An important question presently being asked is “What opportunities does social media regulation in the financial services industry afford?” Furthermore, is the risk worth the reward? Social media, if used intelligently and effectively, can improve both trust and precision.
For various reasons, mainly uncertainty, the financial services sector has, up until now, shied away from the integration and use of social media. The industry consensus is that this shift is quite overdue. Much of the hesitancy towards utilizing social media stems from the assumption that social platforms require the same controls and guidance as conventional corporate media relations. This is not necessarily the case.
Perhaps it would be helpful to use the advent of email as an analogy. When email was introduced, corporations did not attempt to limit their employees’ access to email. Instead, they urged all members of the company to learn how to use it. With the appropriate blend of training and monitoring, the company-wide use of email kept all sides of the equation safe from regulators.
As a recent Huffington Post article entitled Is Social Media in Financial Services a Friend or Foe? is quick to point out, “There have always been unfortunate information leaks and public-relations gaffs via email, but few people suggest that companies should restrict the use of email. In fact, best practice and management tools have emerged, and as a result the majority of us have become skilled at using email. Social media is the same (sort of).”
We are six years removed from the financial crisis of 2008 and yet a recent study done by Ernst & Young found that 40% of customers stated that they were losing trust in the industry. In addition, there is research that states that executives with a strong social media presence can increase their trust factor. This is the result of social media’s ability to give everyone (both companies and consumers) a voice.
The consumer base of any company on social media is incredibly active. Companies need to embrace this trend and garner the skills necessary to attract and engage their customers in a genuine and appropriate manner. Financial institutions have not already jumped headfirst into the social media pool for a very obvious reason: fear. They fear the immediacy of social media and its uncontrolled and oftentimes unmanageable nature. Public relations mishaps and mistakes happen on a daily basis, but this should not prevent companies from branching out into the social media world and embracing the benefits that it offers.
Social media offers many advantages, most notably the ability to reach younger generations of consumers. Furthermore, it allows companies to respond to fluctuating customer demands in a more effective manner.
Because many companies have not placed value or trust in social media, company-wide training has not yet taken place. A lot of companies actually view social media as a fad or a passing trend. The truth is: social media isn’t going anywhere. It’s only increasing in size and strength. This is an international truth. Companies that hope to stay afloat need to quickly embrace this universal appeal and train their employees accordingly.
There is a great opportunity here for companies to get on board and work to improve profitability, while simultaneously managing their reputation. This can be achieved by developing healthy, mutual relationships through social media and proper policy development between firms and regulators.
Regulation can no longer be used as an excuse to not embrace social media and its benefits. The fear needs to be quelled. The most successful companies will be those who take the reins and work to master this platform. Social media does not have to be a world where the few digital experts reside. It can also be home to savvy business leaders who are willing to push fear aside and get into the game.