From bankers to bee-keepers everyone these days is using social media to enhance client interaction. But when it comes to private wealth managers - particularly those focused on ultra high net worth individuals (defined as those with assets of $30M and above) - the social media buzz can prove a distraction, or even damaging, if not adopted in the correct way.

Digital Revolution Impacting Wealth Management Operations/Infrastructure vs. Marketing/Sales

Technology and the digital revolution have impacted wealth management in two important ways. From an infrastructure and operations perspective, data aggregation platforms and new technologies are driving unique ways to analyze and present portfolio performance.

But where social media is having its primary impact is in marketing and sales, particularly in regard to new client acquisition and best practices in business development.

The Red Herring: Social Media and the UHNW Market

Presentations on social media and the private wealth management space are the same all around. They all start out with a video that was compiled by the speaker's assistant to some hip background music where the data and statistics surrounding the rise of Facebook and Twitter and its size and growth rates are astonishing.

Last year, for example, I was speaking to wealth managers at a conference focused on the UHNW space. The previous speaker gave a Power Point presentation charting Facebook and Twitter growth projections in time with some hip background music. I followed that presentation by asking how many advisors in the room were focused on the UHNW market, to which the majority of the room raised their hands. I said, "Good, so everything you just heard will be meaningless for you because your UHNW prospects are not on Facebook or LinkedIn." I then proceeded to explain that the only UHNW individuals that are on Facebook or LinkedIn are the hedge fund managers, private equity fund managers and the so-called ‘digerati’. However, the UHNW digerati are unlikely to connect with you on Facebook or on LinkedIn unless you already have a relationship. The reality is that ultra wealthy families are trying everything they can to minimize their digital and social media footprint.

To understand the limited nature of using the growth of social media data for those seeking to connect with the UHNW market, allow me to characterize the landscape:

-Facebook has pioneered what they call the "social graph" -LinkedIn has positioned itself as the "professional graph" -Twitter has carved out the "interest graph" -Four Square and other geolocation technologies are claiming the "location graph” -American Express with its vast database of client data is referring to itself as the "spending graph"

What is missing is the "wealth graph" that allows the qualification and segmentation by net worth and liquidity, a factor that is critical for reaching the right target market.

Why most Social & Relationship mapping tools have limited value

There has been a proliferation of social mapping technologies and companies seeking to harness the power of social networks. But, without the "wealth graph" to overlay these social maps and networks, to qualify someone financially, these platforms and tools will have limited, if any, value. If you are a UHNW private banker, it does not matter how many relationships you map, unless you can qualify them financially.

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Author:

David Friedman, President, Wealth-X - writing for BFSB's BFR GATEWAY magazine

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