Communicating with clients via social media can be great for business, but financial advisors need to be vigilant about both privacy issues and the policies designed to deal with them. Indeed, in some cases, efforts to deal with the privacy problem can result in more hassles than protection for both advisors and their clients.

Problems can range from inadvertently exposing a private two-way chat to other users on your social media site to divulging sensitive personal client information to anyone on the Internet. Canada has some of the strictest privacy legislation in the world, accompanied by some of the most vigorous enforcement. Couple that with rising sensitivity on the issue among financial services institutions, and the potential landmines for advisors increase dramatically.

At the same time, somewhat ironically, the number of people joining social media sites continues to rise at an exponential pace: the number of users worldwide on Palo Alto, Calif.-based Facebook Inc.’s Facebook.com is now closing in on 500 million.

It all seems so ordinary and easy — and therein lie the traps.“What tends to happen with social media is that people start to treat it very casually and believe that the information they put out there will be limited to only a few people and remain in a private setting,” says Tina Giesbrecht, a partner in Calgary with Toronto-based law firm McCarthy Tetrault LLP. “People need to assume that whatever you put out there can be copied, printed, forwarded and accessed — despite the controls on a social media site.”

Those controls, in fact, can be more mirage than reality. Last month, Facebook executives came under fire from consumer groups: a formal complaint has been filed with the U.S. Federal Trade Commission by a privacy watchdog group provoked by the Byzantine complexity of Facebook’s new privacy settings. Users who fail to understand and deploy the new settings may be in for a nasty shock, now or in the future; by default, virtually any of their postings could be available to any third-party user, indefinitely.

The complaint helps highlight the enhanced levels of diligence required of advisors when they are using social media. That’s particularly true when it comes to their firm’s in-house rules. “Advisors need to be aware of their firm’s privacy policy itself and their confidentiality obligations,” cautions Giesbrecht. “A lot of employers don’t yet have a solid statement on social media. But they will have something in terms of confidentiality, as well as terms and conditions of computer usage. It is the obligation of the advisors to make sure they are complying with their employer’s policy.”

Andray Domise, a financial advisor with Toronto-based International Capital Man-agement, is not letting concerns about privacy stop him from using social media to communicate with his clients. He has made social media part of his business plan since joining the independent firm in 2008. His previous firm had prohibited the use of social media.






@page_break@Domise takes the position that because he is aware of how information can travel after reaching social media sites, he remains in control: “From the very beginning, I assumed my information wasn’t considered private or confidential and I have positioned myself online so that I do not have to worry about what I have posted or sent out to clients. I put myself out there with that assumption. I am surprised that it has taken this long for Facebook to [open its site to] third parties.”

Domise ensures that everything he puts on any social media site is the same information on his business card or posted on his professional website. His contacts on his social media site are a mix of clients and colleagues, and he does not identify who is among his client base.

But for some advisors, jumping into social media was a concern even before the privacy issues became the subject of headlines. Paul West, an investment advisor with Markham, Ont.-based Worldsource Financial Management Inc. in Toronto, has a number of issues with social media and his business — including those surrounding privacy, compliance and liability.

“There are so many questions that arise with social media, and it makes me realize that I need to learn more before going ahead,” says West. “What kind of information would be appropriate? And at what point are you held accountable for what you might post?”

West has been in the business for more than 25 years and manages the assets of more than 200 client households, many of them consisting of middle and upper management and business owners. Maintaining client confidentiality, as well as protecting his own privacy and brand image, are top concerns for West when it comes to social media networks. While he remains skeptical about using social media, he also is keeping an open mind: “Whether I am overlooking something with these networks, I am curious to learn more.”

Still, he’s cautious: “These sites could provide an opportunity for other advisors to know some of the strategic things you have in place, or prospective clients that you are targeting. These are things you may not want out there.”

Some courts in Canada have required plaintiffs to turn over private material from sites such as Facebook. Lawyers are now incorporating social media issues into their regular questioning during litigation, says Bonnie Freedman, a lawyer with Borden Ladner Gervais LLP in Toronto who specializes in privacy and access to information: “The courts are now saying that if it is a relevant matter in the litigation, then we are going to order disclosure [of Facebook postings]. I think we all have to get real about what these sites are for and what the notions are and we have to understand as professionals how to use these sites professionally.”

Adds Giesbrecht: “Users should be cognizant that all the answers to social media questions haven’t been worked out yet. It is going to be up to them to keep up, because things are constantly changing.” IE