Compliance should help advisors use powerful social media tools

“Technology moves very, very quickly, and your policies and procedures are living documents – they’re going to have to change accordingly,” he said.

Many firms prohibited their registered representatives from using social networking sites for business-related purposes in the early days of social media. But they should recognize that social media is here to stay, Bajic argued.

There’s a powerful business case for advisors to use social media, and he said compliance teams should help to facilitate that.

“We are here to assist business,” Bajic said. “Anytime that we have a method that can help them to generate business, we need to be able to be an active participant in that, and provide the compliance and regulatory know-how to ensure that…they do it in a compliant fashion.”

Wayne Bolton, head of North American distributor compliance at Invesco Canada Ltd., agreed that social networking holds business-building potential for advisors. He encouraged compliance professionals to approach social media with an open mind.

“You want to go in with an open mind, and you want to listen,” he said. “It’s a much better experience.”

But the executives warned that there are plenty of challenges associated with managing and monitoring social media. “Of course there’s supervisory challenges,” Bajic said.

Indeed, approving, monitoring and documenting each rep’s activities on social media sites is a time-consuming endeavor for compliance officers.

Some firms have hired third-party service providers to help with this onerous process. But hiring another provider doesn’t mean compliance officers can take a hands-off approach, the executives warned. It’s critical to maintain an active monitoring role.

“If you implement a system to satisfy a regulatory requirement, you want to test it to make sure it’s doing what you think it’s doing – and not just at implementation,” said Bolton. “It’s an ongoing test.”

Advisors also have a responsibility to ensure they’re using social media in a compliant manner, the executives said. Advisors at Assante who breach the company’s social media policy are typically prohibited from continuing to use social media, Bajic said.

“It’s a privilege – it’s not a right of theirs to use social media,” he said.

Advisors should familiarize themselves with their firm’s social media policy, even if they’re not actively using it for business purposes, the executives said. They noted that most firms’ policies also include guidance on the types of personal social networking activity that’s appropriate for advisors to engage in.