Morgan Stanley made news yesterday when Reuters revealed the contents of an internal memo from Andy Saperstein, Morgan Stanley’s head of United States wealth management. Morgan Stanley will be “the first major wealth management firm” “to use key social networking sites to market themselves and share the firm’s intellectual content, while complying with regulatory requirements,” according to the memo to employees.

This news comes a year after Saperstein went on record as supporting social media at an Investment Company Institute conference last May.

What follows are the facts of the announcement, my reaction and links to other perspectives.

The Facts

Who: The full brokerage force of 17,800 advisors

Timing: 600 advisers will start before late June, the rest to follow within six months

What: Accessing LinkedIn and “partial use” of Twitter

How: Socialware will provide social media archiving support, no details on added internal Compliance and other resources

Why: From Saperstein’s memo: “Over the last few years, the emergence of social media has changed the way in which people communicate with each other, and companies interact with clients. MSSB is embracing how social media is changing communication and is at the forefront of the industry in how we are incorporating it into our business strategy.”

Joining A Conversation That’s Underway

Morgan Stanley can score this as a short-term win—brokerage firms that follow won’t get as much media attention, for example, and the decision no doubt appeases those who have been agitating for “social media” from within the firm.

I empathize with the task that Morgan Stanley takes on here. As I repeatedly tell my Rock The Boat Marketing asset management consulting clients, social media isn’t a perfect fit for a big firm, let alone a big regulated firm. Efforts to extrapolate what has succeeded for individuals and small businesses often fall dull, flat and ineffective. A shocking amount of time and people resource investment often barely moves the needle where the needle needs to be moved—in authenticity and real engagement.

As much as I cheer the interest and commitment suggested by this announcement, I share others’ reservations about the limits that are being imposed and the potential value of the advisors’ participation to the social communities about to be joined. There is a “conversation” already underway and the highest level question to be asked is what value will Morgan Stanley advisors add to that conversation.

Should AdvisorTweets brace for redundant home-office-scripted tweets from thousands of advisors? We can be certain that the tweets will represent Morgan Stanley but what will these tweets really tell us about what advisors are thinking? I think of yesterday’s impromptu outpouring from advisors moved to tweet about the death of CNBC’s Mark Haines. How will Morgan Stanley support fresh individual expression, if at all?

But I’m determined not to obsess about that just now. No body—no individual and no firm—has ever taken to social media and followed the plan that was carefully laid out in the Ivory Tower. Participation always leads to a re-set, and that’s likely to happen at Morgan Stanley.

Re-read that line from the memo—the part about using the networking sites to market and share content. With a few months in, my guess is that the architects of the plan will realize that listening and learning should have been an expectation, too. In a conversation it can’t all be about you and what you want to accomplish.

As a result of its initial experience, reception and feedback from practitioners, the firm should be smarter and sharper as a result of having taken this on. I’d look for a Version 1.5 of the plan to begin to reflect the firm’s real vision for the value it can add using social media and, secondarily, the value it can receive.

Also read:

From the New York Times’ DealBook blog: Tweet on the Street
Excerpt: “Financial advisers can also select from a library of preapproved status updates that cover market updates, economic and investment insights and wealth management topics.”

From Registered Rep: Morgan First On Wall Street to Crack Social Media Code
Excerpt: “Lauren Boyman, MSSB’s director of social media, notes that the firm plans to loosen the reigns eventually. Critical will be having the firm’s advisors catch up with those who are early adopters and much more comfortable understanding how to use the social media platform in a compliant manner.”

From Mashable: Morgan Stanley Brokers Will Use Twitter & LinkedIn To Market Themselves
Excerpt: “The advisers will use the social channels to communicate with existing clients and look for sales leads.”

From The Wall Street Journal’s Financial Adviser Blog, this post by Josh Brown, also known as The Reformed Broker on his blog and on Twitter: Morgan Stanley’s Twitter Initiative: Well-Meaning but Pointless
Excerpt: “With all due respect to Morgan Stanley, can they really think that anyone has an interest in being spammed with PR and pre-approved status updates from their broker? This firm is bringing social media companies public for billions of dollars and this is what they think it’s about?”

Finally, for today at least, you can see some other reactions by searching “Morgan Stanley” at search.twitter.com. There’s less to find on this topic but remember that you can also use the AdvisorTweets search engine to check out comments from advisors who are already using social media.

Your thoughts? They’re always welcome.

Much has been made of what a big news week last week was. There was a lot to keep track of in the investment business, too, as many of us benefitted from tweets sent from two conferences underway:

• the Financial Planning Association’s FPA Retreat 2011 (see the #FPARetreat11 tweets)
• the Investment Company Institute 2011 General Membership Meeting (see the #iciconf tweets)

But it would be a shame if you missed a 72-minute discussion on how “Social Media Is Changing The World Of Investing, a Milken Institute Global Conference discussion held last Wednesday and posted online shortly afterward. Even I was putting off watching an hour-long online panel discussion, but trust me when I say that this is worth your time. You’ll get a lot out of the panelists’ insights on and examples of how professional investors are using Twitter, LinkedIn, blogs and other forms of social media to gain intelligence. Financial advisors, regulators SEC and FINRA, and asset managers were mentioned quite a bit.

The panel, moderated by Fox Business Network senior correspondent Dennis Kneale, included:

• Chris Albinson, Managing Director, Panorama Capital and @chrisalbinson
• Scott Burns, Director of ETF, Closed-End Fund and Alternatives Research, Morningstar
• Tom Lydon, Publisher, ETF Trends and @TomLydon
• Evan McDaniel, Chief Information Officer, MerlinOne Trading Partners (@SellPuts)
• Jon Najarian, Co-Founder, optionMonster.com and @OptionMonster

Note that the image above is just an image—code to embed the video has not been made available. Click on the image or this link to watch it.

A few notes follow, but try to watch the video for all the context and color. The numbers in parentheses are time markers.

Social Media Gives Investors An Advantage

Albinson repeatedly referred to social media as a “wrecking ball” whose impact is yet to be felt in banking and finance. One example: He knows a trader who wrote a script for LinkedIn to track the movement of sales reps moving from RIM to Apple. The trader was 12 months ahead of the RIM/Apple trade, Albinson said. (11:20)

Albinson: Asked to provide an example of social media breaking news, Albinson described how a blogger in Moscow pulled together sell-through information from Twitter and regulatory filings and found a discrepancy between those reports and mobile unit volume Microsoft was reporting. “It was a catastrophe for Microsoft. Blogged in Moscow, picked up on Twitter…Who’s the good guy/bad guy in that scenario? Is it Microsoft misleading the public?” (39:00)

Najarian: Twitter broadens and democratizes information access. “Many of you have very sophisticated systems, whether it’s Bloomberg or First Call, very expensive, sophisticated means of acquiring information. Whether it’s at $4,000/month or 50,000 shares a week that you have to do to get that information, that blocks a lot of others from getting that information. You might find that you can get that information on Twitter…With Twitter you can research, hit that stock symbol and see what people post. That’s manna from heaven if you’re an information junkie like me, wondering what’s going on and why would a stock be moving.” (28:00)

Financial Advisors’ Participation In Social Media

Kneale showed several slides, most featuring data from the recent American Century Investments survey.

Saying that the “SEC’s archaic disclosure requirements do not work in a 140-character world,” Burns reacted to the survey data showing that 70% of advisors have a Facebook page. “But what’s actually on there? It’s mostly personal.” (15:00)

Lydon: “The train has left and the SEC is not jumping in front and saying, ‘Stop,’” to advisors. “But what they’re doing is reserving the right to come into shops and asking, ‘Are you posting misleading information, are you pumping and dumping, are you not disclosing?’…For the average financial advisor out there…it’s common sense to do what you want to do.” (17:25)

Lydon: “The average advisor who hasn’t embraced social media and really committed to it is going to have trouble with his business. Right now buy-and-hold isn’t sexy and especially with what’s coming on the fixed-income side, they’re going to have to do a lot to ingratiate themselves with their clients.” (1:08)

Najarian: “The SEC and FINRA really do have to get on board with this. Because what are they promoting? They are promoting people who aren’t registered as spokesmen or knowledgeable about a particular stock. Because the people who are registered can’t say anything.” (18:20)

Najarian: “We’re going to drag the SEC and FINRA kicking and screaming into letting real folks that are the Series 7 or registered investment advisors use social media in a good way…one of the things that will change is that there will be more good guys in the game with good information…There are a significant amount of good guys with good information that can’t participate right now because their Compliance officer won’t let them. Do you see anything on Twitter from Fidelity, from Goldman Sachs, from Morgan Stanley?” (1:10) [In fact, Fidelity does have a Twitter account.]

Asset Managers And Social Media

Lydon: “Broker-dealers and mutual fund companies are handcuffed, they just can’t get information out there before it’s old or irrelevant.” He named Van Eck Global as one firm that has “found a legal way to get the information out” by maintaining a separate Website, HardAssetsInvestor.com. Other firms are using the media and bloggers to disseminate information along the lines of “We have a new product, we’re seeing a trend in bonds, we can talk to you about it, maybe, off the record.” (38:30)

Burns: Naming “successful” blogs like Oppenheimer’s and iShares’, Burns predicted continued asset manager interest “as they figure out that snail mail has died, email has died, how do I communicate with my customer when they have opted to make Facebook their primary place for information?” (1:09)

Lydon: Much of the panel was focused on using social media for trading information but it can also be used as education for the average investor…”A company like PIMCO, a trillion and a half, made their money bonds and now they know what’s coming, they see the light at the end of the table. How do they embrace their shareholders using social media to say, ‘Hey folks, you know this thing is going to change and we have some other opportunities for you and maybe now is the time to start thinking about them.’ That’s a classic situation.” (1:04)