More Archiving Is Good For At Least One Industry
By Jennifer Hoyt Cummings
A DOW JONES NEWSWIRES COLUMN
–With more advisory firms in social media, business booming for archiving companies
–Wirehouses getting more willing to outsource monitoring
–Big expense for brokerages, but it’s insurance against possible fines
[Jennifer Cummings]
The more regulators lay down the law on how brokers should use social media, the better business looks for companies in the burgeoning field of content management.
Last week the Financial Industry Regulatory Authority released much-anticipated guidance about how brokers can use sites like Facebook, LinkedIn and Twitter, as well as blogs and personal devices. Regulators made it clear they aren’t backing down from the longstanding archiving and monitoring requirements that cover brokers’ communications.
That’s good news for companies that collect and archive the tweets, blogs, instant messages and other communications that brokers send. Many of these companies also provide social media training to brokers and act as a first line of defense, scanning postings for potentially problematic words, like “guarantee” or “low risk.” If those words are in a posting, it is prevented from going out and is sent to the company’s compliance department for review.
Big target markets for these companies are the four wirehouses, Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS Wealth Management Americas, which are working to open up social media sites to their massive adviser forces.
Stephen Marsh, chief executive of the Portland, Ore.-based archiving firm Smarsh Inc., says that for a long time, when brokerages mainly just had to worry about tracking employees’ emails, the companies didn’t want to outsource content monitoring. “A few years ago none of them would give us the time of the day,” Marsh says. But now that brokers can communicate in so many different ways, the wirehouses are looking for more help, Marsh says. “It’s causing them to say, enough’s enough, let’s make this somebody else’s problem.”
Austin-based Socialware scored a big win earlier this year when it got a deal with Morgan Stanley Smith Barney, a joint venture between Morgan Stanley (MS) and Citigroup Inc. (C), to help the company roll out more interactive social media to its approximately 17,600 advisers.
Another competitor for the wirehouses’ business is Belmont, Calif.-based Actiance, which provides a wide platform of content management tools to the financial, energy and pharmaceutical industries. Actiance’s chief executive Kailash Ambwani says his company works with three of the four big wirehouses, but he declined to say which ones. Smarsh, which has a partnership with Actiance on certain products, also works with the wirehouses, chief executive Marsh says.
Bank of America’s Merrill Lynch said several months ago that it has advisers with full capabilities on LinkedIn Corp.’s (LNKD) LinkedIn, with a full roll out expected by the fourth quarter to the rest of its approximately 16,200 adviser force. When asked what archiving service Merrill is using, a spokeswoman said the company doesn’t disclose vendor names.
Wells Fargo & Co.’s (WFC) Wells Fargo Advisors has allowed its brokers to have static profiles on LinkedIn for years, and is getting ready to begin a pilot program that will allow interactive communication. A spokesman says the company is still in the process of assessing vendors.
It could cost wirehouses millions of dollars annually to monitor all this content, says Timothy Welsh, president of Nexus Strategy, a consulting firm to the wealth management industry, but the cost is a type of insurance in case a broker misbehaves. “All you have to look at is the kind of fines they would get hit with if there is an issue, and they were caught not supervising this activity,” Welsh says. Most of the companies interviewed for this story declined to get specific on how much they charge.
There’s plenty of work for these companies beyond the wirehouses. LPL Financial, the nation’s largest independent broker-dealer network, is rolling out social media to its advisers with the help of Renton, Wash.-based compliance company Erado. Chief Executive Craig Brauff says Erado’s services are currently being tested by several wirehouses. Another major player in this field is Dover, Ohio-based BMRW & Associates Inc.’s product called Arkovi, a service that’s popular with companies’ IT departments because it doesn’t require hardware or software installation. Arkovi is also in discussions with wirehouses, Chief Executive Blane Warrene says.
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–Jennifer Hoyt Cummings writes about financial advisers and their jobs, with a focus on news and trends related to large retail brokerages. She covers topics such as adviser compensation, management structure, regulation, products, technology, recruitment and best practices. Jennifer can be reached at 212-416-2474 or by email at jennifer.cummings@dowjones.com. You can also follow Broker’s World on Twitter @BrokersWorld.
