin-facts-and-statistics-you-need-to-share/
[2] Frank, Rob. “Millionaires prefer Facebook over Twitter”, CNBC, July 18, 2014. http://www.cnbc.com/id/101846130