Here’s The Case - Spring 2011 TWC Magazine
Wealth Channel Magazine Exclusive
Bringing you practical, relevant information from the industry's top experts and practitioners
In this regular feature, WCM presents a case to two top producers. We ask the producers to consider the best possible advice given their own assumptions about the scenarios, and to include some of the challenges they may face trying to implement their recommendations and some alternatives.
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Doug Stanton has a problem. Doug is a principal and CEO of Stanton and Zinn Financial Associates, a small independent firm with about 30 agents. Over the past five years, Doug has spent a lot of time recruiting younger agents. He knows that according to the informal division of labor worked out through the years between him and the other partners, it is his role to mentor and train the new recruits. He has to admit to himself that as much as he appreciates their energy and commitment to the business, he finds them baffling at times. He is beginning to wonder if he’s qualified for the task.
It all started when Jana, one of Doug’s new recruits, suggested that the firm get a page on Facebook. She brought the idea up at the monthly staff meeting and Doug almost laughed out loud at the expressions on his partners’ faces as she explained the benefits of social networking both in terms of generating new business and maintaining relationships with current clients. Doug was about ready to dismiss the idea out of hand until Jana clicked through a couple of screens and brought up the pages of one of their competitors. The partners reluctantly agreed that they could move ahead with developing a firm page, but they warned Jana not to get too far ahead of what other comparable firms were doing with this technology. They also established a subcommittee to look into developing protocol and procedures for social media usage, but as far as he knew it had never met. And he had never followed up.
Frankly, Doug had forgotten about the whole thing. So when he got a call from one of his agent’s clients, he initially had a hard time understanding the issue. Looking at his notes, he tried to piece the story together. One of his younger agents, Brian, had developed his own Facebook page, which was somehow linked to the firm’s Facebook page. Brian used his Facebook page primarily to connect with potential clients and market his business. The client who contacted Doug was Charlie Wilson, the father of one of Brian’s college roommates who was looking for a financial advisor when discovered Brian’s page. Since he recognized Doug’s firm and remembered Brian, he “friended” him.
Charlie was pretty impressed with his pitch and they exchanged messages for a couple of weeks before he agreed to a face-to-face meeting. The trouble was, according to Charlie, what Brian was offering online and in reality were two different things. “It was a classic bait and switch,” he said. Brian, he believed, lured him to a meeting with promises of services and performance that it turned out he could not deliver. From what Doug could figure, Charlie wasn’t looking to get Brian in trouble. He was not interested in making a formal complaint, even if there was one to be made. He simply wanted some accountability. “It’s easy to promise the moon when you’re not looking someone in the eye,” he said. “This just isn’t good business.”
Doug agreed. He asked Brian for the documentation of his exchanges with Charlie Wilson and found that they were lost in cyberspace. As far as he was concerned, this whole social networking idea increasingly seemed like a bad one. He certainly couldn’t see any benefit to it. The more he thought about it, the more convinced he was that it was not worth it. He was going to recommend to the partners that they disallow any form of social media. They had escaped without a serious problem, but they might not be so lucky the next time.
• What is your initial reaction to the scenario (e.g., compliance)?
• How would this scenario be different if it were e-mail rather than Facebook?
• Aside from dealing with the technology compliance issue, what would you do in this situation?
• What are some checks and balances that the company could have added to prevent a scenario like this from happening?
• Which does this case show the greatest need for: limiting social networking use in firms, stronger management and control over new, young agents, or stricter compliance guidelines?
by Eric Spindt, CFP® • firstname.lastname@example.org
Although developing his own page may have been a violation of what Brian should have done, the branch manager also should have established a clearer set of guidelines about what is allowed and what is not allowed, both for Jana’s and Brian’s endeavors. Social media is not going away, and establishing clear guidelines will help prevent problems from occurring, as well as provide a path to take advantage of the social media outlets.
This scenario would be different if it was e-mail versus Facebook, but it’s no different in the communication. A perception of bait and switch from a prospect can occur via e-mail, phone or in person, not just through a social media outlet. The difference with e-mail is that companies can retain and supervise the communication. Facebook happens outside of what a company can monitor. The reality, however, is that this problem was not created because of social media; it just happens to be the outlet that was used this time around.
Aside from the technology compliance issue, there seemed to have been a lack of guidance, policies and procedures from management. As I stated, social media is only growing and we need to stay educated about it, not shy away. I would discuss the issue with the representative regarding communication and expectations with clients. If certain misrepresentations are being made, they are likely being made via other outlets. The compliance issue related to social media usage is obvious, but an equally important issue is that the communication with the client created the perception of a bait and switch.
by Tim Marriott, LUTCF, CLF® • email@example.com
I don’t think one would get this far along creating a company-approved Facebook page without some checks and balances being put into place. Brian’s behavior, however, seems highly plausible and realistic. Brian could still do the same sort of bait and switch activities via e-mail, if that is truly what is happening. The statement “the e-mail exchanges were lost in cyberspace” doesn’t hold water because Brian, as a Registered Representative, or his company, would have these saved and available in some capacity to comply with FINRA guidelines. Doug’s nonchalance as Brian’s supervisor would not be brushed aside as easily with e-mail because established protocols would have already been in place by Stanton and Zinn Financial Associates to control and monitor proper messaging. Social media regulations for client interactions are still evolving and harder to define.
I see several issues that would need to be addressed. One is the initial set-up of the Facebook page including internal monitoring of the content and use of the page. This includes establishment of guidelines and protocols for acceptable use of social media. Brian’s behavior as a rep for the firm needs to be addressed. At this point, we are only getting one side of the story. Corroboration from Brian as to the extent of their exchanges, along with confirmation of his Facebook page messaging regarding services and performance, would need to be reviewed. Without additional understanding of what Brian actually did, it will be hard to make any concrete decisions about the legality of ethics of his behavior. Another is Doug’s inability to effectively investigate and resolve Brian’s behavior. This includes acknowledging what he expected as far as the lost paper trail is concerned, which doesn’t truly identify or resolve the issue at hand. Doug has expectations and responsibilities as a principal of the firm to thoroughly investigate this issue to determine if Brian’s behavior necessitates further disciplinary action. As Brian’s direct supervisor, Doug’s ambivalence towards social media and his being unaware of Brian’s marketing programs currently in place are relevant issues that need to be addressed as this matter is investigated. Doug should immediately bring this to the attention of the subcommittee to review the content on Brian’s Facebook page. There would be a determination of disciplinary actions for Brian and Doug, if any, based upon what was determined to have actually happened after a formal investigation. Finally, whether or not Charlie Wilson is interested in making a formal complaint, steps need to be taken to resolve the outstanding complaint and determine appropriate actions going forward to mitigate the possibility of this happening in the future. A formal investigation of the allegations needs to be initiated to determine what exactly happened and to eliminate this embarrassment from happening again.