Social Media: In Forums We Trust

21st September 2011

So what about a survey showing a lack of confidence in financial firms and financial advisers?  Is that even more predictable, worth about "person sneezes" on the news value scale? After all, the past two decades have seen mis-selling scandals galore. Our banks are seemingly under constant attack – now they face an Office of Fair Trading probe over foreign currency charges.

But we are more trusting of IFAs and banks than of politicians? Yes is the quick, if surprising, answer.

FSA figures revealed to the Treasury show while only around 30% take any financial advice – split roughly two thirds IFA and one third bank or building society – trust levels are high with 63% having confidence in IFAs and just over half in banks. And the younger you are, the more likely you are to trust a financial adviser. It's only the 50+ demographic where mistrust rules.

It might be younger people have had less experience of a finance industry burning – although  bank scandals such as payment protection insurance and penalty overdraft charges tend to hit the under 40s. But it might also be that younger people are more savvy in social media – they take cues from the experience of others.

Money Saving Expert has its fans – and detractors. But no one can argue that it is the most successful money site in the UK, down to a large extent to the "peer to peer" reviews where non-financial users tell each other of their experiences.  These are often more trusted because those postings have no prior agenda – they don't earn commission. 

According to site measurement tool Alexa, Money Saving Expert ranks at 53 in the UK. It had 11.2m visitors in August (up from 10.8m in July) making around two visits each per month. Its weekly email goes out to 6.5m individuals.

Compare that to "read-only" advice sites. The Financial Service Authority ranks 2,443 in the UK (source: Alexa). It's authoritative, but users spend only just under three minutes on each visit compared with nearly five minutes on Money Saving Expert. And as for the still newish but one way Money Advice Service, backed by the government and the finance industry, it languishes at 5,485 in the UK with an average 2.4 minutes on site.

Only one IFA site boasts ratings worth talking about. Ask anyone to name an IFA and the vast majority will say Hargreaves Lansdown. This FT-SE 100 listed firm has had a bad few months on the stock market, thanks to investor fears over RDR (Retail Distribution Review) and whether its income stream from fund companies via platforms would be curtailed by the FSA, but on Monday it was a leading gainer while it has been increasing market share.

According to Reuters, the firm "attracted a surge of new business during July and August which its founder attributed to a ready supply of disgruntled clients who lost money with rivals during the summer market volatility. Net new business inflows in July and August were up more than 30% on a year earlier. Its assets under administration expanded 41 percent to 24.6 billion pounds in the year to June."

Hargreaves Lansdown users spend an average 5.6minutes on site.

HL is becoming a "category killer", a firm that dominates its business space (like Amazon in online books and music). Its website is 884 in the UK Alexa ratings – rival Bestinvest's site is down at 34,080 and only 3.5 minutes for the average visit.

Hargreaves is still zero on twitter, but it gets peer to peer recommendations on social networking sites including Money Saving Expert – many praising its service levels.

It's realised that with time, customers become better able to navigate online. Its recent smartphone app gained 15,000 users in its first month.

The IFA world is skewed towards richer – and generally older – demographics. So it has been slow to embrace social media.

And much too slow, according to a recent blog from Simon Dixon at Fin Extra.

He asks if "the finance world has gone social media crazy?" His conclusion? Not enough.

He says: "I see a lot of finance companies and banks getting started with a token Facebook page or Twitter profile. I see a lot of finance houses offering some form of financial market update on a YouTube video with 17 views and the occasional blog here and there because they feel they have to. Some are reluctantly trying, but very few are going ‘all out' with their very own niche social network."

Dixon has Peter Hargreaves, who along with Stephen Lansdown founded the firm a quarter of a century ago in a spare bedroom, as an "angel investor" in his bank staff training company.

So perhaps he knows what he is talking about. It's certainly all to play for – and it's could be open house for firms embracing social media.  Who knows? They could be the next category killer.

More from Mindful Money:

Market crash: Headlining and tweeting our way to volatility

Tweeting moods key to stock market forecasting

Social Finance: The New Influentials

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