Defining the risks and rewards of digital messaging in financial services

Defining the risks and rewards of digital messaging in financial services

Digital messaging is now comfortably integrated into our daily personal lives. But do these modern forms of communication—particularly texting and social media messaging—have a place in the financial services world? 

When considering incorporating digital messaging into a business, especially in a highly regulated industry, questions such as the following come to light: 

  • Is using more casual forms of communication with clients and prospects risky? 
  • How do you effectively incorporate digital messaging into a financial firm? 
  • Are there ways to mitigate compliance issues? 
  • Most importantly, do the rewards of digital messaging outweigh the risks? 

Hearsay recently hosted a webinar led by our Chief Marketing & Strategy Officer, Leslie Leach; Chief Product Officer, Alex Falls; and Vice President of Digital Transformation, Alex Schuster, designed to tackle these questions. Here’s the recap.

Setting the stage

To kick us off, Leslie explained what modern consumers want. In short, they demand personalized, 1:1 communication. In fact, a recent Salesforce study reveals that a lack of personalized support and a lack of personalized communications are two of the top three reasons consumers leave a firm.

So how does digital messaging fit into the equation? Email has become riddled with ads, but texting and social media inboxes remain relatively protected spaces. As a result, these two channels help agents and advisors cut through the noise and build relationships with prospects and clients. 

“In the hyper-distracted world, texting is a critical way to connect with clients,” says Leslie. The fact that 93% of consumers want to communicate with businesses via text sweetens the pot. There’s a lot of value for businesses as well since open rates are off the charts (98%), and leads reply within an average of just 90 seconds. 

However, industry regulations create a lot of friction for firms trying to become and remain compliant with SEC and telecommunication guidelines. 

Defining the risks of digital messaging 

Messaging risks are especially poignant today since the SEC has hit many big names with millions of dollars in non-compliance fines. 

Alex Falls says, “Regulators demand more than policy. Scrutiny and fines are on the rise, and the whole industry is under the microscope.” He also points out that although the SEC is the entity making headlines, telecommunications providers are also cracking down on misuse or abuse of text messaging as a business medium. “There’s tremendous pressure to do this right and to have a very robust supervision system for using these channels,” he adds. 

So what specific risks are we talking about here?

Digital messaging risks generally fall into two primary categories:

  • Compliance
    Non-compliance penalties—including fines and, in some cases, even litigation—can be triggered by a lack of record-keeping or the use of prohibited words. Firms without internal supervisory measures in place also risk losing control of their corporate messaging, which can lead to brand misrepresentation and damaged reputations.
  • Scalability
    Having to record, approve, and manually manage every single outgoing message sent by a member of your firm is not only incredibly tedious; it’s nearly impossible to scale. The level of scrutiny necessary to maintain compliance creates significant inefficiencies for advisors and firm leaders. 

There’s no question that utilizing digital messaging without a sound compliance plan in place is a seriously high-risk endeavor. And, given modern consumers’ demands, not being present on digital messaging channels has significant opportunity costs. But what are the rewards for firms that invest time and resources into implementing a compliant digital messaging strategy?

Defining the rewards of digital messaging 

The list of rewards for firms that effectively deploy digital messaging is long and far-reaching. In addition to being able to meet the needs of consumers, there are many efficiency upsides, as well as enhanced customer experience benefits. Alex Schuster says,Advisors, agents, and brokers find that the use of one-on-one messaging can positively influence each stage of the sales cycle.” 

There’s tons of value for clients and firms outlined in the visual above, but how does a solid digital messaging strategy positively impact ROI?

  • Gain efficiencies by leveraging communication channels with high open and response rates (text and social messaging) save advisors an average of 3 to 6.5 hours per week
  • Reduce follow-up emails by as much as 50% by moving messages to a mobile channel
  • Accelerate onboarding by up to 2.5-weeks with 1:1 messaging
  • Implement a system that allows for team account management results in an annual productivity improvement of up to 400 hours

As you can see, the potential efficiency, productivity, and monetary gains are huge. So, where do you go from here?

First, it’s important to assess the channels you use for 1:1 communication to make sure each one is a good fit for the financial services industry, is capable of supporting compliance, and is market-ready. 

Here’s the best way to tackle that analysis:

  • Financial services fit: Prioritize scalability (IT and team management functionality, the ability to use API workflows to support productivity),
  • Compliance fit: Look for enterprise-grade APIs that allow you to enforce corporate policy. Ideal platforms provide compliance and supervision support, data security and privacy, and users and group permission settings.
  • Market readiness: Focus on trusted, proven networks (SMS, LinkedIn) and wait on up-and-comers (WhatsApp, WeChat).

Performing this analysis will help you rule out channels that lag in one or multiple categories, which will help protect your firm from compliance risks related to one-on-one communication. The bottom line is consumers demand personalized, one-on-one communication—but most firms can't support digital messaging at scale without taking on significant risk. The good news is that proven solutions exist for firms ready to capitalize on all the benefits of digital messaging. Watch the webinar or check out our compliance overview to learn more.

Jessica Cates
Jessica is a content creator and strategist dedicated to publishing engaging content across Hearsay's corporate channels. The Gilbert, Arizona-based mom of two loves to tackle a blinking cursor on a blank page – and as a former Nebraskan, is totally down with the southwest's interpretation of winter.

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