Social media are evolving rapidly. Old linear communications have been supplanted by an interactive, multichannel universe with information flowing in all directions. Social media are toppling governments and dictators, and influencing the market. They have changed the way consumers seek information, how brand and product awareness are generated, and how friends, companies and governments interact. The conservative wealth-management industry is certainly not immune, and social media are impacting it in significant, often unforeseen and likely irreversible ways.
Of course, there are both opportunities and risks for wealth managers: Ignore social media, and they risk damage to their brand and industry; embrace social media, and they might just discover new prospects to extend their client base. Social media can be a blessing or a curse, though we believe the positives far outweigh the negatives, particularly when it comes to advancing the wealth-management conversation. But this takes work.
Social media are quickly becoming integral to the risk-management process. Active monitoring and effective participation are required to enhance a wealth brand; understand activist campaign activities; and manage client kudos and complaints. As never before, there is a real opportunity to educate and converse with clients, and enhance wealth-management service offerings.
Wealth management’s time is now
The industry still is recovering from its crisis of confidence following the euro zone and US debt crises. In 2014 the wealth-management industry totaled some $87 trillion. In the next five years, we expect to see growth upward of $100 trillion.
The key drivers to growth in the wealth-management industry are real and immediate: The prospective pool of global savers is growing larger, older and richer, and has a greater capacity to consume. Further, global life expectancies continue to rise; the ratio of global wealth to income is going up; and pension programs are becoming compulsory in many countries. These drivers bode well for the industry. The scale and pace in the industry is the greatest ever, with wealth growing exponentially on a global scale. With such high volumes of cash flowing into retirement savings, the upside potential—and possible downside risks—are significant, and require added vigilance across old and new media channels.
New media, new vulnerabilities…and new opportunities
It comes as little surprise that a rise in available assets is spurring intense competition in wealth management. However, the conservative nature of the industry makes it slow to address lurking reputational vulnerabilities, and embrace the new level of communications and risk management required to succeed in the social-media age. The disruptive nature of social media is helping to evolve client expectations on how they receive information and interact with wealth managers. Clients already embrace social media in their daily lives; the industry must shift focus to social media to better influence the influencers and take better control of its reputation—or else risk disintermediation.
Wealth-management organizations must also come to a new understanding about who is responsible for handling social-media risk. Social media are not strictly a function of marketing. The chief risk officer and head of public affairs must be fully engaged to ensure a productive outcome from the corporate social-media footprint.
Many firms are still in the early stages of social-media planning, despite the urgent need to more quickly get up to speed. Social media are not merely a passing fad. In fact, they are becoming systemic in how influence is created. The power to persuade has shifted, and now firmly resides in the hands of individuals with computers, tablets, smartphones and Internet connections.
Social media are so pervasive that the one-hour news cycle has shrunk again—this time to two minutes…or less. The old adage “good news travels fast” has never been more valid; but in this viral social-media age, bad news seems to travel even faster. Failing to understand this presents risks that wealth managers cannot afford to take.
Social-media analytics
It is always helpful to understand which way the wind is blowing within the wealth-management industry. Social media are instant indicators of sentiment that have the potential to merely dissipate over time or blow up into the latest crisis. As such, social-media analytics provide deep insights into the interplay between social and traditional media, and are vital tools for handling risk in wealth management.
In the context of social media, “sentiment” has become both measurable and meaningful (and potentially profitable). In the US a Boston hedge fund will take this a step further and launch a new fund that tracks consumer sentiment in social media to make investment decisions. In China Tencent (and many other companies) waged a virtual “red envelope” gift campaign to ring in the Chinese Lunar New Year, opening the virtual wallets of hundreds of millions of revelers in the process.
Social-media analytics take a uniform and robust approach to capture consumer data, analyze its meaning, identify influencers, predict potential problems and help preempt them from becoming business obstacles.
The key is to recognize actionable trends early on, before they reach critical mass. Clearly, views expressed via social media can be highly influential. In wealth management, social-media analytics help uncover customer attitudes from a range of online sources, and can put your social-media data to work for you to better understand your markets, manage your brand and improve the experience of your clients. To be continued