October 07, 2010

Disruptive in more ways than one, social media may be altering traditional top-down technology adoption trends by allowing smaller firms to gain competitive advantage from the bottom up. But it's not social media by itself that is shifting the paradigm. Rather, it's the availability of cost-effective archiving tools for compliance, according to experts.

"Large financial firms are in the social media exploratory phase," affirms Brian Babineau, a senior consulting analyst for the Enterprise Strategy Group (ESG). "Most have written policies forbidding the use of such technologies until compliance policies and processes can be hammered out."

Smaller firms, however, are more apt to be on an aggressive trajectory to adopting social media, Babineau says. "Although social media users are currently a small subset [of all financial firms], small sparks start big fires," he comments.

And archiving technology, almost exclusively cloud-based at present, is fueling the flames, Babineau asserts. "There is technology to help [firms] with retaining social media communications," he says. "So the existence of technology shouldn't impede the process of deciding whether to permit these forms of communications for conducting business."

In fact, some small firms began lighting social media blazes well before the Financial Industry Regulatory Authority (FINRA) released its January 2010 social media guidance, which codified social media as "communicating with the public" and, therefore, subjected it to SEC retention requirements. One such firm, Step By Step Tax and Financial Planning, began deploying social media in a compliant manner more than a year ago. "Although we'd developed a niche in the greater Tulsa, [Okla.], area, we wanted to use social media to reach out to people throughout the state," explains Kevin F. Jacobs, founder and owner of the two-employee financial planning firm.

In early 2009, Jacobs relaunched his firm's website to integrate social media technology. "When I blog, the postings are simultaneously summarized and fed to Twitter and LinkedIn," he relates.

Despite the lack of regulatory guidance, Jacobs says, he investigated archiving technology to ensure compliance. "I wanted to err on the side of caution because it's just a best practice to document, document, document," he says.

After evaluating two software-as-a-service solutions, Jacobs selected Backupify for its a la carte approach. "The other solution included e-mail retention," he reports. "Since our CRM solution, RedTail Technology, already provided e-mail archiving, that was redundant."

Backupify has proven the epitome of efficiency, according to Jacobs. "Since archiving was initiated in June 2009, it's been on autopilot," he claims. "Recently, I pulled off my first Twitter report [from Backupify], and the PDF I received was ... very detailed, well-organized and accurate."

For Greensboro, N.C.-based wealth management firm Jonathan Smith & Co. (JSCO), diving into social media in a compliant manner also was a no-brainer. "There was no reason to pursue social media in a haphazard way," notes Jonathan W. Smith, founder of the four-person, family-owned firm.