WEALTH MANAGER-Brokerage firms chafe at social networking limits

* Archiving, monitoring at odds with networking potential

* SIFMA reconvenes task force to clarify small points

* Firms reluctant to offer “halfway” access

By Helen Kearney

NEW YORK, April 12 (Reuters) – Financial advisers and their
bosses are keen to jump on the social media bandwagon, but
regulators are making it tough for them to climb aboard.

Guidelines that the Financial Industry Regulatory Authority
released 15 months ago about reviewing and archiving
communications over such popular sites as Facebook, LinkedIn
and Twitter are so restrictive that brokerage firms have been
afraid to open the social-networking floodgates.

That’s proved particularly frustrating to retail brokerage
executives who have been encouraging their largely middle-aged
and older advisers’ to prove their worth to the children of
wealthy clients and younger prospects by communicating through
the popular new media.

“Social networking is an imperative,” Richard Franchella,
head of RBC Wealth Management’s (RY.TO: Quote, Profile, Research) New York City area
branches said at the Securities Industry and Financial Markets
Association’s private client conference in New York last week.
His own firm, he added, would likely slash a big “X” over any
message he tried to email from one of the sites.

In a January 2010 notice, FINRA advised brokerage firms to
treat information on social media sites as “sales literature,”
meaning tweets, posts and other data must be captured and
retained for at least three years.

“Static” information, such as profiles and blog entries,
have to be pre-approved before being posted online, according
to the self-regulatory group.


The freewheeling nature of social networks that make them
so appealing — their encouragement of linking to outside
sites, their potential to spread messages and images virally —
is of particular concern to compliance officials. The
Investment Advisers Act of 1940 requires SEC-registered
advisers to retain copies of all advertisements circulated
directly or indirectly to ten or more people, and retain any
documents necessary to substantiate performance claims in ads.

“There is a safe way to do it, but it removes the
interactive back and forth,” said Rebecca Pomering, chief
executive at Seattle-based Moss Adams Wealth Advisors, an
SEC-registered investment advisory firm. The rules, in essence,
let people “tweet at you but you can’t tweet back,” she said.

Registered representatives at broker-dealers have to be
wary of the rigidly limited ability to use testimonials from
clients, among other things.

Not surprisingly, then, broker-dealers and independent
advisory firms limit employees’ use of social networking’s
most salient features.

“Social media issues go above and beyond the rules as they
are currently written,” said Jason Thackeray, associate
compliance director at Raymond James Financial Services,
(RJF.N: Quote, Profile, Research) which for nearly a year has allowed advisers to open
Facebook, Linked In and Twitter accounts but not to use their
interactive features. “We would like to see (FINRA) address
social media from a more contemporary standpoint.”


FINRA recently reconvened its social media taskforce, but
advisers should not expect radical changes.

“We’re not looking at it as an effort to change the
guidance,” said Joseph Price, senior vice president of
advertising regulation at the industry self-regulatory

The group is trying to clarify some issues “around the
edges” that firms have raised, he said, such as when changes to
static content give rise to a need for another approval.

That’s cold comfort to advisers and their bosses who say
they — like social networks — were born to build
relationships. There is little point in giving advisers limited
access to the border-expanding sites, said Joseph Corriero,
director of digital marketing at Bank of America.

Executives also fear pushing the networking envelope, or
even having advisers use innovative iPad apps, when regulators
are developing a slew of consumer-protection rules and when
FINRA has made use of social media an exam priority for 2011.

“I’m not sure anyone wants to play those cards right now,”
Steve Gresham, senior vice president of Fidelity Investments’
private client group for personal investing said at last week’s
Sifma conference.

What is being tried is very basic, executives said.

Bank of America Corp’s (BAC.N: Quote, Profile, Research) Merrill Lynch, Wells Fargo &
Co.’s Wells Fargo Advisors (WFC.N: Quote, Profile, Research) and UBS AG’s UBS Wealth
Management Americas (UBSN.VX: Quote, Profile, Research) (UBS.N: Quote, Profile, Research) permits advisers to
maintain LinkedIn profiles displaying contact details and
biographical information but not to link to other profiles.

Morgan Stanley Smith Barney (MS.N: Quote, Profile, Research) has an ongoing pilot in
which just 100 advisers are allowed to use LinkedIn.

Some smaller firms are a bit more aggressive. Commonwealth
Financial Services, which provides regulatory and brokerage
services to independent registered representatives, lets them
post canned messages on Facebook that the firm creates weekly,
said Todd Estabrook, Commonwealth’s chief marketing officer.

It’s also working on an archiving pilot that could capture
advisers’ tweets and blogs, a project it hopes to launch this
year. “These vehicles can help advisers meet new people and
maintain existing relationships,” Estabrook said.

(Reporting by Helen Kearney, editing by Jed Horowitz)

WEALTH MANAGER-Brokerage firms chafe at social networking limits