For all the information and misinformation that crawls across screens from social media sites throughout the United States and the world, social media is still not the universal source of information for wealthy investors.
This is especially true for investors who have assets invested in a defined contribution plan. While many DC participants have no idea how their assets are invested once they are deposited into their DC plan, those that keep a watchful eye do so without the use of social media sources.
However, younger DC participants are so accustomed to finding everything the need on the internet, that social media has grown in its influence of DC participants. Advisors, who are constantly attuned to the need to address the changing environment of contact with younger investors, need to understand that social media is no longer ignored for any informational purpose.
According to Spectrem’s DC Participant Insight Series study Using Social Media and Mobile Technology in Financial Decisions, only 38 percent of plan participants use social media sites for research on investment information. Of course, DC participants would first go to the website of their defined contribution plan to determine the details of their investment portfolio, but investors who want more information on investing in general use the internet to research topics unfamiliar to them. When it comes to social media, however, less than half of participants use those sites to research financial topics.
This is important information for advisors, who are being overwhelmed with studies that show how valuable investors find social media posts from their advisor to be. There is a definite difference between investors who research their financial decisions and those who do not.
For example, 11 percent of Millennials use Facebook for investment research. Ten percent of Gen X DC participation use Reddit to get market updates. Eighteen percent of DC participant Millennials use LinkedIn to find a new advisor. For many Millennial and Gen X DC Participants, Twitter provides articles for research.
Advisors working with DC participants need to address the fears those investors have regarding the use of social media, especially in terms of research, which does not require input of personal financial data. If they are using social media for the purposes of finding a new car or appliance without concern, they can research financial topics in the same manner and with the same rate of success.
DC participants report a strong fear of social media sites, mainly out of concern about the safety of their personal financial information. The population of DC participants is relatively equally spread between Millennials, Gen X and Baby Boomers, and the use of social media for any purpose as well as the fear of social media is often a factor of the age of the user.
Two-thirds of DC participants say they fear social media platforms due to worry about the security of their financial information. The fear is similar whether the information is on a website or app. Such a fear can play a role in how often users implement social media for financial purposes, whether their personal information is placed directly to the site host or not.
However, fear of privacy is not the only reason DC participants are not using social media for financial research purposes.
Among those DC participants who do not use social media for financial research purposes, 39 percent said the No. 1 reason was concern over security and privacy. But there are other primary reasons for a voiding social media.
Ten percent of DC participants who do not use social media say social media is a waste of time. While that may be true for a significant portion of the conversational posts placed on social media, there is obviously a great deal of informational material posted to sites like Facebook, Twitter and LinkedIn that DC participants are overlooking.
Advisors can assist DC participants in explaining how the internet can provide background information on investments that will limit advisor contact and preclude simple questions. And, since 44 percent of DC participants claim to be not very or not at all knowledgeable about finances and investing, providing information on basic investing matters would be beneficial.
Eight percent of DC participants say they have never been taught how to use social media platforms and 8 percent say there are too many platforms to keep track of, which sounds like a class of DC participants who are just social media deniers. Again, such participants can be taught to appreciate the opportunities social media provides for educational purposes, especially on current financial topics.
It is also important for advisors to note that not all DC participants fall in the fear-of-social-media segment. Twenty-five percent of participants say they communicate on social media more than they do on traditional channels such as a telephone, and 16 percent use social media to acquire information more often than they use newspapers and television.
©2019 Spectrem Group