The writing is on the wall. An upsurge in social media participation and increasing accessibility to social media tools is signaling a revolution in the investor decision-making process. So how are investors engaged in, and impacted by, social media? What do you need to do about it? Cogent Research recently surveyed 1,000 US consumers and 1,056 investors with at least $100,000 in investable assets who are using social media for personal finance and investing to find out exactly what the buzz is all about. What we learned was compelling and insightful, and also, for the industry, a little nerve-racking. Social media technologies are giving investors tools that not only allow them to validate, but to also potentially changes their investment decisions. Access to and networks of like-minded investors represent a new variable in the investment decision-making equation. To help you effectively navigate this new landscape and engage in it successfully, we have boiled our findings down to 5 reasons social media should be included in your marketing efforts for 2008.

Reason #1: Social media for personal finance & investing is more prevalent than you think

More than one-quarter of US adults using the Internet are engaging in social media for personal finance and investing (see figure 1). Narrowing the focus to just those consumers with at least $100,000 in investable assets increases that percentage to 31%.

But social media is for the kids, right? Wrong. While Social Media engagement-particularly contributing content-indeed skews younger, nearly half of seniors and more than half of baby boomers report they participate in social media activities.

Reason #2: Social media engagement goes beyond blogs

The potential impact of social media engagement is no longer limited to the lunatic fringe of the Internet. Communities like Cake Financial, Motley Fool Community, Social Picks, and Zecco have recognized the power of emotion and validation when it comes to investing and have created platforms that resemble virtual town halls for investors to view and share investment decisions.

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Reason #3: Investors are less likely to turn to you for information

While you may think investors merely supplement their traditional investment activities with the occasional glance at peer-generated content, the opposite is actually true. Among affluent investors using social media for personal finance and investing:

• 31% rely less on information from investment firm representatives
• 19% are less reliant on advice from their financial advisor (7% say much less!)
• 19% say they go to investment firm web sites less often

So, for a significant portion of affluent investors, social media is replacing yesterday’s information gathering tools.

Reason #4: Investors are sharing information about and experiences with your brand

With word-of-mouth marketing more popular than ever before, firms that ignore their most vocal brand advocates and detractors are putting the reputation of their brand at risk.  Furthermore, what investors are saying is typically perceived as believable (regardless if it is or not). Only 11% of affluent investors told us that “social media rarely contains good or credible information.” Conversely, nearly half (48%) disagreed with that statement and 63% said that they find social media influential when it comes to their investment purchasing decisions and behaviors.

So what kind of information are investors reading and writing about your brand? Most of it is positive…but beware: roughly one-third of the commentary out there is negative. And it only takes one captivating story from a disgruntled customer to dramatically change the tides of your brand impressions among your customers.

Reason #5: Your customers are putting their money where their mouths are

Sure, social media contains droves of information from countless sources. It’s rarely subject to the same level of legal or bureaucratic scrutiny that your official communications must go through. But, at the end of the day, is there actually a measurable impact to the bottom line? The answer is a resounding YES.

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_COGENT THOUGHT

.Social media signals a revolution in the investor decision-making process. Investors who are already engaged provide a glimpse into a world transformed by social media, where perceptions of advisors, providers, and products are constantly subject to peer validation and scrutiny. Firms failing to fully understand these emerging media risk relegating the fate of their brand to consumers.