From Barack Obama to the Pope – everybody seems to have the social media bug and are using sites such as Twitter to share their words of wisdom with the world – but can social media add value to firms in the second-charge loan market?
The finance industry in general has been more reluctant to embrace social media than most celebrities and public figures due to issues around compliance and exposure.
But with around 829 million daily active users on Facebook, 15 million UK users on LinkedIn and around 500 million
Tweets being sent every day, can second charge firms afford not to be in the social media game?
Making Yourself Visible
Bridget Greenwood, director of Financial Social Media (UK), a digital marketing consultancy which helps financial firms with their online and social media strategies, says in the past few months the level of interest it has received from financial firms has grown dramatically.
“As social media becomes more mainstream and familiar to financial firms, they are beginning to embrace it,” she says.
“However I still believe the majority of firms don’t have social media on their agenda.”
Using social media can not only reduce a firms marketing spend but also help a firm find new clients, says Greenwood.
Matt Tristram, director and co-founder of Loans Warehouse, says social media is a great free tool if used correctly.
He says: “We use LinkedIn and Twitter purely as an intermediary tool rather than a direct to consumer one. Both allow us to highlight relevant news to a target audience who have chosen to follow us without incurring a cost.”
The company also uses Facebook for recruitment purposes.
“With most of the followers locally based it again allows us to reach the local community when we have a vacancy,” he adds.
The second charge industry’s use of social media differs from that of the rest of the mainstream finance industry in that it is not predominately targeting the end user.
Tim Wheeldon, managing director of Fluent Money, says: “For us it’s about making ourselves visible to our lead introducers.
“If they are looking for a second charge broker they can find us on Twitter, tweeting relevant news and issues about the industry.
“Our social media is aimed at our corporate customers rather than borrowers.”
Wheeldon says 99% of its social media use is business and finance related but it does not tweet anything as specific as loan rates.
“All we are doing is talking about the market and its current affairs,” he says. “We want to be seen to having intelligent and relevant debate.”
Making an Impression
Matt Cottle, commercial director at Y3S Group, says using social media such as Twitter and LinkedIn for business purposes is an absolute must as far as he is concerned.
“Some weeks we get half a million hits on LinkedIn,” he reveals.
“For me it’s part of my daily routine – a few hours a day. I spend about 40 hours a month on social media.”
Although it is hard to gauge what impact social media has on the firm’s business volume, Cottle says he is confident that the hours he puts in he gets back in terms of enquiries.
“In six months’ time a deal might land on a broker’s desk and they might think of the guys they see on LinkedIn and Twitter all of the time,” he says. “It’s impossible to moderate what you get back from it in terms of business, but for us it’s about having a rounded marketing mix.”
It recently ran a series of spoof ads on social media which featured men and women in compromising positions.
The campaign received mixed responses and while some saw the ads as light-hearted fun, others viewed one ad in particular as too risqué.
Cottle says: “The image was a spoof ad that the marketing guys threw in front of me during a meeting as a wind up. It was so well thought out that I had to run it for fun as we only advertise to brokers and not end users.”
Cottle says he decided to only run the campaign on social media and not in print because he feels social media is “more accepting and experimental in its views.”
He adds: “Men and women alike have said it’s superb and obviously there have been a few nasty comments, but that is to be expected,” he says. “The main thing for me is that it’s being talked about. Good or bad, it really doesn’t matter.”
Cottle believes it can sometimes be advantageous for firms to show their jokey side on social media.
“A lot of companies are quite stiff on the internet whereas we feel we are honest and not too corporate and boxy,” he says.
Steve Walker, managing director of Promise Solutions however, is not convinced of the benefits of social media for business purposes.
“People have told me that there are business benefits to sites such as Twitter but whenever I look at it I struggle to see it,” he says. “I find that it is full of information which is social – but it doesn’t talk about business.”
Walker believes social media sites such as LinkedIn can be helpful in a business environment but adds: “On sites such as Twitter you have to be very selective about who you follow and if you’re not careful you will end up following people that are saying things that don’t necessarily add value.”
He says he finds it hard to engage with social media at times because sometimes the content can be a bit ‘spammy’.
“I’m not interested in how people are feeling, what they had for breakfast or whether it’s someone’s birthday in the office,” he says. “What I am interested in is any great products that are coming out, case studies and the latest lender news – but how you find that amongst some of the spammy type tweets is becoming a little difficult,” he adds.
Careful What You Tweet
Social media may seem like a harmless way to get your latest PR message across but now that the sector is regulated by the Financial Conduct Authority, firms need to be careful about what their messages contain – or more to the point, what they don’t.
Any posts regarding specific rates and products posted on sites such as Twitter, Facebook and LinkedIn are classed as financial promotions in the eyes of the regulator.
In the FCA’s consumer credit sourcebook – CONC – it states that all financial promotions should be clear, fair and not misleading.
As the sector awaits its final rules from the FCA it is somewhat in limbo regarding what guidelines second charge firms need to follow when it comes to financial promotions.
However at the very least firms will need to follow the rules laid down under the Consumer Credit Act of 1974, which states that financial promotions must contain a warning such as:
“Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.”
Robert Sinclair, chief executive of the Association of Finance Broker, warns: “Firms can’t get very product specific in the second charge market without falling foul of the financial promotion rules. All financial promotions require disclosures that cannot be made in the 140-character limit available for tweets.”
Firms marketing to the broker community can accompany all of their tweets with a warning that the promotion is for intermediary use only, but Sinclair says they would have to demonstrate that it was only being sent to brokers.
The FCA is due to update its guidance to social media later this year – something it has not done since 2010.
Greenwood says firms should expect much more detailed guidance from the regulator with specific examples of what falls within regulations and what would be considered a breach.
She says: “This should clarify for a lot of firms still being overly cautious with their social media, or indeed lack of social media presence.
“If it follows suit from the US, there will also be some guidance on best practice, risk and management as well as purely regulatory considerations.”
Social media has undoubtedly changed the way consumers, firms and businesses go about their lives.
Future generations will find it inconceivable that there was once a time when you could not instant message or stream photos live to thousands of followers.
Social media can be an invaluable tool for firms – it’s free, easy to use, and a great way to build trust and brand awareness with potential introducers.
The popularity of social media however has in some ways trivialised the use of sites such as Twitter.
Financial firms in particular need to put as much energy and thought into their social media strategy as they would any other aspect of their marketing and PR. It is vital firms remember that just because it is free, easy and simple to use, it doesn’t make the messages they are putting out over social media any less important.
The FCA’s guidance later this year should offer some insight as to what the regulator deems a suitable use of social media and firms should expect that as the social media growth continues, so will the FCA’s scrutiny of how firms are using it.