Social media tools are gradually being implemented in the institutional financial services industry, but a number of CCOs are still avoiding social media sites altogether due to regulatory and privacy concerns, according to a new report from Aite Group.
Financial firms are currently primarily using social media for marketing, sales and service as well as recruiting.
Sites most often used by financial services firms are LinkedIn, Facebook, Twitter and StockTwits - an open, community-powered idea and information service for investments that is integrated with Twitter.
Other dominant sites include aggregation tools TweetDeck, which enables users to update and monitor Twitter, Facebook, MySpace, LinkedIn, Google Buzz and Foursquare; and HootSuite, which also provides a dashboard view to connect to and manage multiple social networks from one platform.
Also popular in the financial community is WordPress, an open source platform for users to create a blog; Ning, which enables users to create a custom, private social networking site with all the features of social media in a closed community; and SocialTurns, a community dedicated to helping bring social media to the financial services industry. The site targets marketing, technology and compliance professionals.
While Aite found that there are cases where social media is being used for business-to-business communication, firms are wary of risks including communication overload, regulatory infractions, and the private nature of the institutional market.
"Social media still has many wildcards: individuals on the sites, their intent of use, interactions between members that may create an unexpected exchange, and a media that lends itself to human error through unplanned or spontaneous communication, all working in an industry with strict but sometimes interpretative regulation," says Denise Valentine, senior analyst with Aite Group and author of the report.
In the institutional client market for investment management or brokerage markets, communication for a trade may occur through appropriately archived instant messaging, Valentine says.
Beyond transactions, prospect and client communications are more often formalized by conference call, investor seminars, client meetings or conferences than online discussion groups.
"It's no surprise that many CCOs simply prefer to avoid the issue altogether. With time, however, the industry, aided by technological automation, will develop a means to accommodate behavior and intent through proper procedures and validation."