Social Media: Financial Services’ Friend or Foe?

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With reputation and customer service issues persisting due to the financial crisis fallout, financial services firms are rushing to social media to build bridges, and improve communications and service with consumers, employees and other key stakeholders.

The social media findings of the 2014 Makovsky Wall Street Reputation Study released today revealed that social media has become more important than other marketing initiatives, according to 68% of senior communications, marketing and investor relations executives at financial services companies. The number of financial services firms using social media to combat negative perceptions with external audiences nearly doubled from 2013 to 2014. However, the study also found that while its effectiveness was on the rise, social media still trailed many traditional marketing and communications channels to improve external perception, according to the executives.

The financial services industry overall has been slow to adopt social media because of complex compliance issues. Most of companies in this sector only have partial social media strategies. In fact, 71% of executives agree that compliance at their company restricts the use and application of social media, while 63% say it is difficult to agree with compliance and attorneys on the use and expansion of social media.

The findings indicate a pent-up demand among marketing and communications executives and they are pushing the social media agenda forward. Eighty-five percent (85%) of executives said more time will be spent on social media activities this year compared to last year, while 84% of executives plan to investment more in the creation and distribution of content than last year. The study revealed a greater competency in social media with 80% of executives who believe their management understands it.

“Financial services companies are searching for ways to improve customer satisfaction, further their position, and stem losses,” said Scott Tangney, Executive Vice President at Makovsky. But when it comes to social media, it is catch-up time for financial services firms. It promises many benefits and we are seeing increased activity within the industry. However, executives are reporting that they still face obstacles, including getting through the compliance gauntlet, controlling the message, and limiting negative outcomes.”

The third annual Makovsky study uncovered the formidable cost of negative perceptions for financial services companies. Executives estimated a business loss of 27% ─ equaling billions of dollars ─ over the past two years as reputational and customer service issues drag on performance.

Financial Services Firms’ Reputation and Social Media: The Good and The Bad

Seventy-three percent (73%) of executives believe that social media has improved their company’s reputation, and 72% agreed that using social media allows their companies to provide better customer service and response than other communications channels.

More than seven in 10 (73%) financial services firms use Twitter and Facebook to conduct customer service. Executives agree that some of their company’s top uses for social media includes:

Distributing thought leadership education content (81%) Engaging customers and investors (81%) Quantifying sales (77%) Carrying on conversations with stakeholders (77%)

However, 56% of executives believe their social media efforts have created more problems than benefits. More than seven out of 10 executives said that controlling the messages on social media is hard to do, with two-thirds (67%) reporting that more negative conversations about their company surfaced on social media versus traditional media.

Targeting new customers is one strategy to shore up business. Eighty-four percent (84%) said engaging in social media allows financial services firms to reach a younger audience.

Employee Communications

Indicating a shift beyond traditional intranet and internal communications, the vast majority (83%) of companies are using social media as an employee communications tool to keep staff informed about company news. Employee ambassador programs at financial series firms are also on the increase, year over year.

For three years in a row, The Makovsky Wall Street Reputation Study has revealed concern among most companies about negative employee perceptions related to the company and its products and services, management related to the financial crisis. In addition, employee communications ranks second in terms of issues critical to building a strong reputation.

“It makes sense that companies embrace social media for employee communications, especially with the emphasis on employee engagement and the increased use of mobile devices to consume information over social channels,” said Tangney. “Executives are strongly indicating that social media works better for certain things and that it can be a double-edged sword.”

Research Methodology

Ebiquity, formerly Echo Research, completed 225 interviews with executives and managers responsible for the management and supervision of communications, investor relations or marketing at large and mid-sized publicly traded and private financial services institutions. The type of companies surveyed included banks, brokerage firms, asset management firms, insurance companies, real estate companies, credit card companies, mortgage lender, venture capital firms and credit unions and financial technology firms. Respondent titles included Chief Marketing Officer, Vice President, Director and Manager/Supervisor. The study conducted online and completed in May 2014. The margin of error associated with this level of reporting is +/- 6.5% at a 95% confidence level.

About Makovsky

Founded in 1979, Makovsky (www.makovsky.com ) is one of the nation’s largest and most influential independent integrated communications firms. The firm attributes its success to its original vision: that the Power of Specialized Thinking™ is the best way to build reputation, sales and fair valuation for a client. Based in New York City, the firm has agency partners with nearly 2,000 professionals in 100 cities through IPREX (IPREX.com ), the second largest worldwide public relations agency partnership, of which Makovsky is a founder.

About Ebiquity

Ebiquity is a leader in above- and below-line communications tracking and research, providing independent data-driven insights to the global media, CMO and CCO community to continuously improve clients’ business performance.

Published July 22, 2014 – Reads 687

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