During my last post, I posited a question that many wealth managers are considering when it comes to social media: How do we measure influence? What happens when a peer (John Doe) on a social networking forum says something that contradicts your advisor’s opinion? If John Doe has 1,000 followers, will that make his opinion more trustworthy than if he had 200 followers? Is there a tipping point where if John Doe says something enough times or has enough followers your advisor will find his “expert” opinion mattering less than John Doe’s? Social psychology has been addressing the concept of trust of social impact for decades. One particularly relevant theory is Bibb Latané’s “Social Impact Theory”. While some may dismiss a look at social psychology theories as “merely academic,” previous research and results have been borne out of practical considerations that are directly applicable to social media strategies. One such practical application is the consideration to allow advisors to participate on Facebook, LinkedIn, Twitter, or to keep advisors “above the fray”. A brief introduction to social impact theory: it uses mathematical equations to predict the level of impact created by social situations, and it is composed of three basic rules:
- Social impact is influenced by the strength (S), immediacy (I), and number (N) of its sources. Thus social impact = f(SIN). Strength is a measure of how much influence or power the individual perceives the source to be. Immediacy is how recent the event occurred or whether there were intervening events. Number is essentially the number of sources. Thus social impact is higher when the source has higher status, when the statement is more immediate, and when there are a higher number of people saying it.
- The most significant difference in social impact occurs in the transition from 0 to 1 sources. As the number of sources increases, the incremental impact lessens.
- The more targets of impact that exist, the less impact each individual target feels. That is to say, a person will feel more of an individual impact if the source is directing a comment to 3 people versus if it is directed at 50.
So what does this information mean to the advisor and to the wealth manager? There is some good news and some bad news. First, the good news.
Strength: Advisors are likely to have a higher measure in the “strength” category than are an investor’s peers; since the “strength” is affected by things such as status, education, and perceived expertise, the implicit and explicit designation of the advisor as an “expert” gives his advice a higher degree strength (and thus impact) than would a peer’s. Furthermore, the advisor need not be overly concerned with his advice being drowned out by a sea of other sources claiming something contradictory. Since the largest difference in social impact occurs in the transition from 0 to 1 sources, the advisor needs to be less concerned with having many different sources agree with his opinion, and more concerned with getting his opinion out on a social network. Now for the bad news.
Immediacy: social media enables peer-driven information and opinions that are far more immediate and real-time than are client-advisor meetings, or even weekly scheduled phone calls. For example, if John Doe poses a question on a dedicated Facebook page, he may get immediate responses from several other investors. Given the number of clients an advisor has, he may not necessarily be able to respond to an email from John Doe with the same speed.
Number: While the largest difference in impact occurs between 0 and 1 sources, the measure of “N”, and thus the measure of social impact, still increases incrementally the more sources. So an advisor need not worry if 2 people are contradicting him, but if 50 people are, then he’s got a problem. Below I’ve presented some basic advice as to how to improve each measure of social impact (Remember, social impact = f(SIN).
Immediacy. The advisor needs to be present on Facebook, Twitter, LinkedIn, and be able to track or participate in any private forums for clients. Advisors must be able to follow their clients on Facebook and Twitter, and on any private client networks hosted by the wealth management firm. This will allow the advisor to track what the clients are saying and immediately respond if John Doe poses a question, and mitigate the impact of other sources’ influence.
Strength. The advisor has an inherent advantage in the strength category, given that he is marketed as an expert. However, when creating a private social network hosted by the wealth manager (i.e. “the sandbox in which clients play”), the wealth manager must be careful about how it promotes status-building functionalities on the social network. For example, several online brokerage social networks assign clients who have many followers or who have had strong stock performance special designations like “expert” or “pro”, etc. This is perfectly suitable for the self-directed world, but is less suitable in the advisory world. Assigning such a status to another client or investor will elevate his status and may thus dilute the advisor’s status and therefore his “strength”.
Number. Here collaboration is important. Advisors may want to coordinate their messages with messages coming from the wealth management firm. Also, the audience to whom you are speaking matters. The larger your audience and the more general your content, the less the impact on each person. Advisors participating on social networks must direct their content to either individual clients or specific sub-segments. This will increase the impact of the advisor’s message. These are just a few instances in which social impact theory can be applied to social media strategies. There are many more and I encourage you to read up on the theory on your own. Disclaimer: For more information on Bibb Latane’s theory of social impact, one can consult any introductory psychology textbook or social psychology textbook. Personally, I like: Aronson, E. (2008).
The Social Animal (10th ed.). New York: Worth Publishers
