Social networks – Facebook, LinkedIn and Twitter among others – have become the preferred method for communicating with friends and family; reading news articles; and discovering new places to dine, shop and visit.
While the affluent may have been slower than most markets to jump on the social media bandwagon – perhaps out of privacy concerns around posting personal information online – all that is changing. A fall 2011 Spectrem Group study found 47% of U.S. ultra-high–net-worth investors (those with a net worth of $5 million to $25 million, not including primary residence) now use Facebook.
“Early adopters have shown that social media sites can be useful for building and enhancing relationships, so now late adopters are jumping in,” says Milton Pedraza, CEO of the Luxury Institute consulting firm.
Social Media for Business or Pleasure
Although they may have been later to join than most, the affluent market now takes advantage of social media – Facebook in particular – for the same reasons as everyone else: to keep in touch with friends and family living away from home. “Their habits are very similar to mainstream consumers but perhaps more guarded,” Pedraza says.
A January 2011 Luxury Institute survey, for example, found that wealthy Facebook members have on average 145 friends – not far off from the average Facebook user who has 190 friends.
For business purposes, the wealthy market turns to LinkedIn. According to the Spectrem Group study, 26% of ultra-high-net-worth investors use the professional-focused social networking site.
“LinkedIn is used to connect to people with whom they share interests or with whom they want to cooperate,” Pedraza says. “There isn’t as much dialogue or chatter on LinkedIn. They use it to research and connect, and then take the dialogue offline if it matters.”
As for Twitter, the Spectrem Group study found just 6% of ultra-high-net-worth investors used the social networking site in 2011. Clients typically use Twitter only to obtain the latest news, says Sheryl Larson, director of digital marketing for Northern Trust.
Connecting With Advisors
The affluent market is also leveraging social media to engage with financial organizations and advisors.
Over the past year, Stephanie Harper Stefanik, client online marketing manager for Northern Trust’s Personal Financial Services, has witnessed a rapid increase in the number of clients requesting to connect with their relationship managers on LinkedIn and Facebook.
While Stefanik recognizes the benefits of clients engaging with their advisors via social media, she recommends advisors keep their personal social accounts separate from their professional social accounts. If Facebook accounts, for example, are used to share photos and news with family members, it may be best to avoid “friending” or connecting with clients. But if LinkedIn accounts are used to build a professional image and expand business connections, the site can be an effective channel to extend the client/advisor relationship.
In addition to connecting with their relationship managers online, Stefanik says clients use social media professionally to obtain brand advice from peers, discover thought leaders and search for recommendations on services and advisors. “Clients want to evaluate reputations,” she says. “They want to read about the rating of different services and see what’s working for other people in their demographic.”
But it’s a two-way street: It’s not just clients reaching out to their financial organizations and advisors in the social space; organizations and advisors increasingly attempt to connect with clients as well.
Northern Trust, in particular, is focusing its current social media efforts ¬– including connecting with clients and prospective clients, as well as advertising – on LinkedIn. “Most businesses are focusing on flashier outlets like Facebook and Twitter. We already have a presence on both, but LinkedIn is where we want to establish a stronger identity,” Larson says.
And because Google now includes social media networks on its search results pages, Northern Trust encourages its relationship managers to leverage social channels. “If someone searches the words ‘financial advisor Chicago,’ for example, we want our relationship managers to be at the top of the search list,” Larson says.
Staying Secure in the Social Sphere
Although the popularity of LinkedIn among clients may not be a surprise given the professional nature of the site, less expected is clients’ frequent use of FourSquare – a location-based social network for mobile devices – to “check in” at branch locations.
“We assumed our clientele wouldn’t want to publicize that they’d just visited the bank, but it seems like a point of pride for many of them,” Stefanik says.
But that point of pride could mean a potential breach in security. Larson reminds clients active on social media to carefully maintain security settings in each of their networks. Doing so helps ensure confidentiality and that activity is shared only with the people in a client’s network.
“It sounds simple, but many people still have not adopted tighter privacy settings because they aren’t informed about what is shared publicly and how to make those things private,” Larson says.
Pedraza says the wealthy have plenty of reasons to provide less information online – and may instead opt for good old-fashioned conversation. “When you have a great deal to lose, you need to protect yourself,” he says. “And many people feel that face-to-face and voice interaction is richer anyway.”