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The reputation of a business is one of the most valuable assets a company can possess, but with the influential growth in social media, management can become quite a challenge. Personnel of Finance departments who think their companies have no presence in social networks are sadly mistaken and obviously naive.

Compliance with the need to create a positive online profile is a bugbear. Financial Services Authorities around the world are clear on the topic of financial promotions using new media. The approach is no different from financial promotions using any other medium.

Financial promotion is defined as any communication that is an invitation or an inducement to engage in investment activity. They define new media as social networking websites such as Facebook and Twitter, forums, blogs, Blackberry and iPhone applications.

In its update, the FSA said it had identified “both good and poor practice”, noting that some firms’ “promotions” lacked risk warnings. “Firms may not have considered these factors to meet the definition of a financial promotion and therefore have not applied the relevant communication rules.”

The rise in importance of social media to the financial services industry is something several groups are trying to track. An independent financial services research group, in its 2011 study, revisited a study performed three years earlier.

In 2008, it found that none of the mutual fund companies that it tracks used Twitter; by 2010, half of them were doing so – most often to post links to market commentary aiming at driving traffic to their websites. By 2011, more than 85% of them were doing so.

Clearly social media is something the financial services industry is finally embracing. While many firms still struggle with compliance concerns, and few have developed metrics for measuring their success, most of the companies tracked are optimistic about this phenomenon and are willing to at least experiment here.

Judging from current trends, even if asset managers are doubtful over the use of social media as a trading tool, its value in a firms public relations cannot be overlooked.

Toyin Adun is the Finance Manager at Mediacraft Associates Ltd

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