Brokerage firms continue to talk a good game when it comes to social media, but few are actually doing anything about it, and that may turn out to be a mistake.

According to a Corporate Insight report, almost all full-service brokerage firms expect the quality and content of social media outreach to improve, but James McGovern, the firm's vice president of consulting services in New York, says few are willing to make the first move.

"There's a lot of intent," he says, citing 2008 data. "But there hasn't been much by way of an embrace."

Ironically, mutual funds, which were by far the most conservative of the financial services firms when it came to social media two years ago, have picked up the ball and run with it. Vanguard has a corporate blog in which it offers commentary on various subjects, and its own Facebook page.

In general, "asset management firms are at least leveraging their intellectual capital," McGovern says.

Full-service firms, by comparison, remain hobbled by vague rules from the Financial Industry Regulatory Authority and onerous requirements where the rules are clear. "Archiving Facebook communications for six years is a pain, plus the rules are not yet crystal-clear to the attorneys charged with protecting these firms," he says.

Advisers are taking baby steps. McGovern says that anecdotally, around 100,000 financial advisers have pages on LinkedIn. "They're creating profiles and connecting with their existing clients," he says. At the very least, the site allows advisers an easy opportunity to keep up to date with what is going on in their clients' lives.

McGovern doubts that compliant sites such as linkedFA, while keeping advisers the right side of the law, will catch on. "It sounds like the technology is great, but how are you going to get clients to sign up?" he points out. "It's a lot easier to swap e-mails or to pick up the phone every six months."

Full-service firms' reticence is a problem because both advisers and their clients are now used to using social media: "You need to be where the action is," McGovern says.

Mitchell Kauffman, an independent adviser with Raymond James in Pasadena, Calif., is comfortably walking what the full-service firms still see as a tightrope, using LinkedIn and, soon, Twitter and Facebook to disseminate his pre-approved white papers on the market. Kauffman is also setting up a YouTube account to post videos of himself discussing the economy. It is all compliant, and the adviser hopes the content will lead clients and prospects to sign up for more.

"In an economic downturn, people are looking for more meaningful connections," he says. "Regulators' narrow approach is missing an opportunity to serve investors."

Kauffman says he has had a few inquiries from prospective clients who found him through his social media outreach, but that that aspect of the strategy is still embryonic. "Networking is not about hunting, it's about farming," he says. "I'm making myself available as a resource and feedback is positive, but I can't say it's opened the floodgates of new business, although that may come at some point."

Rather, "this is something that can really help build close relationships, reassure clients and help enhance my search presence," on the internet.

Most advisers, though, are still on the sidelines, and that's a problem. While full-service firms are dragging their feet, other firms are leaping in. Charles Schwab Corp., for instance, uses Twitter for customer service and it has created customer communities. And self-service firms Zecco and TradeKing have both made social media the focus of their business, with investment forums that are open to anyone who wants to join, the goal being "to drive traffic and turn investors into customers," McGovern says.

Even banks are trying it. Wells Fargo & Co. stands out for launching a blog the day after its acquisition of Wachovia to update customers on its integration. It was also one of the first banks to use Twitter, reaching out to users — those with a significant number of followers, at least — who were complaining about fees of service.

McGovern doesn't expect full-service firms to hold out much longer; the competition is simply too great. "Once these firms work out the data monitoring and retention issues, and their advisers understand what they can and can't talk about, we'll see some interesting developments," he says.

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