Fund Managers Start to Like Social
Fund firms are beginning to like social
media and the devices their staffs use to communicate online with
Fully 50% of respondents to the 2012 Money
Management Executive Technology Survey said that their companies were
adopting social media such as Facebook, LinkedIn and Twitter for the
That's a big step up from the 2011 survey,
when fewer than 20% of respondents said their firms used either
Twitter or Facebook to communicate with present or future customers.
That stepped-up presence was reported by a
select sample of 77 director-level and above executives at mutual
fund, exchange-traded fund and alternative investment firms.
Respondents included top-level executives in technology, operations,
marketing and overall fund management.
Of these, nearly a fifth say they are
using social media as means of reaching customers and increasing
revenue. The top two: Twitter (19%), for communicating with customers;
and Facebook (17%) for promoting products or services.
That does not reach the level of Web site
usage, for reaching customers and generating revenue, by far.
Currently, 74% of fund firms are using their Web sites as the primary
use of digital technology to reach out to customers. And 25% are using
their sites as direct commerce sites, allowing visitors to purchase or
Still, the shift toward social media as a
means of reaching out appears to be picking up mind share at fund
firms. In 2011, 84% of respondents cited a Web site as their firms'
top means of reaching customers, to increase revenue.
Accompanying that movement is acceptance
of the sorts of mobile devices that make it easier for marketing and
other staff members to communicate, around the clock, with customers
through social media.
Thirty-six percent of respondents said
that their firms were allowing employees to use iPads and other tablet
computers for the first time; and, another 20% said their firms had
begun to embrace iPhones and other 'smart' phones that make it easy to
'tweet' or update Facebook and LinkedIn pages on the go.
In fact, those kind of devices were seen
as the number one means of increasing executive of staff productivity.
In the survey, 51% of respondents said iPads and other tablet
computers were the best technological means of increasing productivity
at this point and another 32% pointed to smartphones.
After that: Replacing desktop computers
with laptop computers and giving broadband mobile access to the
Internet to those laptop computer users.
That embrace appeared also to signal a
re-embrace of spending on technology, throughout the fund industry.
Last year, fully 38% of respondents said
they could not predict whether their firms' spending on technology
would rise or decline.
There was no such uncertainty this time.
In this year's survey conducted in May and June of fund executives
across the country, 41% expected spending on technology at their firms
to pick up. Only 10% expected it to decline. Thirty percent expected
no change. Nineteen percent weren't sure what to expect.
Of those that were certain that spending
would pick up, by contrast, 13% said it would pick up by 5% or more.
Some of those more aggressive spenders
clearly expect to use technology as a means of differentiation.
Nineteen percent of respondents said their firms would spend 5% or
more of their operating budgets on technology.
That is up from last year, when 16% of
respondents said their firms would spend 5% or more of their operating
budgets on technology.
And, in 2012, 42% of firms expect to spend
3% or more of their operating budgets on technology.
As with the past, however, firms clearly
are expecting their technology departments to do more, with less.
Ranking as the top spending priorities for
fund firms were projects involving back office and administrative
operations and customer relationship management systems. These each
were put at the top of their spending lists by 29% of respondents.
But when these same executives were asked
where they expected to cut costs, these two areas also hit the top of
the list. Thirteen percent of managers said they would cut back office
and administrative operations costs, while another 8% targeted CRM
Also high on spending priority lists were
risk management systems, given the steady advance of Wall Street
reform regulation and the adoption of new cost-basis reporting rules
by the Internal Revenue Service. The industry is awaiting a second set
of reforms, for instance, in how money market funds can operate, from
the Securities and Exchange Commission.
But, often, very prosaic, basic
information technologies made the top of the spending priority lists.
Twenty-six percent of managers said
integrating existing systems was a top priority in their spending
plans, another 25% put operating system upgrades at the top of their
lists. And mobile computing initiatives garnered 21%.
One San Antonio-based technology manager
said he was watching for technology that had been commercialized on a
"large scale in fast-growing markets that have 'leapfrogged' costly
For many respondents, that sort of search
ended up being spelled "cloud.''
Seventeen percent said they were looking
at using public processing and storage capacity that can be rented or
paid for by the drink. Another 5% were trying to create their own
private clouds, where they would charge departments internally for
But cloud thinking was clearly on
information technology and other managers' minds, in seeking to cut
Fully 21% said they would reduce the
number of different types of hardware in use, to save money, another
17% said they would "virtualize" storage, another 17% said the number
of applications would be reduced, and, not surprisingly, 14% planned
to cut staff.
Not high on anyone's list were such
technology advancements as better means of processing corporate
actions notices (5%), improving tax reporting (4%), interactive
reporting of financial information using the extensible business
reporting language (XBRL) (also 4%), or proxy solicitation and
electronic voting systems (3%).
When it came to individual technology
initiatives inside companies, though, security seemed to again getting
LinkedIn, for instance, was involved in
the publication of 8 million encrypted passwords this year by a hacker
who was seeking help unscrambling them. Last year, the RSA SecurID
tokens that many technology shops use as extra security beyond user
names and passwords for secure access to networks was breached.
"Securing the information technology
environment" was the top concern of an operations manager of a Denver
fund firm. "Adopting new technology that prevents and quickly responds
to fraud" was the object of a Philadelphia finance operations manager.
And a New York fund executive wanted to upgrade technology "to meet
any challenges that pose a threat to the organization.''
In the end, 'integrating' systems however
did not always mean getting different old systems to talk to and work
with each other better.
With the adoption apparently at hand for
the majority of fund firms to communicate with customers through
web-based marketing, "social media integration" also was cited as a
To stay competitive, fund firms must
build, buy or rent systems that let them communicate with customers on
a one-to-one, one-to-many and even many-to-one basis. And do so
without running afoul of securities industry regulation on how to
conduct and keep records of communications with customers.
FINRA's Regulatory Notice 10-06, issued in
January 2010, tried to establish a distinction between one-to-one
communications on such sites, which would be treated as electronic
mail, and one-to-many, or "broadcast" messages, which would be
regarded as promotion, potentially.
Discussing a mutual fund on a social media
site triggers disclosure to regulators and clear tracking of what was
posted, W. Hardy Callcott, a partner at Bingham McCutchen who
concentrates on regulatory issues affecting broker-dealers, investment
advisers and mutual funds (See "Secret to Success in Social Media: No
Financial Advice," May 28, 2012).
Practically speaking, it can be costly, as
well. If you're posting eight times a day, five days a week, to your
Facebook page, for instance, "it can get quite expensive filing with
FINRA,'' according to Shayna Beck, head of social media at Vanguard.
© 2012 Securities
Technology Monitor and SourceMedia, Inc.