Published on September 23, 2010 – Ignites – An Information Service of Money-Media, a Financial Times Company- written by Gregory Shulas
Fund companies may benefit from having a social media presence, but they don’t need a Facebook profile to effectively compete. That’s according to Ignites poll respondents.
Roughly 53%, or 147 voters, believe industry firms have no serious need to participate in social media networks such as Facebook and Twitter. That made it the top sentiment expressed in the Ignites survey about whether competing effectively today requires a social media presence.
Of the majority group, 38%, or 106 voters, said a social media profile is nice, but not a necessity today, while 15%, or 41 voters, were more cynical, calling it just a fad.
In contrast, 47%, or 130 voters, said firms must have a social media presence if they want to be competitive in the marketplace. The minority group includes 9%, or 26 voters, who said a social media presence is vital for a firm’s continued success, as well as 38%, or 104 voters, who believe it is “important” for firms to maintain a presence on social networks.
Ignites has reported on how fund companies are increasingly embracing social media strategies as a means to communicate and strengthen relationships with investors. An informal survey conducted by Ignites found that TIAA-Cref has the most popular industry Facebook site, with 13,000 “fans,” a number that exceeds Vanguard’s 9,500 fans.
Despite industry market leaders’ embrace of social media, many professionals remain cautious about adopting such strategies. Dennis Dolego, Optima Group’s director of research, says that while such platforms seem like the “thing to do” for mutual funds, there are some legitimate reasons why firms have reservations about them.
For example, the primary value a fund company offers is performance, which Morningstar provides data on, he says. So industry executives may legitimately question what real value — beyond performance figures — a fund can offer to investors through a Facebook or Twitter posting, Dolego says.
Additionally, fund companies can face problems if negative information about their product is posted online. “They see it as something to do but they don’t feel comfortable doing it; they see some of the problems involved,” Dolego says.
“Overall, social media is almost like Consumer Reports or referral marketing. You want an objective party to say positive things about what they do,” Dolego says. “The goal is to get the support from the consumer that is independent, objective and unsolicited, and then to build a buzz about products and services.” Negative postings can be counterproductive to such marketing campaigns, he adds.
Andy Klausner, founder of strategic consultancy AK Advisory Partners, disagrees with the 15% who said social media is mainly a fad. In his view, the growth of these social networks is part of a larger shift in information distribution. To succeed in this new age, fund families must be active participants in these social networks, he adds.
“Information flow and marketing has unquestionably changed from pull to push. In other words, rather than pull in clients by delivering the message that we want, clients are demanding information on their own terms — you need to push out your information, show your value-added and inform clients on their terms,” Klausner says.
“Because of this overall change, firms that successfully embrace social media are giving people the information that they want, delivered the way that they want it — and that is not a fad but a distinct competitive advantage,” he adds.
