Wall Street Brokers *Carefully* Stepping Into Social Media

Morgan Stanley Smith Barney is about to become the first of the big Wall Street brokerages to allow its financial advisors to tap the power of social media tools like Twitter and LinkedIn. But other big brokerages aren’t far behind.

In an internal memo viewed and reported on by Reuters, Morgan Stanley told its 17,800 brokers that by this fall, after a summer pilot test, they would be allowed to post pre-approved, static updates on Twitter and LinkedIn – but not, at least for now, on Facebook. The test group of 600 financial advisors were scheduled to begin the try-out this month, sending tweets to distribute research, for example.

“The emergence of social media has changed the way in which people communicate with each other and companies interact with clients,” Morgan Stanley Smith Barney U.S. wealth management boss Andy Saperstein said in the memo.

But the advisors won’t be permitted to recommend themselves or other financial advisors or be recommended by others because of regulatory restraints on the use of testimonials. The Financial Industry Regulatory Authority (FINRA) last year established rules for limited social media use, but Wall Street has been slow to let brokers participate.

FINRA requires static communications, such as advertisements, to be approved by a company representative licensed by regulators to approve sales materials. Interactive content, which covers most emails as well as tweets, posts and texts on mobile phones, doesn’t need to be preapproved, but has to be supervised. Companies have to keep records of both types of content for at least three years.

Merrill Lynch expects to have a few hundred financial advisors using LinkedIn this summer, rolling out permission to its other brokers in the fourth quarter. According to Registered Rep, UBS allows invitations and introductions on LinkedIn, but not messages, while Wells Fargo allows its advisors to create profiles only. Some independent broker/dealers like Raymond James Financial, Commonwealth and Cambridge Investment Research are allowing interactive conversations to take place in realtime, without pre-approval.

Meanwhile, Massachusetts’ top securities regulator is polling registered investment advisers in the state about their use of social media sites like Twitter, YouTube and Facebook amid concerns about disclosures and marketing and advertising practices on the Internet. The survey asks financial advisors to explain how they use social media for business purposes, what their policies are for monitoring content and allowing third-party postings on their websites, and what their policies are for recordkeeping.

Do you work in a highly regulated industry?  We’d love to hear more case studies of how regulated brands are managing social media strategies.