The Growing World of Customer Experience Management

Folks, we head into a new world, and one that we are seeing is quite a challenge in financial services. This world is about 'Customer Experience Management'. With the advent of transparency and the need to deliver demonstrable value to consumers in order to receive fees, there is now the immediate and present challenge as to how to deliver value to consumers where value is in their minds, not what was sold to them.

Because the feeling of value is so different for so many different consumers, the industry is evolving to understanding that the consumer 'experience' is actually as important, if not more important than other parts of service delivery. Move over 'products', it is now about 'experience'. In an on-line world, products are often available everywhere, purchased on-line and often at razor thin margins. In the world of 'experiences', anything goes, and consumers will vote with their feet if they don't think your experience is up to it. Difficult to predict, yet perhaps a goldmine for those who can get a lead and jump into a new way of consumer engagement ahead of the competition.

Only this week, I tried to set up a share trading account with a new service in the Australian market. The website looked great, big balance sheet backing, some nice looking screens, but after half an hour I had failed to set up one of the accounts. After many pages asking me questions, each with nice ticks beside them, at the last hurdle I got a message on the lines of 'unexpected error - please call the call centre'. As you can imagine I rated this a poor customer experience, and whilst I did ring the call centre, they only rubbed salt into the wound and asked me to repeat the whole process all over again - another half hour perhaps lost. Sorry, I have moved on.

The key things to think about in the world of customer experiences is what is it really like to be a customer ?, not what is it like to be you, not like your manager etc ? One thing is for sure, unless you are out there talking to them, understanding the new era of consumerism, consumer interactions and consumer tolerances and alternatives, you have little chance of success.

In our business at Financial Simplicity, we have invested over 15 years already in working with consumers and those that service them, understanding what our clients and their consumer clients are seeking about consumer centric investment products and services. Whilst we are proud of this, we still suspect that we are only part way down the journey and have more to learn, and given the ever changing pace of social innovation, suspect it may never cease either.

Changes In Industry Architecture

I have been speaking a lot recently about how the industry architecture is changing, changing in line with regulatory change from being a product lead and product distribution architecture to a more consumer centric architecture.

 

So what is the difference ?

 

• Does the new architecture still involve platforms ? Yes (but they move from being menu driven supermarkets to back office outsourcers)
• Does the new architecture still involve those who deal with investors ? Yes (although the justification of their value may be a little more transparent)
• Does the new architecture still involve those who manage investments ? Yes … although....
• Does the new architecture leave the same environment for the commercialising of investment products ? NO !

 

So what does this last point mean ? Well it means that a lot of the behaviour that has developed over the last few decades in incenting layers of the industry between product provider towards the investor are undergoing change, as this is no longer to be permitted. Combined with the fact that if anyone was taking the risk for recommendation of products in less than a ‘perfect’ way, will now have a duty of care to choose the best product (or solution) for the investor.

 

The combination of these two points fundamentally iron out  the industry architecture and ‘supply chain’ from being one where each layer has it’s own clients, relationships, management of such, metrics, focus, culture to one where the whole supply chain has to focus on in delivering transparent and more tangible value to the end investor who can see what they are paying for. It means that every participant has to stand up and focus on the rising sun of the new regulatory and consumer driven regime. All participants must fundamentally consider the value that they are providing, and for what costs, and as many others write about, at what risk.

 

The systemic impact of this need for alignment in focus of all areas of the industry towards this new world is now being starting to be understood, and a large part of this is the positioning of the value add of investment management.  There is no doubt in my mind that this discipline adds consumer value, but what is happening is that this activity is moving closer to the client where, unlike in a ‘product’ where everyone is treated the same (remember how can it be right that the investments for a 20 year old be in the same fund as a 70 year old), by moving the process to the client can facilitate a high degree of personalisation and value creating ‘context’ for each investor.

 

With this we are seeing professionals with investment management skill sets popping up elsewhere in the supply chain, in boutique portfolio managers, in financial advisory firms, even in investment platforms where they can operate with perhaps a higher level of efficiency as they are closer to the registry of assets.

 

The next chapter which we are also seeing is that now product manufacturers are starting to respond to this and having to re-invent their proposition to compete. Productised ‘funds’ move over, it’s now about portfolios, portfolios about investors. The questions for many is ‘what value are you adding ?, how do you fit into this new era of proposition ?, what relationships do you need to change or develop ?, how do you get paid ?’.

 

Little doubt that some of  you may be thinking about this already…..

 

 

 

 

 

 

 

 

The FCA's approach to supervising wealth management and private banking firms

I saw a transcript of a speech by Clive Adamson, Director of Supervision, the FCA, at the APCIMS Compliance Conference, London, and noted some key points that the FCA suggest firms focus on. For those reading I thought I would add some commentary (in bold) as to how a number of themes are inherent (or at least my reading of such) within Financial Simplicity’s technologies…

•             Firms should consider their oversight arrangements to ensure they are suitable for the nature, size and complexity of the firms in question.

 

(My Comment : We think that the need for oversight is spot on and the need for firms to be equipped with a new era of management information about their portfolio operations. This is not just about providing clients with some oversight and perspective at portfolio review time, but continual oversight in their businesses about the relative status of client portfolios to their prescribed or assigned investment mandates. At Financial Simplicity we have pioneered this new era of oversight so that regardless of the size of a firm, anyone and everyone in the firm is equipped with the portfolio management information to get the perspective and oversight of the service they are delivering)

•             Firms should record and keep up-to-date consumer information in order to ensure their individual portfolios continue to be suitable for them. We expect firms to make every effort to keep this information current and relevant.

 

(My Comment : We believe that this is a mandatory, and not only in terms of contact details, and records about risk profiles from a compliance point of view, but to absolutely inclide the very specific instructions and feelings from clients about the way they want their investment  portfolio managed for them). Our feedback from many consumers (and advisers) is that in the past much focus has been about theory of investment management with less focussed on the client’s specific feelings about investments in their portfolios). With a highly competitive environment upon us, we feel that systems that can accommodate individual client specific rules, preferences and constraints will be critical not only form a compliance perspective but also from a client relationship management and client retention perspective)

•             Firms should identify and manage conflicts of interest. We want to see that you have thoroughly considered any potential conflicts of interest and will look, for example, at how many in-house products or products manufactured by an associate of the firm are held within individual portfolios – questioning whether this is right for the customer.

 

(My Comment  Whilst I don’t see it a role of technology to drive the choice of investments used by a firm, clearly with focus on conflicted remuneration now upon us, the real issue here is that what is the most appropriate, efficient and to some extent cost effective way of delivering value for investment clients. With the massive growth of passive investment funds in the last few years, there is strong argument to indicate that the value add to clients has moved from the choice of products, to the active monitoring and management of portfolios, requiring the oversight and decision support technologies to achieve such)

 

•             Firms must deliver the services customers have signed up for, agreeing upfront the exact nature of the service they will provide and how the customer will pay for this – ensuring it is recorded in the client agreement signed at the start of the business relationship.

 

(My Comment : For some time the question of ‘delivery vs promise’ has been around in relation to investment services. With increased focus in this area from both a regulatory, but also consumer perspective, both the demonstration of value and it’s delivery and articulation of such will be increasingly important. From a technological perspective this is all about providing the capabilities for constant oversight and monitoring, pro-active rather than scheduled client interaction, and such interaction being focussed on each specific investor rather than an ‘across the board’ approach. We designed Financial Simplicity for this.

•             Firms should ensure that their customers’ wealth is legitimately acquired. It is important firms have a culture based on integrity and ethical values, combined with effective anti-money laundering controls and anti-bribery and corruption processes to prevent their businesses from being used for the purposes of financial crime.

 

(My Comment : Absolutely !)

•             Firms should ensure portfolios are consistent with customer objectives. It is important to explore and record your customer’s attitude to risk and fully understand how they want to invest their money. Where we find that your records are unclear, we will question why.

 

(My Comment : We think that there will be growing emphasis on technology to support this point, and the need for a new era of relationship managers who can adapt and interpret this from investing clients). The monitoring of portfolios to these objectives and goals will move to become a hygene factor over time)

•             And finally, firms should clearly set out their periodic reports. These provide vital information to customers with discretionary accounts and without them, they cannot judge how well their investments are being managed, whether they are performing in line with their expectations, or if they getting value for money. So we expect reports to be clear, use appropriate benchmarks and adequately disclose relevant fees.

 

(My Comment : In a new era of smart phone empowered consumerism, we are of the view that access to information about consumer assets has jumped to a new level where the baseline is moving to a level where the consumer seea everything about their investments on-line 24x7, on any device, and with the information comes perspective and context. Technologies such as Financial Simplicity have a huge role in this and our latest portfolio ‘presentation’ module we hope will define the new standard for consumer interactions by wealth firms)

 

 

 

Enabler vs Protector

With industry change well under way, I am seeing two distinct behaviours in the firms that we are working with,  and there is a high level of struggle between them that is proving to be a considerable management challenge.

ENABLERS VS PROTECTORS

‘Enablers’ are ones that are extremely aware of the impact of regulatory change in terms of what this means in terms of the supply chain. I hear lines like ‘servant leadership’, they question really what does ‘client centric’ mean, and they fundamentally are prepared to air their views about they would like to receive as a client of an investment firm. Words like ‘proposition’, ‘service’, ‘value’, ‘trends’, method of engagement are common.

‘Protectors’ are the ones that appear to display the characteristics of seeking to retain much of the current industry model and structure and seem to be trapped in some lines of thought and practice that is perhaps becoming redundant. Words and phrases like ‘product’, ‘distribution’, ‘segment’ are used heavily, often in the context that these things are fixed.

 Are you an ‘enabler’ or a ‘protector’ ?

Continuous, Cost-Effective Compliance IS Possible

The emergence of a stricter, more onerous regulatory environment in a number of OECD countries, namely Australia, the UK, and Singapore to protect investors is excellent for the industry but it comes at a high price.  Or does it?

Certainly, an effective compliance regime (eg one in which client portfolios do not breach their guidelines but allows for imaginative investment latitude within defined boundaries) requires constant vigilance. This kind of attention requires a great deal of thought, reflection, and adjustment - generally performed over many hours by several staff. As a result, monitoring effective compliance can be one of the most significant costs to a wealth management business. 

Now, however, smart, flexible technology can ensure that the entire compliance process can be automated.  Every portfolio in a wealth management business, irrespective of individual and widely-varied compliance requirements can be adjusted simultaneously and in complete conformity. Beginning with the client’s own rules, preferences and constraints, compliance can now be vertically integrated throughout the entire investment process. 

The entire process is automatic and portfolios are monitored on an ongoing basis. The ability to scale portfolio adjustments easily and accurately makes it possible to provide a genuinely tailored investment service for the masses in a low-cost manner. 

Supply Chains vs Stacks

One of the key differences we are finding when helping firms put together their new era of ‘client centric’ propositions is that the design of the proposition and the components that form such are taking a very different form, in the form of ‘Stacks’ as opposed to ‘chains’. They are characterised by the fact that each layer of the ‘stack’ must add value to the overall client value proposition and work as part of it, rather than the value proposition be passed down a chain and just packaged up with layers of costs and overhead at each stage.

Whilst this may be obvious, it does have considerable impact on the design of systems and propositions from a technology perspective. What it generally means is that participants in the overall stack must work out ways to integrate into the last system that enables the investor proposition. It means that one needs to think about where in the stack a type of business sits, and what are the key integration points, authentication protocols and data related issues in order to nicely fit within the stack of your business partners.

 At Financial Simplicity we have taken this now to a new level, where we recognise that as a ‘proposition enabler’ that our technology must neatly and flexibly fit inside other systems, often our client’s web sites and client interaction layers. To do this we have broken down the overall user interface into ‘containers’ and ‘components’ where the components can be easily embedded in our client’s and partner’s web sites that deal with advisers and investors. We now fit nicely into their ‘stacks’.

 We generally see that the top level of the stack is the engagement layer, then there is the authentication layer, the  user navigation layer, the componentry layer, and then for each component, the permissioning layer, the business logic layer and the data access layers… and sometimes a few more.

 We have thought about this a lot recently and in my view the key to the better propositions moving forward will be how efficient and client centric and efficient their stacks become. Something to think about when choosing technology providers..

Connection is the new form of Distribution

AS the industry moves from the structure of ‘product’, ‘platform’ and ‘distribution’ to one of ‘proposition’, ‘site’ and ‘engagement’, we are seeing some distinct trends around how Financial Simplicity and our clients are doing things.

One of the key trends is about ‘connection’ – just connecting systems and working to common sets of data. Rocket science no, but straightforward in achieving such, no also. Naturally there are issues such as data privacy, data protection, timeliness, formats, protocols to deal with and most of these are quite easy to deal with alone, to achieve them all at the same time requires quite a change in thinking in terms of systems for many industry participants. Gone are the days where systems were built just for internal staff access, gone are the days where systems were designed as for staff who could see an entire client base….

The new era is about providing authenticated role based and data domain based permissioning, whole of supply chain access, separation of data vs presentation, and 24x7 uptime. These are becoming the tools to connect to industry participants and are becoming a significant factor in choice of suppliers. Connection is becoming the new form of distribution…. How connected are you to the industry participants that are going to be critical for your business ?