‘Friending’ clients: Unprofessional, or a way to deepen ties and boost confidence?

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Finance culture is changing quickly as financial institutions realize that wealthy women represent a lucrative business opportunity. Advisors of both genders need to adopt a new language and style because women tend to learn, communicate and buy differently than men.

This is the third of a five-part series in which I share my research findings for advisors who want to become more female-friendly. I spent the last 13 years conducting more than 1,200 qualitative interviews with highly accomplished women around the world in diverse industries and professions.

In this third article, I look at social media and other technology and how it can deepen the advisor-client relationship and build investor confidence. Have you heard of “trading salons” yet?

Finding No. 1: Women care a lot about social media, and their advisors should, too

Women continue to use Facebook at higher rates than men. More than three-quarters of female internet users are on Facebook, compared with just 61 per cent of men. About 44 per cent of female internet users are on Instagram, versus 36 per cent for men. (Those figures are from the Pew Research Center’s 2021 Social Media Fact Sheet.)

A decade ago, while I was a partner at an investment firm, I was initially concerned about “friending” my clients. Wouldn’t that be unprofessional? But I came to understand why it was a good idea to share more of yourself with clients.

One of my more sophisticated investors had always been direct and businesslike in our portfolio review meetings. But then she friended me on Facebook. A short while after, she reposted one of my silly cartoons. I was surprised to see this aspect of her personality, but when I stopped to think about it, I realized that social media allows us to see a softer side of each other and this is another way to build closer, more trusting relationships.

I ended up becoming Facebook friends with at least half of my female clients, and many are now also my real-life friends.

Yes, but what about compliance?

In 2020, about 65 per cent of U.S. advisors were using Facebook for business purposes with their clients. Then in 2022 the SEC created the Marketing Rule, which changed the game in many ways. The percentage of advisors using FB for business has fallen 27 percentage points to only 38 per cent.

The SEC rule doesn’t actually prohibit the use of social media for client interaction – it just requires the firms to track those conversations. That can be difficult or expensive, so many firms (but not all) imposed blanket bans on using social media platforms for business purposes.

1) As I said, many but not all – 38 per cent of advisors in the U.S. were still using FB as of 2022. That’s nearly 4 out of 10.

2) Plus, where firms “ban” social media, they mean for business purposes. Talking about markets and client business may not be allowed, but advisors are still able to be friends with clients on social media platforms, to interact on personal matters, and to share interesting articles, links and news stories, as long as they aren’t about their firm or investing matters (depending on the exact link).

This matters. My research shows that women care a lot about social media and use it more than men. And even if I can’t have portfolio conversations with clients on social media, I can share my life, learn about their lives, foster a closer and more personal relationship, and share books I have read, places I have seen, and news stories that we both care about.

There is no SEC rule saying you can’t start a client meeting by saying, “I saw that dinner you had last night, it looks delicious. And the new puppy is so cute.”

Canada has rules governing the use of social media, too. For example: https://www.iiroc.ca/news-and-publications/notices-and-guidance/review-advertisements-sales-literature-and-correspondence#toc-social-media-websites.

To be very clear, I am advocating the use of social media as an important tool to strengthen and/or build relationships with female clients. I am not advocating some kind of work-around of the rules. Just be careful that you are on high alert as to what is and isn’t allowed by your firm and your compliance department.

Finding No. 2: Discussing our clients’ online trading is a great way to deepen a relationship

Women young and old are using the latest apps and investing platforms. Here is what a couple of my interviewees had to say on the topic:

• “Technology is making information accessible, so investing has become much easier. Thanks to social networks, chat apps and mobile apps, women are becoming more and more tech-savvy. My 70-year-old mother is constantly on Facebook, iMessage, WhatsApp and Skype. Every day she comes up with some information she found online – things I don’t know about, which I find absolutely amazing.” – Sales executive, Istanbul
• “Women are extremely savvy, both about money and about technology, and as technology advances, it is becoming increasingly easy to do your own investing. I have seven financial apps on my phone! Mobile has changed my life completely when it comes to money.” – CEO, marketing firm, San Francisco

I highly recommend encouraging your female clients to open up an online trading account (this is in addition to the accounts you manage for them), creating a great opportunity to improve client/advisor dialogue around markets and risk-taking.

One happy client I interviewed shared her experience:

• “My professional advisor suggested that I open an online trading account. Being a cautious person, I started with a modest sum during a market slump and for months hung on every fluctuation of the economy and the stock market, often selling what I should have kept. I’m more relaxed now and I have learned to trust my initial judgment. Panic is not an emotion that will make money or safeguard future income. The knowledge necessary to build a financial portfolio is considerable. I now have a greater understanding and respect for the job done by my advisor. My new knowledge hasn’t changed my approach to investing but I am clearer on some of the issues.” – Artist, Halifax

Finding No. 3: Social trading salons are both fun and effective

If our clients’ friends and family – especially their daughters – haven’t yet started investing, what can we do to help them? Host online trading salons.

Trading is a great way to build financial confidence. One successful advisor invites clients and friends to trading salons where they either set up or share their investment accounts and discuss how to use the platform. She encourages women to try trading online in a classroom format and discuss what to think about when making investments. Small groups work well and this might evolve into a series of classes.

Even if our clients are already comfortable trading, they are likely to be interested in an online investment salon of some type. As one of my interviewees told me:

• “An investment salon is a good idea. I would participate if the topic was of interest to me – I would love to share stories about sustainable investing. A group of 10 to 12 women could meet on a quarterly basis. We could also then continue the discussion via a social community?” – Architect, Vancouver

Maybe it’s time to banish boring seminars. A communications expert I interviewed certainly thinks so:

• “There is something very wrong with today’s model where you have elite boy’s clubs running the show at investor seminars. This doesn’t allow for new thinking. Encourage more cooperation via a new, more open style of presentation and interaction – online as well. This will be a game-changer.” – SVP communications, Toronto

More articles from this series:

• Be a female-friendly investment advisor: Communicate in her language
• How to be a female-friendly advisor: Get the risk right

Writer Barbara Stewart is a Chartered Financial Analyst (CFA) with 30 years of investment industry experience. She spent five years as a foreign currency trader, more than two decades as a portfolio manager for high-net-worth entrepreneurs, and for the past six years she has been performing interview-driven research for financial institutions around the world.  Barbara is a keynote speaker for CFA Societies, banks, stock exchanges and industry conferences globally, and she is a columnist for CFA Institute and Canadian Money Saver magazine. She is on the advisory board of Kensington Capital Partners and also is the Ambassador for the Kensington Women’s Forum. In addition, 13 years ago Barbara saw a need to challenge outdated financial industry stereotypes and share positive messages about women and money. Today, Barbara is recognized worldwide as one of the leading researchers in women and finance. Her Rich Thinking® global research papers quote smart women and men of all ages, professions and countries and are released annually on International Women’s Day, March 8. To find out more about Barbara’s research, visit www.barbarastewart.ca.

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