Financial Services and Social Media The Australian
If your financial services advisor is not using social media, sack them. The Cost of Inaction is too high.
If your financial services/advisor is not using social media, sack them. The Cost of Inaction is too high.
WHEN the Twitter account of Associated Press was hacked last week, a single tweet was sent out: “Breaking: Two Explosions in the White House and Barack Obama is injured.”
The Dow Jones Industrial Average dropped 150 points in about four minutes, erasing about $150 billion of value.
Once people looked outside and noticed that the White House was indeed still there and once AP had corrected the report, the market bounced back. The real questions are: how can a market be so vulnerable to a single tweet, is this a new situation and what should financial boffins be doing about social media?
In 2008, Twitter’s CEO Evan Williams tweeted about it being a great day in Seattle. He was blissfully ignorant that the twitterati would put two and two together and figure out that Twitter had gained funding from a Seattle venture capital company. The market responded accordingly. Clearly, even Twitter’s CEO did not understand the impact of social media.
Rumour, innuendo and conjecture about companies, investment, who’s hot, who’s not is grist for the mill in social media. No wonder the ASX updated their continuous disclosure guidelines this year to make it absolutely clear: the financial sector must monitor blogs, Twitter and Facebook to check whether details of secret deals are leaking. If a market-sensitive transaction is being discussed on social media, then the market must be informed. Monitoring social media is no longer optional for companies: it’s a legal requirement.
Which makes it all the more surprising that research by Comar Brunton into more than 500 retail investors in Australia found that 54 per cent considered that social media delivered “no real benefits” for investors. Only 5 per cent of investors said they relied on financial planners or brokers for advice: the rest of the time they back their own judgment or else listen to family, friends or the media. Perhaps they don’t realise social media is family and friends?
There are some great social media integrated dashboards available. I monitored the Toyota Prius brakes story unfold on Twitter, with the stock ticker open; it was fascinating to watch the price tumble in real time. Surely, even if the discussions are not from trusted friends and family, a large volume of strangers talking up or down a stock has to have some impact on investment strategies?
The financial sector’s biggest issue on social media is not ROI (Return on Investment) but COI (Cost of Inaction). A response — even “let me find out” — is preferable to silence.
Six years ago, when the Engadget technology blog received information that an Apple product would be delayed by three months and inquired of the company whether the rumour was valid, Apple responded with “We don’t engage with social media”. So Engadget published the rumour with Apple’s “no comment” response. Apple’s stock promptly tanked on massive selling, going from $107.89 to $103.42 in precisely six minutes. At the time, this wiped just over $4 billion off Apple’s market capitalisation. Oops. Apple now engages with social media.
If I was talking to financial advisers and they proudly declared to me that they did not monitor, leverage or engage with social media, I would grab my purse and back out of the room. Rapidly. The cost to both of us would just be too high.
Laurel Papworth is a social media educator and a member of Forbes magazine’s ‘Top 50 Social Media Power Influencers’ list globally. Twitter: @silkcharm
First published in The Australian April 29 2013 (paywall)
lol so are you saying no one goes to Seattle unless getting a truckload of money? …maybe he was just there for regular business meetings.
He tweeted from the street he was on (a well known street for the VC company they got funding from) and something like, great meeting, great day. I never said 2+2 added up to 5 😛
I’m not sure of the validity of the inference that you’re making here Laurel. I get ASIC and the SEC’s requirement that publicly listed companies need to add social media monitoring to their conventional media monitoring, so they can more quickly identify any rumours, leaks or hacks which might be driving unusual trading activity.
And as we saw in Australia with the ANZ press release hoax in relation to whitehaven coal, anyone who trades on HotCopper message board rumours in the absence of formal disclosure has only themselves to blame. Professional investors don’t make these kinds of mistakes and even amateurs generally know better.
But none of this means corporates themselves need to set up social accounts. Any clarifying statements need to be posted to the announcements platform of their relevant securities exchange, which is the source of truth for all investors. I’m also not sure of the connection to financial advisers.
What does socially-driven misinformed trading in publicly listed shares have to do with whether your adviser is on Facebook? Surely you can’t be suggesting that an adviser should be on social to pick up on rumours so would be in a position to tell you whether to buy or sell a share?
If so, you’d be one of the victims of the ANZ prank!
ps….and i think that you are improperly conflating any connection of social media to the examples above, with share price impact. It’s not Twitter that’s impacting the share price because its penetration isn’t high enough in the investment communities. It might be an amplifier of, or catalyst or, a rumour. But it’s the existence of rumours in the mainstream financial press and general street talk that leads to share price movements – not just because a rumour is swirling around social media. This is why it’s not accurate to express surprise to say that Twitter didn’t realise how powerful social media was. In fact, the Twitter exec was an idiot for an egregious leak and should have known better. This is really just an illiustration of his stupidity rather than the inate power of the medium to move markets. And in the case of Apple, the tech paper isn’t really social media, it’s a digital publisher. Saying Endgadget is social media is like saying the SMH IT section is social media, simply because readers can comment on stores
Bob on your first point I want to point out that without monitoring you would be unaware until traditional media got hold of the story,and without an account, you have no right to reply. On the second one: I’ve watched stock drop as news broke on twitter but not yet on traditional media (Woz’s tweet on Toyota was an example). And Apple’s response to Engadget was “we don’t respond on social media” not “we don’t respond to traditional media with comments sections”. Thanks for commenting but I haven’t changed my mind…if you don’t at least monitor, you are screwed by the time the Evening News breaks it. cheers 🙂 Laurel
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