Morgan Stanley Cautiously Wades into the Social Media Waters; Will Others Follow?

JUNE 5, 2011 BY ERIC RICE LEAVE A COMMENT

175 million users on Twitter. Over 100 million professional profiles on LinkedIn. That’s a whole lot of people. None of them came from Wall Street… until now.

Morgan Stanley Smith Barney, the largest retail brokerage in the United States, has decided to allow a select group of advisers to get their feet wet on the popular social media platforms Twitter and LinkedIn. “Feet wet” might be a bit of an overstatement, perhaps “toes damp” would be better suited. 600 of Morgan Stanley’s elite brokers will be allowed restricted use of Twitter, and almost free reign on LinkedIn.
According to an internal memo obtained by Reuters, the test group consists of Morgan Stanley Smith Barney’s “Chairman’s Club” brokers along with approximately 100 advisers. If all goes as planned, the program will be extended to Morgan Stanley’s entire staff of nearly 18,000 advisers within six months.
In 2010, the Financial Industry Regulatory Authority (FINRA) established guidelines for limited social media use, but Wall Street has been leery to participate. Regulators strictly monitor information disseminated by brokers to the public or to their clientele in order to protect the public from investment scams and deceiving recommendations. Phone calls are recorded, emails are archived, and everything is reviewed.
In order to comply with FINRA’s regulations, Morgan Stanley will use special technology to hold onto all communications that occur over LinkedIn and Twitter. In addition, advisers will be extremely limited in their access to the social media platforms. On Twitter, advisers will only be allowed to post information that has been approved in advance by Morgan Stanley, and on LinkedIn brokers will not be allowed to recommend or be recommended by themselves or others.
FINRA’s guidelines require posts and other data to be captured and retained for at least three years, profiles to be approved in advance, and all information posted must be treated like any other sales literature a brokerage makes available to the public.
Says Stacey Haefele, CEO of HNW, Inc., a leading provider of wealth marketing solutions, “Social media has been regarded mostly with trepidation by brokerage firms because of FINRA’s strict compliance guidelines, but social media can be an asset to existing clients and a vital way to reach potential clients.”
Other brokerage houses are taking notice; UBS Wealth Management Americas, Merrill Lynch, and Wells Fargo Advisors have also dipped their toes into the social media waters. Brokers from these firms are allowed to display profiles on LinkedIn, but have not yet been allowed to share information or links on that site or others like Twitter.
The coming twelve months should be very interesting as we watch social media begin to play a more active role on Wall Street. We’ve seen companies pushing their investor relations departments into the space, and now brokers and advisers will cautiously make their voices heard. How will this affect the market? It remains to be seen, but you don’t have to look far to watch the saga unfold. Just jump on Twitter, Wall Street is right behind you.

Eric Rice CEO of  LWI Investor Relations