Rapid rise of social media poseschallenge for investment industry
Social networking tools can involve risks for investorsMonday, May 25, 2009http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=49474&cat=147&IdSection=147&PageMem=&nbNews=&IdPub=ByMegan Harman
As Canadians seek to educate themselves more than ever on investing, social networking websites arerapidly gaining momentum as a source of advice and information, which is challenging the role of financialservices firms, a panel of experts said on Monday.At a panel discussion on social networking tools for investment and trading advice, the speakerscommented on the rapid speed in which social networking Web sites have developed into a prominent toolamong investors.“People are typically going to use social media for one of two reasons: they want information or they wanteducation,” said Sam Seiden, a professional trader, author and director of online education at OnlineTrading Academy.With so much information so widely available online, he believes social networking sites couldpermanently erode the role of financial services firms going forward. This is especially true at a time whena major financial crisis has hampered consumer trust in financial industry firms, he said.“I think it’s really changed things forever,” Seiden said. “I don’t think Wall Street is ever going to go back towhat it was before, no matter how much they rebuild the trust, because now every person has analternative.”The surge in demand for alternative sources of information has been witnessed first hand by OnlineTrading Academy, which offers educational courses on trading and investing. In each of the past threemonths, the organization’s revenue has hit record levels. On Monday, the academy launched a new high-tech educational facility in Toronto.Discount brokerage Questrade has also seen investors actively embracing such alternative sources of information. In response, the company is expanding its offering of social networking tools available toclients. This week, for example, the company is launching Facebook applications that will allow Questradeclients to share their favourite sources of online investing information as well as buy and sellrecommendations.“They’re all about user-generated content,” explained Jeffrey Beck, chief sales and marketing officer atQuestrade. “It’s all about forming a community of online traders and providing them with the empowermentand the ability to become even more successful in trading.”But the panelists noted that social networking tools can involve risks for investors. Since advice on Websites such as Twitter and Facebook could be coming from inexperienced investors, it’s crucial to consider
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