As Facebook prepares for its initial public offering this spring, now is the perfect time for mutual fund directors to broach the subject of social media with their colleagues around the board table. Directors should not only familiarize themselves with how their own fund complex and others are using social media, they should become familiar with social media itself.
According to research firm kasina, some 80% of asset managers were active in social media in 2011—up from just 48% of managers in 2010. They’re using blogs, Facebook, LinkedIn, Twitter and YouTube to get their message out to the market and to the masses. The effectiveness of these firms’ efforts varies, according to kasina, but the momentum behind this movement toward social media is strong and not looking to slow down anytime soon.
Just knowing your fund complex is using social media outlets is not enough, however. Directors should be familiar with the firm’s policy on social media use and how it is training its employees with regard to using social media. There are real reputational risks associated with social media—for the firm, its employees and the trustees—and directors will sleep more soundly if they know compliance and others are doing as much as possible to minimize those risks. Aside from reputation, there are myriad other issues to consider as well: storage, confidentiality, and the potential for client accounts to be compromised, to name a few.
Perhaps the best way to understand social media is to participate in it. Directors, start tweeting, friending, blogging and linking in. Put yourself out there and create a real-life frame of reference for those board room discussions. What better way to get—and keep—a handle on the virtual world that is becoming more and more important to the mutual fund industry every day? And send a friend request; I’ll accept!