This week's blog was written by SEI's Shannon Gallagher with contributions from John.

I used to think I wasn’t susceptible to the drug that is social media. I was born in 1994, on the cusp of the millennial generation and Gen Z. I played sports as a kid, was outside on my trampoline almost every day, and didn’t get a smart phone until I turned 17 (pretty late for my age group).

Because of these reasons, I felt like I was bigger and better than social media platforms. I wasn’t born with an iPad in my face and I recognize daily how impactful and addictive our cell phone usage is. I believe that I didn’t let it control me, at least not as much as those younger than me.

So this past weekend, as I relaxed one evening with my Ben & Jerry’s, I turned on Netflix and the first show to pop up was “The Social Dilemma,” a new documentary on how “dangerous” social networking can be. I immediately bet that they wouldn’t tell me anything I didn’t already know. I guessed this doc would say, “Put down your cell phone! It’s controlling you!” “Yeah,” I thought. “I know… but I can let go of it whenever I want and so can many other users.” I don’t care if they have my data or that they send me ads based on my interests. Being aware of my susceptibility gave me a super power that protected me from cell phone addiction. 

Well it hooked me, thankfully, for the full hour and a half. As I watched, I considered all the questions that I get from financial advisors about using social media, and more importantly, how they can contribute without being part of the problem.

“There are only two industries that call their customers ‘users:’ illegal drugs and software.” – Edward Tufte

Here’s a short synopsis on what I learned. We have fallen prey to these large technology companies fighting for our attention every second of every day. Artificial intelligence has given them the algorithms to know what to show us and when to show it so we never want to stop scrolling and leave their apps. They show us articles and stories from dubious news sources that feed into our fears and concerns. They promote a culture of consumption that suggests you will be happier if you buy their products. The very nature of social media is your friends and family “promoting” their best life with pictures that show themselves at their best. 

As I got deeper into the documentary, it occurred to me that advisors need to be wary of the “noise” but as J. Womack and John Anderson suggested in their work on goals-based wealth management, both investors and advisors are susceptible to behaviors like herding or confirmation bias. We have to look in the mirror to see if we are being manipulated too. 

Understanding what we see

If “social media” is a drug (and the documentary makers suggest it is) then acknowledging the addiction is the first step to recovery. Understanding what your clients see and what will make them react can be your first step to assisting them. For example, you may know that many of your clients are retirees, and they’re inundated with stories and articles around:

  • Top places to retire or travel
  • Where to invest without volatility
  • Miracle drugs and supplements that will make even the slightest pain go away
  • Strong “reasons” they should have gold, bitcoin etc. in their portfolio

And of course, the pictures in each of the stories will feature the silver-haired, youthful looking couple walking down the beach, being active or swinging in the hammock together — living their best life. 

social dilemma for financial advisorsTeaching our clients (and sometimes ourselves) about these types of articles can take time and practice. We have to understand two things: that the sponsors have something to “sell,” and that the social platform gets paid to put those items in front of your clients often. Sometimes it is easy as they use “clickbait.” Other times, it is much harder as the “source” seems credible. The keys are to have the conversation about social before they call you, and to remind them often.

Get out in front

I was always told that the best defense is a good offence. Instead of waiting for your clients to reach out to you with “something they read on the internet,” why not reach out to them? Here are a few ideas:

  • Find a typical social article on investing, such as some esoteric alternative investment or a tip on buying a specific stock. Do your research on who is promoting and who stands to gain. Highlight that research in your next meeting as an example of how social media is attracting speculative money, instead investments that fit into their individual financial plan. Being proactive will show them how to look with a jaded eye.
  • You may have to answer a question that a client brings up after “reading something” on the internet. Ask them to be very specific on how it affects their plan, the risk would it add, how their goals have changed and so on. Put them on defense. Afterwards, kindly share how social is designed to keep them engaged by targeting their fears and insecurities — remind them why they have you.
  • Target your own social media to your personas. The more general information you share, the more you’ll get lumped in with the general noise (and become part of the problem). Make your posts are specific to a target to stand out and show actual value.
  • Think about how you present performance in review meetings and discussions. Instead of performance vs. a benchmark, discuss progress to goals. By emphasizing goals, you remind clients of why they invest, why they chose you and their progress. It is harder to be seduced by a post promising fantastic returns when you know your goals on track.
  • Set up a watch party with clients; send a recommendation in your next newsletter, blog or communication. Show them that you think it’s important for them to learn about how social media can manipulate and how it can affect their financial lives. Put the conversation in terms of how you interact with them.

At the bare minimum, watch “The Social Dilemma” yourself. Understand this is how the world is interacting today. Understanding social media allows you to better help protect clients from themselves, now and in the future. 

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Please check with your Firm or Firm's Home Office before implementing any suggestions contained herein.

Examples are provided for illustrative purposes only.

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Information provided by Independent Advisor Solutions by SEI, a strategic business unit of SEI Investments Company. The content is for educational purposes only and is not meant to provide investment advice or as a guarantee of any specific outcome. While SEI welcomes comments, SEI is not responsible for, and does not endorse, the opinions, advice, or recommendations posted by third parties. The opinions expressed in comments are the view(s) of the commenter(s), and do not represent the views of SEI or its affiliates. SEI reserves the right to remove any content posted by users of this site in its sole discretion.

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