The founder of linkedFA, the premier social networking site for financial advisors and their clients, talks with Managing Editor Leslie Stone about his ground-breaking website, how he complies with regulatory requirements and why he’s not ready to sell out just yet.
“Necessity is the mother of invention.” So said the ancient Greek philosopher Plato 2,500 years ago. His words still resonate today for Jason Bishara, CEO of linkedFA: “When you have to build something out of necessity to address a concern that’s when the best products come about.” Bishara saw a need for a social media application that would allow financial professionals to collaborate and network in a secure online community that would comply with industry regulations. The rest is history.
Opportunist: Tell us about your background.
Jason: I started out in 1995 as a financial advisor and went on to open up my own firm. To enhance our workflow and increase productivity, I started developing software technology that would lower our costs and create a higher degree of accountability and compliance. In the early days of internet communications, financial professionals weren’t allowed to use email. Through SLM Holdings, Inc., a New York-based technology company I founded, I developed a proprietary web-based CRM [customer relationship management] application that sent out pre-approved templates.
Opportunist: How was the technology received?
Jason: The Broker’s e-Vantage, or TBeV, created a financial opportunity for us because other brokers would come to our firm to have our proprietary product. We recognized that we had a commercial application and began to sell our product to the independent market and had rapid adoption. The wire houses, Morgan Stanley, Wachovia, Merrill Lynch, etc., wouldn’t accept a web-based application in those days due to security issues. With a keen interest to receive large enterprise adoption we acquired a company that developed an overlay program called Financial Application for Compliance and Tracking (FAct). FAct was built on top of SAGE Software’s ACT! CRM application, which was on the desktops of most of the brokerage houses. SAGE eventually bought the product and renamed it ACT for Financial Professionals (AFFP).
Jason: [Laughs] The funny thing is, I’m not a technical person — I just understand the needs of the end-user. If you talked with me a few years ago this would have been the last thing I would have imagined myself doing. I’ve been selling products to the financial industry for a long time, and I’ve had thousands of people use my products. After we sold our CRM technology to SAGE we still maintained our relationships with the wire house executive teams and compliance teams. One day, while talking with the CTO [chief technology officer] of a large wire house about his company’s social media strategy, I realized social media was reminiscent of email in that it was here to stay. We have to tackle social media the same way we did email — by selling to the user base and to the industry by appealing to the end user’s need. We got into brokerages by selling to the end user. That’s what we are doing with linkedFA.
Opportunist: How long did it take for the idea to become a reality?
Jason: It started out as a hobby, or a favor really, to address the need for a secure, compliant social media product. Back in November of 2008, we seeded it by letting people in the industry know about it and it just took off by itself.
Opportunist: Tell us how your site works.
Jason: We are the only social networking site designed specifically to address the needs of financial advisors by enhancing their business relationships. They can personally invite their clients to join them in a secure online environment where they can share information and team up with other investors. No one likes to cold call anymore. Users can cultivate new relationships by sharing information with them. They can cultivate 100 relationships at the same time. That certainly makes it a lot easier to prospect. One user, whose name I won’t mention, spends two hours a day creating content. But he’s everywhere on the web — creating blogs, and so forth. As the best in breed, we satisfy our users’ compliance and archiving needs, as well as linking to other social media sites through a singular portal. The way our product works, users can connect to Twitter, Facebook and Linkedin. The conversation you have or information a user shares on linkedFA will be shared (if the user wishes) with all of the other three social media sites. If anyone comments on any of those threads the conversation and content are pulled back into linkedFA which enables the end user to use linkedFA as a portal for all of his/her social media communication. Additionally, by pulling the conversation back into linkedFA the correspondence is now compliant because linkedFA is recording the entire conversation.
Opportunist: How does your site compare with other social networking sites such as Facebook or LinkedIn?
Jason: At first glance we might look similar to other sites, but our site is very unique. We are specialized because we know that professionals want to network in small rooms of qualified peers and prospects, and they want to know what the immediate return on their investment and time is. Most advisors want to leverage social media to grow their business but they don’t want it to become the major portion of their day. Our users can have a general open discussion on their “board” (our term for the “wall”) or take their conversations into their own individual network. On other sites people can see your network and all of your clients whereas on linkedFA you cannot see the other person’s network. We strive to be very conscious of the industry’s needs by reducing the fear factor associated with client poaching and reputation management.
Opportunist: How does that work?
Jason: Let’s say I have a dispute with a client and he posts something negative on my Board. We have the ability to pre-review conversations to make sure no one is saying something disparaging about you that could damage your entire network.
Opportunist: Does linkedFA allow other member-users to see and connect with everyone else’s friends or contacts similar to other popular social networking sites?
Jason: No, people cannot see your clients and contacts even if you want them to. We are very sensitive to how that would create a pool for other people to start fishing for your clients. You cannot do that on our site. The only way you’d be able to invite somebody from another network is if you want to invite that singular person and basically you’d have to know them. We keep things extremely private and basic for a very specific reason: to meet rules and regulations and compliance.
Opportunist: Have you encountered any obstacles?
Jason: Yes, primarily with the rules and guidelines that regulate how financial advisors are able to communicate in an electronic format. Social media is not set up and designed to be controlled and monitored the way the financial world needs it to be. What’s happening is you have two different defined groups: compliance officers who expect you to minimize risk and liability, and end users who want to use the site freely. Once you exercise too much control and turn off all the good stuff, it makes the product useless for the end user.
Opportunist: How do you handle compliance and the Securities Exchange Act of 1934 rules without putting limitations on the site?
Jason: We have a security-centric architecture and application code that affords our users privacy while meeting industry standards for compliance. Pre-review of static information vs. real-time information is a major issue. Everything from blogs to profiles need to be pre-approved by the end users compliance department before it goes up on the web for the naked eye to see. We try to keep the site in its purest, basic form until FINRA [The Financial Industry Regulatory Authority] comes out with more defined rules. It will be very interesting to see how social media evolves in the financial industry.
Jason: Our average user age is 42 and 50 percent are male, but the most active users and creators of content are female. Women seem to spend more time building their brand and brand awareness. There are about two million FAs in the United States, but the majority of them are independent financial advisors. Our user base is primarily the independent financial advisor who works under the name of a large firm but will set up his shingle and advertise in a local magazine. They are always looking to expand their brand at the practice. Nowadays, instead of using the local publications, they are going to the Internet and using it to communicate and advertise.
Opportunist: How many members do you have?
Jason: We are growing at a very rapid pace. Since January, our user base is up 350 percent and we are very excited about it! Currently there are more than 8,000 users and we hope to have 80,000 by the end of the year.
Opportunist: Do you have advertisers on the site?
Jason: Yes, SPDR-ETFS, Oppenheimer, Vanguard, Dow Jones to name a few. We are a very solid distribution channel for people who want to sell products to FA groups.
Opportunist: Do you have any additional features planned?
Jason: We built an advisory panel of 25 hand-selected financial advisors from a diverse background. They are all Tier I technology industry leaders at the top of their peer group, telling us what they would like to see in the product line. We are constantly integrating content. We recently partnered with McGraw-Hill and we are integrating content from Thomson Reuters to enable financial advisors easy use of sharing content. It was at the request of our advisory panel that we do this.
Opportunist: Have you received any offers to acquire linkedFA? Would you consider selling?
Jason: Yes, absolutely. We have received offers, but it’s probably a little too early. Besides, I am enjoying this way too much to even consider selling just yet.
Opportunist: Thank you, Jason, for talking with us.
Leslie Stone is an award-winning writer/editor with more than two decades of experience covering business, finance and lifestyle issues for newspapers, magazines and online publications.