New research shows that 70% of affluent US investors have made an investment decision based on information they have learned from social media; 34% use social media specifically to help inform their personal finance and investment decisions. Even for High Net Worth individuals with more than $1m in investable assets, 25% seek investment advice from social media.
The report, from Cogent Research, is based on a survey of 4,000 US investors with more than $100,000 in investable assets and shows the growing importance of social media in the investment management industry.
There is much that investors and financial companies can learn from this and from the growing use of social media as an information source for significant decisions including financial purchases. As in other sectors, we are seeing these affluent investors using social media to verify information they get from other sources as well as to augment it with new and more real-time commentary.
As Remy Domler Morrison, co-author of the report, comments:
Todays investors are scrutinizing traditional sources with content and commentary they are finding through social networks, and are becoming much more critical and conversant when it comes to their investment choices
So, just as we’ve seen with other purchases, investors are integrating social media as part of the sources they turn to when making purchase decisions. Many financial companies are exploring how best they can make the most of this growing trend among investors to use social media advice. For some there are concerns about negative mentions of their brand (and how these should be handled) or indeed about whether the trend to use social media as a research source will reduce the use of professional advisers.
The Cogent report provides two insights that should help inform such firms:
- Investors recall more positive comments more than negative ones – for the brands investigated by the research, investors could recall more positive mentions than they could negative one. Possibly suggesting a level of filtering out of the negative comments that are not providing useful information for their decisions.
- Social media is motivating investors to seek professional advice – for those firms that use social media effectively in this space there is the real possibility to generate more interest in advice services from those investors looking for information in social media.
So as we’ve seen in other parts of the financial services sector, social media is providing investors with new sources of information but also provides many opportunities for firms.