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Why financial services are grappling with social media

Matthew Wilson, 27, is taking his MBA at the Peter B. Gustavson School of Business at the University of Victoria. He is doing a summer internship at Wickware Communications Inc., based in Toronto.

Being thrown from the grind of academia back into the work force has proven to add a lot of value to what I have studied up to this point. Looking back upon what I have learned and seeing many of the concepts shared in the classroom reflect the needs of businesses, validates the whole process of making the choice to return to school.

There are especially a few hot topics that we have contemplated a lot in various classes, which evidently are very pertinent to the needs of businesses right now. One of those is the continuing debate on social media and how businesses can use it. It is a subject that many young business students are familiar with and many business owners struggle with. Is this really a viable mode of communication? Is it a passing trend? Will tweeting really lead to more sales? If large companies like Morgan Stanley are letting their employees use Twitter and LinkedIn now, should our business, as well? These are common questions that I find myself confronted with again, as I undergo my summer internship with Wickware Communications Inc., which focuses on financial services firms and is based in Toronto.

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Now, to really know if social media can help your business, the first and most fundamental thing you must look at is the industry which you are in and assess if a social media community is a viable and realistic idea. Is it reasonable that a Facebook page filled with videos, photos, discussions and interactive content dealing with Adidas shoes and apparel is likely to generate traffic to the page and create a small following of devoted customers who will frequent the site and contribute to the brand? Well, yes. Is this same concept viable for Joe's Dry Cleaning down the block? Not so much. Certain types of business seem to 'fit' the social media mould better than others, where two-way communication can take place and people can collaborate with brands by co-creating ideas and giving feedback.

With all of this in mind, many companies in the financial services sector wonder what they can do with social media. With the privacy of information being possibly the most important aspect of customer relations in the financial sector, many firms haven't bothered to touch the potential land mine of social media. Also, with the recent privacy breaches at Sony and Google, it is not hard to see that even the most technologically savvy companies can have problems keeping information secure, so why put yourself out there on social media?

Many firms are also asking if people really do want a "community" where they can talk online about mutual funds or upload videos on financial strategies. There is no doubt that customers are interested in the traditional one-way flow of information that comes from financial institutions in various forms that discuss recent trends, news and updates. But many firms are wondering how to create a two-way channel of communication with customers and whether that is something people want.

A recent development in the financial industry that may shake things up is that Morgan Stanley has started to allow its employees to use social media. Starting this month, it will allow employees to use both LinkedIn and Twitter as modes of communication to connect with customers. The initiative comes from heavy demand on both the customer and employee side, and Morgan Stanley is now the first major financial firm to allow this, as most other firms are still grappling with the compliance side of how to properly use these tools. But since regulatory bodies in the United States published guidelines in 2010 for the storage of messages and how to properly comply with rules regarding the use of social media tools, it is a natural progression that larger firms want to be the first to utilize them.

I am currently helping Wickware Communications research a white paper based on a major investigation of how hundreds of financial services companies are not only using social media, but how it is contributing to their overall brand message. While it is important for companies to understand these channels of communication, what some may find is that they are rushing into social media without understanding how they can properly use it to benefit their business and thus, their efforts are going to waste. Many companies will be patiently watching Morgan Stanley to see what they do with Twitter and LinkedIn and to assess if some of the same tools can be used in their businesses. With regulations now firmly in place for financial companies to use social media and giants of the industry moving toward it, we may start to see the formation of a new community that interacts with the financial industry in a totally new way.

No matter which way the industry goes, young business people must be ready for the older generation to be turning to them for answers on what their businesses can do with social media.

Special to The Globe and Mail

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