The group’s latest report is the fourth in a series, based on a Q1 2011 survey of 437 US financial advisors. In the new analysis, the concept of “reaching new prospects” was mentioned by just 19 per cent of advisors who use social media as its main benefit – a figure which is barely more than half of what it was when Aite Group conducted a similar survey in 2009.

In fact, the percentage of advisors who have used social media to “differentiate their practice from competitors’ practices” declined from 21 per cent in 2009 to 9 per cent in 2011. Moreover, advisors who have seen an increase in revenue from using social media dropped from 16 per cent in 2009 to 6 per cent in 2011.

As a result, the group stresses that social media must be used correctly - and with “realistic expectations” - in order to benefit from its full potential.

On the other hand, the perceived “absence of benefits” from social media might be jeopardizing advisors’ attitudes towards the potential influences social media can have on business objectives, said Ron Shevlin, senior analyst at Aite Group and co-author of the report.

“It is hard to criticize advisors for aggressively going after new clients, but many seem unwilling to admit that social media may be better suited to communicating with existing clients than to finding and acquiring new ones,” Shevlin said.

Actiance, eMoney Advisor, Financial Social Media, Social Volt, Socialware, SocMediaFin, SunGard, Thomson Reuters, and Wired Advisor offer tools and services to help wealth management firms effectively use social media. However, “advisors don’t know which tool to use for what purpose”, according to the report.

While the percentage of advisors who use social media professionally grew by nearly a third between 2009 and 2011, in terms of specific tools and sites, such growth can only be attributed to LinkedIn. To generate brand awareness and achieve true differentiation, there are a number of additional tools and sites which are more effective, the report says.

Similar findings were also noted at the Future of Private Banking Conference in October, where Andrew Haigh, managing partner at Coutts, warned that firms must understand that social media is part of the relationship management process and not merely another distribution channel.

For example, Haigh explained how in 2010 Coutts launched on Twitter, YouTube and 4Square, eventually going live on Facebook this summer. This type of steady exposure within social media is “absolutely necessary”, he said.