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January 14, 2012
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A practical guide to LinkedIn | Part II: 7 tips for making connections

January 12, 2012

In our first post on LinkedIn for investment industry professionals, we talked about building your LinkedIn profile. With your best professional face toward the world, you’re ready to start making connections. Here are my 7 tips for widening your business network.

But first this reminder:

These tips are based on what I understand to be the typical social media policy. The policy at your firm may be more restrictive, so. . .

Make sure that you read your firm’s social media policy carefully. If you have any questions about it (or even if you don’t), ask your supervisor to clarify exactly what is and is not permitted – then follow the guidelines to the letter. It’s not worth losing your job over a social media post.

  1. Your LinkedIn address book. Making connections is natural if you think of LinkedIn as a replacement for your address book. No need to keep track of email addresses and phone numbers – you can easily get in touch with any of your LinkedIn connections through a direct message. These days, whenever I meet someone new at a meeting or conference, I follow up by asking them to connect through LinkedIn.
  2.  Have rules about who you will connect with. . . and stick to them. My policy is to agree to all requests to connect – even if I have no idea who’s making the request. In other words, I click “connect” first and look at their profile later. My logic: Everything in my profile is completely public, and I’m interested in widening my network to help promote NICSA. . . and I don’t want anyone to feel that they’ve been discriminated against. (I suppose there’s some possibility that I would “unconnect” with someone if they were sending me messages I didn’t want to receive – though that hasn’t happened yet.) You’ll probably want to limit your connections to people that you’ve had some dealings with, but see the next rule.
  3. Be evenhanded – this is business. This rule is especially important when it comes to your current colleagues, and it’s critical for those with supervisory responsibilities. Don’t ask to connect with 7 of your 8 direct reports and leave one person out. Nothing good can come of that.
  4. Use tags. LinkedIn allows you to categorize your contacts by using “tags”. You can see and edit your tags in the left-hand column of the Contacts tab. To assign a tag to a contact, click on a name in your contact list, then click “edit tags” in the right-hand column. Assign tags to each new connection as you make them. Don’t be like me and wait until you have several hundred contacts before putting them into some sort of order.
  5. Review the LinkedIn connection suggestions periodically. These appear in the upper right-hand corner of your LinkedIn home page under “People You May Know.” I’ve reconnected with some long-lost business friends by going through these.
  6. Customize your connection message as needed. Social media experts will tell you that you should always write a personal connection message whenever you look to connect with someone – but in my experience, the standard “I’d like to add you to my professional network” works fine in most instances, especially with people you know reasonably well. Save the customized message for those you’d like to approach more formally.
  7. You can’t connect with everyone. LinkedIn only allows you to send invitations to those in your immediate network, meaning that they’re colleagues, classmates or connections of your connections. (This is one reason why it’s important to link yourself to the correct company page when you build your profile; see the prior post.) In fact, you won’t even be able to see the full names of people who are outside that group. To connect with those in your extended network for free, you’ll either need their email addresses or introductions from mutual connections. (Click on “Get introduced through a connection” to see a list.) Or if you’re willing to pay a fee, you can send them “InMail.”

LinkedIn groups can help you get around the restrictions on invitations. We’ll cover groups in Part 3 of this series.

A practical guide to LinkedIn for investment industry professionals | Part I: Your profile

January 10, 2012

It’s hard to avoid LinkedIn these days. The online business networking site now has over 135 million members around the world – and is adding more than 2 new members every second. They’re using LinkedIn to keep in touch with former colleagues, reach out to new connections, keep up with the news, research the job market – and even apply for a new position.

But when it comes to LinkedIn, professionals in the investment industry often feel the kid outside the candy shop – staring through the plate glass window at the goodies inside. Strict policies at their firms – designed to ensure compliance with stringent regulations – have made social media into something that they can largely only look at and not share in.

There’s good news, however. While Facebook and Twitter are usually off limits for business use, most firms in the industry do allow their associates to maintain a professional profile on LinkedIn – which means that they can take advantage of some (if not all) of LinkedIn’s features.

What follows in this and subsequent posts is my guide to LinkedIn for professionals in the industry. It’s based on what I understand to be the typical social media policy. The policy at your firm may be more restrictive, so. . .

Make sure that you read your firm’s social media policy carefully. If you have any questions about it (or even if you don’t), ask your supervisor to clarify exactly what is and is not permitted – then follow the guidelines to the letter. It’s not worth losing your job over a social media post.

8 tips for improving your LinkedIn profile

Start by taking a close look at your profile – which is how you present yourself to the LinkedIn world.

  1. Professional photo.  Upload a photo that shows you at your business best. Wear clothes appropriate to an important meeting against a plain background. A professional headshot is best. Avoid that photo of you at the corporate Christmas or at Disney World with your kids – even if you crop it.
  2. Check for typos. Nothing says “unprofessional” more than a typo in your LinkedIn profile. Read your profile out loud, ask someone else to check it – do whatever you need to do to eliminate typos. (Here are some proofreading tips if you need suggestions: http://grammar.quickanddirtytips.com/proofreading.aspx)
  3. Customize your LinkedIn url. Your LinkedIn profile has a url that can be customized. To do this, start editing your profile. Click on the edit button next to your Public Profile url, then click on “Customize your public profile url” in the right hand column of the page that comes up. Choose a url based on your name.
  4. Keep it business. Include non-work activities only if you’d be willing to discuss them in a job interview. If it’s purely personal, put it in on your Facebook page – not here.
  5. Connect to company pages. When you input your positions into your profile, you’ll be prompted to enter the company name. As you start typing, you should see a drop down menu of LinkedIn company pages that are possible matches. Try to select from one of these pages –even if the company name doesn’t exactly match the one on your business card. Linking to one of these pages will make it easier for you to connect with colleagues.
  6. Company and title only for current job. Your firm’s social media policy probably limits what you can post about your current job to just company name and your title. Don’t be tempted to elaborate – unless you’re absolutely sure it’s ok with your firm.
  7. Use keywords to highlight your strengths — but check your firm’s social media policy first. Think about what you’re best at professionally – then identify a few words that summarize that expertise. In my case, it was “mutual funds” and “investment management.” For you, it might be “tax specialist”, “mobile device security” or “experienced manager.” Now use those words as often as you can throughout your profile. You will need to skip this step if your firm limits you to company and title for all positions.
  8. Write a strong headline — but ditto. The headline is the first thing that people see when they look you up on LinkedIn, so make sure that it provides a good summary of your professional expertise. Use some of your keywords if possible, and don’t just plug in your current title. “Tax specialist at Public Accounting Firm” is a much stronger headline than “Partner at Public Accounting Firm.” Again, your firm’s policy may limit you to just the bare facts — check before you write.

In Part 2, we’ll talk about making connections.

What’s in a Like? | Adoptions and testimonials

January 5, 2012

What does it mean when you click the “like” button on a social media site? The answer depends on who you’re asking.

Facebook says that it’s “making a connection.”

FINRA calls it an “adoption.”

And now we know that the SEC considers it a “testimonial.”

In a Risk Alert issued January 4, 2012, the SEC’s Office of Compliance Inspections and Examinations explains that:

use of the ‘like’ feature on an investment adviser’s social media could be deemed to be a testimonial if it is an explicit or implicit statement of a client’s or clients’ experience with an investment adviser or an investment adviser representative.

Which makes them problematic, since under SEC regulation, testimonials are not allowed in advertising under any circumstances.

Implications for the investment industry

So what do the regulatory interpretations mean for the investment industry?

As we noted in our first blog post on the subject of  “likes,” FINRA’s approach makes it risky for anyone working for an investment adviser to “like” content. In FINRA’s eyes, if you “like” a page or a post, you’re effectively providing a seal of approval – or at least some assurance that its content isn’t false or misleading. Since this type of “entanglement” creates liability risk, most large investment advisers completely prohibit use of the “like” button for anything business-related.

On the flip side, the SEC’s approach makes it next to impossible for an investment firm to be “liked”. In fact, any kind of positive comment from someone who may be or once was a client may fall afoul of the testimonial rule. Firms may have to choose between closing down all interactive features or permitting only negative comments to be posted. Doesn’t seem like much of a choice to me!

Why it’s a problem

FINRA and the SEC obviously have the right motivation: they want to protect investors from a small number of bad actors – and, as the new kid on the block, social media merits special attention. As the co-chief of the SEC’s Enforcement Division noted when announcing a recent enforcement action, “Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes.”

Unfortunately, the stringent regulations may end up hurting investors in the long run by inhibiting the flow of information. A case in point: the investment professionals who are members of NICSA are unable to “like” our Facebook page. That means that they won’t automatically see our posts in their news feed – which means that won’t see our updates on regulatory issues, compliance best practices or industry trends – information that can help them better serve investors.

Like it or not, social media is changing the way the world communicates. The investment industry needs to keep pace – but that will be difficult without more nuanced regulation and supervision of social media activity.

News Bites | Leadership in the fund industry

November 30, 2011

News Bites is an occasional column in NICSA News that collects memorable facts, quotes and insights from our recent reading.

This edition of News Bites looks at an article by Bob Pozen and Theresa Hamacher, published by the Financial Analysts Journal in December, at a speech by Don Phillips of Morningstar given at the Business & Wealth Management Forum held in October, and at McKinsey & Company’s most recent annual review of the asset management industry. All three discuss factors leading to success in the mutual fund industry. These were our takeaways:


1. “Leadership in fund management isn’t permanent.” (Phillips)  — as the following chart from Pozen and Hamacher dramatically illustrates:

2. “The winners had a long-term investor focus.” (Phillips)

3. “The best predictors of success in the U.S. fund business are the focus and organization of the fund sponsor.” Pozen and Hamacher demonstrate that firms dedicated to asset management have gained market share at the expense of diversified firms. They looked at the assets under management of the top 25 fund complexes over a 20 year period:

4. McKinsey reached a similar conclusion, noting that the market share of independent firms grew from 28% of assets under management in 2002 to 54% in 2011. (McKinsey & Company)

4. Diversified firms have been most successful when building off traditional strengths.

Cited in this post:

Want a job in investment management? Watch your political contributions

November 22, 2011

Interested in working for an investment manager? Or already in the industry and thinking about changing firms?

Rule #1: Be careful with your political contributions. You may not be eligible for the job of your dreams if you’ve given too much money to the wrong candidates.

Here’s why:

The pay to play rule. . .

In July, 2010, the SEC adopted Rule 206(4)-5 – titled “Political Contributions by Certain Investment Advisers,” but known as the “pay to play” rule. The rule is designed to prevent investment advisers from winning money management business from government clients (the “play” part) by making political contributions to officials in that government (the “pay” part).

Under the rule, if an investment advisory firm makes a contribution to a state or local official, it can’t accept any compensation from that official’s government for managing money – and that’s for 2 years after the contribution, a period that play-to-pay aficionados call the “time out.” The time-out sanctions also apply to contributions made by the firm’s executives, by managers in policy-making positions and by salespeople. Each firm determines exactly who qualifies as a “covered associate” subject to the rule.

. . . has a “look back”. . .

The pay-to-play rule has a “look back” provision, requiring that investment advisers check the contribution history of anyone who has just become a covered associate – either through a new hire or as the result of the promotion. This look-back period is 6 months for most positions – but 2 years for individuals who will be soliciting clients. If a new covered associate has made a contribution during the look back period, the time-out provisions apply.

So this is your nightmare scenario: There’s an opening at Avon Hill Asset Management for a VP to head the finance department, a covered associate position. You’re perfect for the job – but last month you made a $500 contribution to the governor’s successful reelection campaign. Avon Hill runs money for the state pension plan – so it won’t hire you. If it did, it wouldn’t be able to be paid by the state for its services.

. . . so don’t get locked out.

Fortunately, you can avoid getting locked out of an investment management position by following this simple guideline:

Corollary to Rule #1: Limit your contributions per election to $350 to candidates you can vote for and $150 for all others.

The SEC considers these amounts de minimis, and they don’t trigger the time-out provisions and affect a firm’s ability to get paid for running money. To keep things simple, many investment advisers prohibit their associates from making larger contributions.

Yes, the rules technically allow you to make larger contributions to political parties, political action committees and federal candidates – but the complexities of the rule could trip you up. Better to keep it simple.

And don’t get your spouse (or your mother or your brother-in-law) to make the contributions that you can’t. The rules specifically prohibit you from doing indirectly what you can’t do directly.

Preparing for your next SEC exam | 3 tips and 6 hot topics

November 18, 2011

Under a magnifying glassSEC examinations are getting tougher every year – and any materials deficiencies the examiners uncover are increasingly likely to be the subject of an enforcement action – so you’ll want to be prepared for the SEC’s next visit. Panelists from Ernst & Young, K&L Gates, Matthews International Capital Management and the Securities and Exchange Commission — speaking at NICSA’s West Coast Regional Meeting this week — had these tips on how to get your firm ready:

  • Take a step back and evaluate your overall compliance effort. The SEC’s assessment of your compliance culture is now a key part of the exam. Make sure that your annual compliance review is robust – and that you’re ready to answer probing questions about your policies and procedures. Don’t miss the obvious: you’ll want to confirm that you’re complying with things like the terms of any exemptive orders.
  • Be prepared for a broad range of interviews. Examiners will ask to speak with senior executives, and they’re likely to ask to meet with your auditors as well. They may even request interviews with independent directors, especially if they’re concerned about management’s attention to key issues.
  • Expect an intensive review of new initiatives. Compliance problems are often a result of inexperience, so the SEC is paying close attention to new entrants. If you’re starting up a new product line or entering a new distribution channel, take the time to identify needed controls before you start accepting client money.

You’ll also want to pay attention to the SEC’s current list of hot topics. Here are some questions you should ask yourself:

  1. Administrated sponsored funds. Do you have a robust process for overseeing subadvisors?
  2. Fee setting. Is the board getting and reviewing the information it needs to evaluate the level of fees in the 15(c) review process?
  3. Valuation. Have you documented reasons for any deviations from policies or procedures? How are you handling corrections of NAV errors?
  4. Insider trading. Have you identified potential sources of material nonpublic information and established controls around them?
  5. 12b-1 fees. Are all parties receiving 12b-1 fees authorized to receive them, and are they providing the services they’re being paid for?
  6. Affiliated and cross transactions. Does the board have a robust review process for these transactions? Is the board receiving adequate information about them?