Is there any guarantee that this is going to work? Who’s done this before that can demonstrate best practices? How are we going to make this work?

•    Individuals will go where systems lead them.

Community benefit organizations, credit unions, retailers and countless other businesses are successfully using social media for a wide variety of reasons with great success. Adopting and adapting best practices from systems that are known to work with your own systems will lead people to begin to participate with the financial sector in social media space. FINRA saw fit to require the sector to document policies and practices, so you will need to create a planned system in order to begin. Fortunately, you are fashionably late to the party and there are lots of systems on the table to choose from. One is our own available here.

This is an opportunity to clearly show your differential advantage in the market. Never before has it been so easy to publish and interact with the public in a way that demonstrates thought leadership. Now it is possible to take all of the informative and educational ideas and material that you have sent to your investors and make it available in a dynamic venue that enables your constituents to interact with you. It’s an opportunity for people to share your value with their friends and create positive word-of-mouth referrals.

It’s an exciting time and a critical juncture. The collision of market events, technological changes, and generational shifts has created unrest and an opportunity. I believe the organizations that plan to create a better future and move decisively will reap rewards that their laggard competitors will never see.

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What if someone says something bad about us? Why should we provide educational information to anyone except our customers?

•    Everyone and everything is interconnected and interdependent, whether we acknowledge that or not.

This is the beauty of social media; it models the real world in how we are all interconnected and interdependent. It’s what makes social media work. Don’t worry that someone might say something bad about you, they already are. Social media gives you a vehicle to find out and do something about it. It’s a brilliant channel that enables you to listen to your customers and immediately respond. It’s also a public channel where you will operate in a totally transparent manner. By providing outstanding service and education to your customers through social channels, you will also be publicly demonstrating how good you are to your prospects. That creates demand — a good thing.

Is this really necessary since we’ve been an established institution for many years? We have effective systems in place for sales and marketing. Why disrupt what we know works?

•    “Being the change we want to see” means walking the talk of our values.
•    Strength builds upon our strengths, not our weaknesses.

Among the millennial generation Pew says that 75% use social media. Microsoft research on millennial financial habits reveals that 51% intend to never invest in a 401(k) plan. The oldest millennials are 30 years old. The youngest are 10. More than half of this generation should currently be investing but in fact very few are or intend to begin. Nearly every financial sector website has a statement of values that includes something about delivering exceptional service and communicating clearly with your investors. This is how you can do that. Your values haven’t changed. Your strengths haven’t changed. Your audience simply moved to a different channel and has only heard what’s being said in your absence. Now you have a fantastic opportunity to move to that channel and do what you do best — help a new generation plan for their future.

Image: McCulloch’s Leap, Major Samuel McCulloch escaping Indians by forcing his horse to jump down Wheeling Hill. 1851 lithograph by Nagel and Weingaertner; image from Library of Congress

A great place to start is with big picture thinking from Hildy Gottlieb’s, The Pollyanna Principles. The book has absolutely nothing to do with financial services; it’s about creating change in communities. Since social networks are communities and social media is all about building communities, this is a good, yet unorthodox place to start. The financial sector has a new opportunity to communicate important information and to create needed changes in how we spend, save, give and invest. Ultimately, taking a look at the big picture through such a different lens should dispel some of the trepidation of getting involved with social media.

Gottlieb has identified six Pollyanna Principles that can be used to guide organizational change and create a new future. Over the next three posts SPURspectives will examine each of them. They answer many of the major objections that I’ve heard from the financial sector about social media such as:

How can we participate in social media when no one has the time? Why should we get involved? Two Pollyanna Principles speak to that:

•    We accomplish what we hold ourselves accountable for.
•    Each and every one of us is creating the future, every day, whether we do so consciously or not.

While this can come across as preachy, remember that it was written for guiding nonprofits, but I believe it is important to the financial sector because of the following. According the Pew Research Center’s Internet and American Life Project, as of September 2009, 74% of Americans are online, 57% use online banking and 47% use social media. Social media isn’t going away. It has been growing since the first emails were sent in the 1970’s. Social media isn’t a burden of additional work; it’s an opportunity to shift efforts to communicate with people in the manner that they desire. You and your firm’s founders have relied on social interaction to build the business over the years even though you use radically different communications channels. Change is happening again and FINRA says it’s time to get on board. Tomorrow SPURspectives will continue this discussion with a look at some other common objections and more of the Pollyanna Principles.

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•    82 percent are concerned that more financial institutions will continue to fail in the near future.
•    67 percent are less likely to invest money in the stock market based on the current economic climate.
•    51 percent are not likely to invest money in 401(k)s or other retirement plans.

This is important. Their mistrust is justified in some cases, but not all. Some financial services institutions operated in a responsible manner and are being unfairly painted with the wide brush that’s damning the entire profession. The result will be catastrophic if this is ignored. So, how can this be fixed?
I see two major steps that every institution needs to take if they are to have any chance of overcoming a grim future:

•    Clearly demonstrate a differential advantage in the market by showing the good work that you do in the community — demonstrate value and integrity.
•    Communicate to your market in the appropriate channels.

Most financial institutions; banks, credit unions, financial advisors or insurance companies, are unable to claim a clear differential advantage in their market. To your customers you all look the same and compete on price. Most claim that their difference is service but cannot prove their claim making it a moot point. To claim an advantage, your constituents must be able to clearly articulate how you are different and why it matters to them.

I suggest cause marketing as a solution. I understand that most institutions are philanthropic and support their local communities. But very few have aggressively taken up cause marketing as a means of supporting something they believe in and inviting others to join them with their money and effort. Millennials are civic minded and used to having a hands-on effort with causes they support. There is opportunity in making an honest effort to provide extraordinary support for a cause and inviting others to join you.

However, to make this work with the millennial generation you are going to have to start communicating with them in the channels that they choose. This means that you will need to aggressively adopt the use of social media. Recent advances in available technologies have eliminated all of the regulatory hurdles. Social media in the financial services sector is not only possible; it is now a requirement for survival. It is the channel of choice for a generation that you need as customers. To provide the service that they want, and that you claim to provide, you will need to change. It isn’t a big change, but it is a critical change whose time has come.

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• For more than half of his life the President of the United States was a Bush.
• His first memory of a political event was Bob Dole losing the presidency to Bill Clinton.
• His first exercise of political freedoms was voting for Barrack Obama for President.
• He has no recollection of the cold war.
• Our nation has been at war for half of his life and now his childhood friends are soldiers.
• He was a 4th grader on September 11, 2001.
• About a month later the iPod was launched.
• He has always had access to a computer.
• There has always been an Internet, wifi and email.
• There have always been cell phones and text messaging.
• Music has always come from the Internet in the form of files.
• Cameras and video have always been digital.
• There have always been video games.
• News comes from the Internet.
• Research is done online.
• Money is a debit card.
• He went inside a bank once.
• Saving and investing have always been done online.
• 40% of his life has been spent in economic recession.

The result is a very tolerant, civic minded, social conservative who gathers and processes information at an astounding pace. He and his friends have vivid imaginations, a rich appreciation for irony, and an extraordinary amount of compassion. But he is fiscally and socially conservative. He is intolerant of rebellion and respects order. He is very adaptable but dislikes uncertainty. To sum it up, he is a product of his times.

When I hear colleagues befuddled by the millennial generation I am surprised. All things considered, millenials strike me as very well adjusted.

What do you think? What else defines a millennial?

Illustration: http://www.flickr.com/photos/mikekline/ / CC BY 2.0

If you follow Jane McGonigal’s work on alternate reality gaming, you may be familiar with her ideas concerning engagement. They make perfect sense for massive multiplayer online gaming as well as for her real life alternate reality efforts that involve solving real world social problems. Consequently, they also make sense for describing why Habitat for Humanity is successful. McGonigal describes an Economy of Engagement as including these elements:
•    Satisfying work to do
•    Experience of being good at something
•    Time spent with people we like
•    The chance to be part of something bigger
That sums up Habitat for Humanity pretty well. But it doesn’t account for my reaction and the shared reaction of my Habitat team when we saw the completed house where we had previously worked. This was somehow different.

My epiphany came when I remembered Penelope Burk’s ideas surrounding Donor Centered Fundraising. To successfully build a donor base and prepare them for a second ask you must successfully complete these tasks:
•    Thank them for their gift
•    Confirm that it went where it was intended
•    Report the result of their generosity
It’s that last bullet point that completed the circle for my crew. We received a report of the result of our effort — live and in person. What a powerful way to show us what we had done. Our crew was immediately more engaged. We made plans to do more. We graduated from being a casual group of volunteers to being an engaged community. That’s the difference — game theory meets fundraising theory. Viola, a community is born.

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So, what did the school do? They tried to hide. Rather than tear off the bandage quickly and get on with life, they became silent. But the bulldog could smell the stinky sock and tugged and tugged. Publicly available information appeared in the press day after day with everyone left on their own to draw conclusions. What did everyone conclude? Why the very worst, of course. In the vacuum of any real information, we assumed the worst. As the drama continues to play out in the press and the courts with all parties trying their best to smother the fiasco, there is one damning fact that has emerged. The school’s brand equity has evaporated.

What was once a shining star is now a black sheep. The odds of repairing the damage are incalculable. The students, faculty, alumni, donors, and community are all paying the price while the board and former executives battle for cover. They tried to hide behind the walls only to have the walls disappear. They were hiding behind their brand. Now it’s gone.

We live in an age of transparency. It is no longer possible to continue operating as was done in the past. Information literally moves at the speed of light. Covering up is no longer an option. Covering up will kill your brand with silence. Character, transparency and responsibility are no longer laudable goals they are absolute requirements.

Photo: (English Bulldog w:en:User:WolvenRose says “is a picture of my bulldog. Taken by me on the 26th of June 2005″) This file is licensed under the Creative Commons Attribution ShareAlike 3.0 License.

~ Yogi Berra

Have you ever asked for advice from someone you trust only to ignore the advice and continue down the road you were on? When you heard the advice you knew it was the right thing to do. But you chose to ignore it and suffered the consequences. You hoped everything would work out. But it didn’t. Deep down you knew it wouldn’t. But you hunkered down and hoped it would all go away.

Change is hard. Accepting that you are on the wrong path is hard (thank you Garmin). When we find the path is really wrong our senses kick in — fight or flight. But some of us will duck and cover.

If you seek professional advice from a qualified, objective, third party and have the advice corroborated by a second opinion, you have what you need to make a decision. Now it’s up to you — fight, flight, or duck and cover? Doing nothing is a valid choice. Just make sure that you’re willing to accept the consequences.

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As the economy continues to lag, I am seeing this happen more and more. Organizations flawed operations are being exposed as they continue to operate, or even try to grow, in spite of no sustained funding. They are operating on passion for their mission and hope that it will all work out. In good times you can occasionally get away with that. In harsh times it’s fatal.

When our government does this the Congressional Budget Office calls it an unfunded mandate and tries to bring it to a halt. Sound businesses of all types adjust their operations to match their revenue. But it’s the organizations that were founded on passion alone that are suffering because they were never sustainable. Without a core revenue stream they have no hope of survival.

Passion is great — it’s essential for every entrepreneur, social or commercial. But you only have a sustainable operation when your passion is shared by a source of continuous funding. Passion doesn’t trump supply and demand.

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1.    Approval and Recordkeeping (Rule 2210)
The rule that kept most advisors away from social media was the fact that posts, pokes, and tweets were classified as sales literature and required pre-approval. That is no longer the case — pre-approval of social media posts is not required. However, this is going to be a big cultural change for larger firms. So, expect to see cautious participation or adoption of systems to enable filtering for specific terms to flag some posts for pre-approval.

2.    Supervision (Rule 3010)
Written procedures are required. They need to be appropriate to the business, size, structure, and customers for the review of incoming and outgoing materials, printed or electronic. While this is no surprise, advisors are going to need to be very familiar with the nuances of each social media platform that they elect to use in order to develop guidelines. The speed of change in social media may be an eye opener for some firms.

3.    Books and Records (Rule 3110)
Ads and sales literature need to be stored and available for 3 years following their last use. Since online dialogue is defined as sales literature or correspondence it all needs to be captured and stored in a manner so that it can be easily retrieved. This applies to all communications — from the office, home or mobile device. Again, not a free for all on Twitter, but there are solutions available, some of which are low or no cost.

4.    Recommendations / Testimonials (Rule 206(4))
Basically, no. Publishing or distributing recommendations or testimonials is out. If a client sends you a nice recommendation on LinkedIn, you need to decline. You’ll probably want to have a statement worked out in advance to explain why you are doing this since recommendations are a big part of doing business in social space. You may even consider installing a system to disable these functions.

5.    Third-Party Posts (Rule 2210 / Notice 10-06)
Posts by customers or other third parties aren’t considered the advisor’s communications. So, the prior principal approval requirements of this rule don’t apply to posts. However, if you’re involved in the process the post can become attributable to the firm. So, retweeting a client’s post may be an endorsement by the firm depending on the content. Giving a client’s blog post a thumbs-up from Stumbleupon could also be seen as an endorsement. So, some level of care in training will be necessary before a firm opens social media firm wide. Some firms may also opt to find one of the software applications that enables posts to be moderated prior to going out.

So the rules aren’t difficult or complicated. It simply requires the same level of knowledge, character, and professionalism that are required for all other forms of communication from a firm. It’s a different channel and has some rules that are unique to the channel. Training can alleviate most of the problems that can occur. Some additional software may help your CEO sleep better at night.

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