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It comes as no surprise that much of the investment management industry continues to be perceived negatively by the general public, whether due to perceptions on executive pay or investment returns. However, investment managers, particularly those who are independent and free from conflicts of interest, such as proprietary trading, can leverage the online channel to regain or increase the level of trust they are bestowed.

Insight and Research:

When selecting an investment manager with which to do business, the personal or professional referral is the most important factor for many people. This stems from the level of trust and credibility we assign to those within our social network.  As social media has become a viable online channel, the investment management industry can now establish another means by which information about products and services can be shared, empowering our social networks with credible information.

Research from InSites Consulting in January 2010 which was highlighted in eMarketer.com, showed that internet users were most likely to favor their peers when it came to information found about brands on social networking sites.

We can conclude that since much of the investment management industry are in the early stages of adopting social media, one of the initial goals for industry participants should be to establish the brand’s credibility through their own social network presences, which are also highly trusted. However, this needs to be done in a manner which does not run afoul to any of FINRA’s recent guidelines on social media.

Complicating the efforts of investment managers to establish a trusted online presence is the concept that “trust is faceted”. Courtesy of a recent article on Endeca’s blog, Search Facets, emerges the idea that trust is not binary, i.e.  “I trust you or I don’t”. Instead, trust depends on the context of the task. This is especially true for investment managers. Those in our social network that we may trust for movie or music recommendations, may not be the same people we would trust for investment advise or guidance on selecting our next financial advisor.

Investment managers have an opportunity to establish their online brand credibility as a means of counteracting the industry’s negative perception, but will have to be conscious of how the online information maybe used by advisors and peers within social networks.