By Kim Gits, CFO of Social Market Analytics
Are you prepared for the shift in attitudes and expectations of the next generation of investors? What is the next step for social media use in the capital markets? How far will you go in implementing a social strategy to retain/attract investors? Once in house, how will you communicate with them?
Much has been said about this new generation of investors - the Millennials. Their generation is larger than even the Boomer generation. They will be recipients of the largest wealth transfer in history. They grew up with cellphones and instant access to information via the internet. They are social and mobile.
But what does this mean to firms who wish to court this generation of investors?
In the last few years, we have seen Twitter and other social media sites like StockTwits and Seeking Alpha come of age as reliable data sources. At Social Market Analytics, we are incredibly excited about these questions and the changes in investing that are on the horizon.
I’d break down the market response to this paradigm shift in waves. The first wave many years ago was to develop a consistent firm-wide policy for employee use of social media. Much legal angst went into creating these edicts. Many of the Boomer and even GenX population saw it as a fad that would pass and certainly never saw themselves as Twitter users (Deja-vu for me when thinking about the adoption of the internet in the late 80s). This first wave marked the beginning of a new means of communication. For us at SMA it represented a new source of data as “smart money” finally had the clearance to Tweet their thoughts.
I’d describe the second wave as the re-posting of individual Tweets - something we began seeing as early as 2012. A few firms began streaming Twitter posts as they related to stocks and the markets. But let me ask you - with over 500,000 tweets, about stocks, a day (and growing) is it really possible to read all of those Tweets and still get any work done? Do you really care that your brother-in-law’s third cousin thinks Apple is going up (unless of course he's Warren Buffet)?
The third wave was adoption of social media data by hedge funds and quant traders. Always on the lookout for new ways to generate alpha, this group has been adding various forms of social media data to their trading strategies. SMA and its partners have been at the forefront of research in alpha generation strategies using S-FactorsTM, our social media metrics. Growth at this level continues with more advanced strategies using multiple asset classes.
The final wave as I see it is the native integration of social media and its rich knowledge sharing capabilities into the investing platform. Not only will investors be alerted to what they want to know in real-time, they will also have the ability to communicate socially with their brokers and execute transactions on a mobile platform based on either alerts or social communications from their broker.
As you address these coming changes, we are prepared to help. SMA finds the real-time “smart-money” conversations in social media. Knowledge sharing is known to be important to this new generation of investors. SMA’s differentiation is that our proprietary filtering eliminates the spammers, scammers and naïve-user conversations. Our metrics are based on the social media posts of “smart-money”. Also, SMA’s unique normalization process helps users find hidden stock conversations that might otherwise be overwhelmed by the likes of Apple, Google and Facebook. Our data and metrics are engineered to perform at the highest levels and we offer fine-grained customization to meet the needs of your specific customer base. User-defined thresholds of our metrics let investors listen to only the conversations that are meaningful to them. To learn more, please contact us at firstname.lastname@example.org