• Insurance & Technology discussed New York Life’s Launch of Social Media, powered by Socialware
• Socialware was named top tech company to watch by Bank Technology News.
• Socialware was also named 2010′s Best Tech for Advisors by Morningstar Advisor
• Bloomberg featured Socialware in their article Tweeting Rules May Leave Brokers With Little to Say to Clients

In addition, SocialTurns was highlighted by Wall Street & Technology as being a key player in helping capital market firms adopt social media. The site we launched just a few short months ago has already reach over 600 users from 20 different countries. I’d like to thank the SocialTurns Council again for their contributions and support in making SocialTurns the destination for financial professionals to discuss social media issues, best practices and news.

In October, we shared the news of our record growth across the financial services industry. The pace at which regulated firms are adopting social media is staggering. You could have seen this trend coming just by looking at the attendance of webinars like the series LIMRA and Socialware are co-producing on the social media adoption lifecycle.  Not only was the first webinar in the series the most well attended of any webinar we’ve hosted, to date we’ve had over 1,500 participants across the series!

Needless to say this has been an exciting few months and more great things are on the horizon. I want to personally thank the entire Socialware team, our customers and our partners for getting us to this point. We are wrapping up a great year and I expect 2011 to be even better!

PS: If you are looking for a new challenge we have openings in Sales, Marketing, Client Services, Development and Design. We would love to hear from you.

92% of executives use LinkedIn making it the most popular social network. Facebook comes in second with 51% stating they use it. When it comes to frequency, executives are spending quite a bit of time on these sites. 40% said they are using it many times per day although their capacity for variety is limited. Half of the respondents stated they only use 3-5 social media sites in total.

Another great part of the study were the top five reasons executives use social networks. Here is what they found:

1. Great way to keep track of peers and colleagues
2. Easy access to thought leadership or information that can’t be found elsewhere
3. Good way to showcase themselves or their companies
4. Easy access to learning and professional development
5. To find out what others think of products, vendors or approaches

Of course, there are still concerns when it comes to social media. The top fears listed were:

1. They want control (in an a world based on transparency)
2. Lack of understanding (around technology that changes every day)
3. They fear it will just be a fad (you must have a plan and clear goals)

Intrigued? Looking for someone to model yourself against. Check out the latest article in the Harvard Business Review about Brian Dunn, CEO of Best Buy. The article outlines his use of Social (no he doesn’t outsource it to his communications team!). I found it very enlightening and a great example of where the industry is headed.

You can access the full report from Cisco but here are a few of the statistics that caught my eye:

• Of the employees that admit breaking IT policies, about 41% say it’s because they need the restricted program and application to get the job done — they’re simply trying to be more productive and efficient.
• 20% of employees worldwide said they break IT policy because they believe their company or IT team will not enforce it.
• 41% said they are restricted from using Facebook at their job and 35 percent are restricted from using Twitter at work or with work devices.
• 66% of employees believe they should be able to connect freely with any device — personal or company-issued — and access the applications and information that they need around the clock. Policy or no policy, many employees will simply do it, raising the question about how effective a policy is and how IT can update, enforce and ensure better compliance.

In the world of regulated industries policy enforcement is critical. You can’t simply assume that employees will remember all the things they should and should not do. Automating that policy (for both access and data capture) are steps organizations can take to start opening up access to the social web.

Companies also need to start planning for multi-device use. While you can’t always enforce usage policy outside of work you can plan for ways to manage the data that is being created. This is especially true for regulated industries where data retention and supervision is required.

We might never know exactly what happened, why it happened or why it wasn’t caught. But we can learn from this example. In this case, one simple email has cost the firm in excess of 100 million dollars (my rough estimate). Here is how I got there:

• Loss of the investment banking fees – $30mm. This is one of the largest deals in Wall Street history and the firm stood to make tens of millions on the deal on fees alone.
• Lost proceeds from orders – $30mm. As the firm to bring the IPO to market they also had the ability to take orders from their investors. By being removed they lost this right, every order and every commission.
• Relationship, brand damage & lost future revenue – $40mm. There is no doubt that this will leave a lasting impression on investors. You hope that individuals will stand by their broker but it is possible they will lose a number of accounts and many of them will be quite large and quite profitable.
• Loss of time – $1-10mm. This one is tougher. No doubt all the time put into the analysis, the roadshows, the sales calls, etc. is all for naught. Aside from the actual cost of the man-hours, think about the benefits of applying that time elsewhere. While this is the smallest bucket it is still worth pointing out.

What if this had gone out through a tweet or status update? Could it have been stopped? How will firms deal with these scenarios in the future?

The short answer is yes, it could have been prevented, assuming firms think through their policies and procedures to govern them. In addition, they must adopt the right technology solutions to ensure it can all be managed.  Let’s look at each area in detail.

• Policy: a firm’s social media policy should have provisions to account for the specific needs of each business unit. While FINRA regulated reps have one set of issues to deal with, these will be different from the recruiting team, analyst team or brand marketing team. Additionally, firms should consider the concept of a more restrictive policy based on specific projects, such as an IPO and the required quiet period.
• Procedures: the next step is making sure the firm has the right procedures in place to review critical projects and timelines, to update policy and to also change the types of keywords or phrases to search for in electronic communications (both email and social media).
• Automation: last, make sure your solutions can keep up with this level of change. You want the granularity to set policy by user and role. You need the ability change user policy in real time (referring to the technology that scans and automates your physical policy). And finally, the ability to set and update those lexicons of words and phrases as needed.

This truly was an unfortunate mistake, but one that is worth analyzing as firms look to prevent it from happening again in the future.

But unfortunately these CRM systems and address books quickly get out of date and in some cases don’t capture critical pieces of information. For example, how do you keep track of your friends changing phone numbers or address books? Maybe your computer crashed and you lost everything. And CRM systems don’t keep track of the context of a contact. For example, what groups they belong to, their interests, people they are connected to or their job history.  Sure many systems are flexible enough to allow you to insert any new piece of information, that isn’t the issue. The challenge is that you don’t normally capture those details in your conversations.

However, this information does exist. Executives update their LinkedIn profiles with all of these specifics. As consumers we use Facebook to chronicle our personal lives and add details like our birthday, marital status, current location and so much more. When I need a phone number I go to LinkedIn. Not only does LinkedIn capture that information but each user keeps it updated for me. Why would I ever bother maintaining that information myself? In fact, I ran a little experiment. Today in my PC-based contact database I have 457 entries. However, on LinkedIn I have 787 connections. And today when I receive a business card I will invite that person to connect on LinkedIn. I can’t actually remember the last time I added a name to my contact database. Why bother when you have social networks.

The point is social networks are as important of a tool to managing relationships as email is to communication. This past week Adam, one of the members of our team, got a Facebook message from an old college acquaintance that is now an insurance agent and registered representative.  He wasn’t a close friend and they hadn’t spoken for some time but they had stayed connected over Facebook.

During the conversation he shares that his corporate policy prohibits all social media activity and even goes so far to say that they shouldn’t have a Facebook profile (he works for a top insurance firm).  While compliance officers will shutter when they hear this, it is a common occurrence. In a recent study we found that 40% of registered reps knowingly violate corporate policy when it comes to accessing social networking sites. This particular agent is a 27 year old who’s had Facebook for 3 years and he is not about to give it up.  It’s what he uses to keep in contact with everyone he knows.  It’s his personal CRM. He didn’t have a phone number or email address so this was the only way to reach out.

As it happens the message was well timed. Adam actually needs to revisit his insurance and financial planning needs and is happy to give his college acquaintance the business. What’s also interesting about this story is that because the message was sent over Facebook it received a response. Adam pointed out that he gets emails all the time from agents or advisors looking for business and these immediately get deleted. Because he saw the message and was able to quickly recall how he knew the sender he responded and will likely be his latest client.

As firms consider what social has to offer don’t overlook some of the nuances of how people behave on these sites. A “cold call” over Facebook is likely to produce a much higher response rate compared to yet another email (assuming you even have an email address to use). And also give some thought to the notion of personal vs. professional. In a relationship business your personal contacts are your business. So yes, the lines have blurred and that is actually a good thing in terms of the opportunity it creates for organizations that embrace social media.

This got me thinking about firms that are trying to manually monitor LinkedIn. Not only is it inefficient but it’s also ineffective. For example, say that you are going to rely on LinkedIn’s search to find reps from your company. The site offers a fast way to browse profiles, but they limit you to 300 results. This is a huge issue.

The only other option is to manually search for reps by name. Talk about a waste of time. And what will FINRA think of this approach to supervision? In the recent MetLife ruling FINRA fined the insurer $1.2mm because their email supervision approach was “hardly an effective means to detect misconduct.”

We recently spoke to a registered rep of a top 10 wealth management firm. Their policy allows reps to have LinkedIn profiles but they must be pre-approved (more on that later). While the content of the profile is approved by the Ad Review Department, there are no automated mechanisms to detect misconduct or better yet, ways to prevent it in the first place.

Taking advantage of LinkedIn’s Advanced Search I was able to find reps of this firm that had recommendations, certifications, personal activities and group associations – all violations of the firm policy and in some cases violations of SEC/FINRA regulations. The reality of social networking compliance is that the policies and procedures must be automated. The volume of content and activity is simply too high and the pace of change is too great.

So what exactly do firms need to be thinking about when it comes to LinkedIn compliance? Early this year FINRA published 10-06 as we all know. Even though the notice has been out for almost a year there still seems to be confusion. Let me try to clear up some of the confusion.

1. There are no new rules, just interpretation of the existing ones.
I took this point for granted early on. But as I talked to more and more companies I got the sense that organizations felt they had to deal with new FINRA rules. The reality is that 10-06 is simply an interpretation of their existing rules. Here is a snippet from the Notice that makes this point.

FINRA is issuing this Notice to guide firms on applying the communications rules to social media sites, such as blogs and social networking sites…At the same time, FINRA is seeking to interpret its rules in a flexible manner to allow firms to communicate with clients and investors using this new technology.

2. LinkedIn IS a social network
Another point I’ve heard from the industry is that some compliance departments don’t believe LinkedIn is a social network and as a result 10-06 doesn’t apply. FINRA actually calls out LinkedIn specifically in their notice and the same rules apply here as they would for Facebook, Twitter or other forms of electronic communication.

“Social networking sites, such as Facebook, Twitter and LinkedIn, typically include both static content and interactive functions.”

3. LinkedIn content must be archived and supervised
Yes and Yes. FINRA differentiates between static and interactive content on the social networks. They point out that static content is information like a LinkedIn profile and as with other web-based communications a registered principal of the Firm must approve all static content on a page of a social networking site before it is posted. This can create an issue for firms that don’t have the ability to manage access to the edit features of these profiles. Otherwise you are trusting a rep won’t violate policy, and testing against your policy would be highly manual and error prone.

In addition, FINRA makes it clear that every firm must ensure that it can retain records of social media communications as required by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110. For firms that allow access to LinkedIn without automated archiving and supervision this creates a massive risk. Here is a quick example of one risk that most firms overlook.

The main driver of value on LinkedIn is your network. You build that network by inviting people you’ve worked with, clients, prospects, recruits, etc. As you can see from the form above you create a short note to the contact so they remember you and understand why you are asking to connect. For firms that allow access without an automated solution they are going to miss every connection note (won’t be archived or supervised) and be in direct violation of FINRA/SEC.

If you are looking for more information on understanding FINRA 10-06 or LinkedIn specifically you can download the following guides:

The Companion Guide to FINRA/SEC Social Networking Compliance

A Guide to LinkedIn Social Networking Compliance

Employees are a key element in deploying social media. Today’s younger workers spend a lot of their personal time on social networks, and expect to have access, even at work. Firms that bar such access risk missing out on top performers as more and more Baby Boomers retire from the industry.

According to “Social Networks: The Insurance Agent and Broker of the Future?” (Gartner, Inc., September 2009), social networking is starting to impact insurance buying decisions. “Social networks are beginning to become the prime conduit for online users (especially younger generations) to connect with others who can speak about concerns and interests in an easy, open, and free community,” Gartner explained, citing studies that show that social media is currently in use by three-quarters of the online population in the United States.

The report goes on to point out the major benefits — and risks — that come with social media adoption.

Significant benefits:

• Generating long-term revenue growth. Social network use is growing in all demographics, and has had a major impact on retail and other industries that have embraced it.
• Getting and keeping top talent. Top agents are already using these tools to enhance their relationships with their clients.
• Optimizing marketing spend and effectiveness. Social media is another tool insurers can use to gather customer information and deliver targeted marketing to the right segments.

Worse, there are risks to ignoring social media:

• Risk to the brand. Employees and customers are already using social media — ignore it and risk losing out on significant branding opportunities. Do you really want to be the only agency that is not talking to its customers?
• Compliance risks. If employees are using social media without a firm’s guidance, they could be at risk without even knowing it. And research shows 40% of agents have gone rogue and are in direct violation of their firm’s policy of prohibition.
• Competitive risk. Ensure you’re talking to the next generation of customers. Do nothing and you may lose top talent and loyal customers.

Just as insurers puzzled over how email would impact business a decade ago, social media is a puzzle that the top performers will conquer and find great success. I think we’ll continue to see more and more of these types of reports highly regulated industries, like insurance, dip their toes into social media.

If you haven’t already download the entire report – it is a quick 8 page read and offers some great insight and perspective.

First let’s start with background on the MetLife fine. The issue at hand is that they did not follow their own policy on matters related to email archiving and the review of archived email.  Their policy was clear as far back as 1999. Brokers were required to provide copies of their own emails to supervisors so they could be reviewed. In 2007 they acquired technology to facilitate the process or more specifically, to facilitate their policy. The fine covers 1999-2006 where the policy was crystal clear but the practice was “lacking.”

Susan Merrill (FINRA Executive Vice President and Chief of Enforcement) pointed out that FINRA’s rules “afford firms the flexibility to tailor procedures that are appropriate for their particular business models, all firms must have the ability to flag emails that my evidence misconduct.” She then points out that having a “system” that requires the broker to manage the compliance process by “providing copies of their own emails to supervisors for review is hardly an effective means to detect such misconduct.”

So what does this have to do with social media? At this point every financial firm is participating in social media. Some are doing so under corporate directives such as a brand marketing initiative, others have employees that are participating that are in direct violation of policy (a simple LinkedIn search will show this) and still others are opening up access in a managed and compliant fashion such as New York Life.

Those that are moving forward with a policy of prohibition have to be concerned about their ability to supervise adherence. In our upcoming webinar with LIMRA we discuss the Procedures stage in the Social Media Adoption Lifecycle and outline the steps required to satisfy regulatory requirements on this issue.

One popular position I’ve heard is firms allowing access to LinkedIn as a “business card.” The idea is that they can have a profile on the site (albeit a limited one) and are not allowed to use any other part of the site such as LinkedIn Mail, Groups, LinkedIn Answers and many other valuable parts of this social network. Since the profile is static content (as defined in FINRA Notice 10-06) that information must be approved by a registered principle.

The problem is anyone that has ever used LinkedIn will know that all of these unsupervised features are tremendously valuable. In essence this approach is saying, “have a profile but don’t connect with anyone on the site.” It defeats the purpose of being on LinkedIn in the first place – and your reps know this.

So now back to the MetLife story. Are firms that are taking this approach going to see a similar fine from FINRA in a few years? Time will tell. My guess is that a written policy and “trust” that reps won’t use the most valuable parts of sites like LinkedIn with no automated supervision “is hardly an effective means to detect such misconduct.”

Here is a preview of what you will read about in the article. This is just a quick synopsis so don’t forget to check out the entire piece here.

Like many companies New York Life has created a corporate social presence on sites like Facebook, Twitter and LinkedIn. But now they are underway of their roll-out to agents, recruiters and other employees. Partnering with Socialware, New York Life can now “automate and manage social network policies and usage for New York Life’s more than 11,000 agents and field managers.” And by year-end “New York Life expects to open up use of social-media sites to all of its employees.”

The value of social media is always a top question. When asked about their motivations Tom Shea, the First VP and CTO had this to say: “Agents can use them as a way to connect with customers. Our recruiters see these sites as effective tools to communicate with potential agents. And this is also a great way to get our branding messages out there, to highlight the strengths of our company.”

Given the regulatory challenges of this industry, New York Life like many others had a very simple social media policy: “No.” The need to comply with the SEC and FINRA guidelines simply created too much overhead and risk. That all changed after clarifications from FINRA through Notice 10-06 and the adoption of Socialware’s Compass solution to help automate the compliance and supervisory risk.

Shea pointed out “if customers have a question on a social media site, you can’t tell them ‘I’ll have an answer for you after my compliance department reviews it.’ But you still need to have all correspondence available for review after the fact. So that’s where the need to capture, store and archive comes in.”

We congratulate New York Life on their progress in adopting social media. Their efforts set a great example for the financial industry and we look forward to helping them reach their goals.

Read the full article here

According to Cisco’s 2010 Midyear Security Report, 50% of end users in large organizations ignore company policy prohibiting use of social media tools at least once a week, and 27% said they change the settings on corporate devices to access prohibited applications – all at the same time Facebook and other social networks continue to explode, and more and more business is taking place here.

Employees spend much of their time playing games. Cisco found that 7% of Facebook users spend more than an hour each day playing FarmVille, the most popular social game; those who play Mafia Wars spend almost as much time. While there aren’t any current examples of malware carried through these social games, security experts say they could pose a potential security threat.

The point of all this isn’t to distrust your employees; instead, it’s important to automate your social networking policy so that agents are able to use the tools that will help them grow their businesses, while mitigating risk. Automation is the key, as once a policy is set, it becomes transparent to users. If FarmVille simply isn’t available – but other useful Facebook features that help connect agents with prospects and clients are – agents will naturally be more productive, and get the most from these tools.

Without automation, firms can spin their wheels, creating then recreating policies and worrying about enforcement. And as collaboration via social networks continues to help agents build their practice, automation helps everyone achieve their goals.

As I’ve discussed before, ignoring social networks doesn’t work – in today’s world participation is no longer a choice. With that said take time to learn more about social media policy automation so you can get all the benefits of social but without the risk.