The competition for wealth management firms to win with customers is constant and growing. What is driving this?
Technology is the source of the problem, because it is driving down costs and fees while accelerating the commoditization of offerings. Technology is also the answer, because the intentional, intelligent application of technology can help wealth managers reinvent and differentiate themselves. Let’s focus on four themes embraced by leaders in wealth management: connectivity, trust, confidence, and action.
Most companies would say they are customer-centric, but are they really? Connecting with customers is the first step to establishing a relationship. People who are new to investing need to feel they can trust their wealth advisor. They may require education on the basics of financial planning to understand their goals and their tolerance for risk before they can take the plunge to allocate money into specific asset classes, funds or stocks. Equally, experienced investors will not appreciate advice that is appropriate for beginners; they need investment ideas and suggestions that are nuanced for sophisticated audiences. Tailoring your options to the readiness level of customers is one way to differentiate your offering.
In our experience, a simulation-based approach can help financial advisors and wealth managers evaluate investment performance differences in future scenarios. For example, you can use OutRank to simply help a customer understand how much they can save if they invest £X’s per month, or consider OutRank’s thousands of economic scenarios in seconds to visualize and demystify what a rise in interest rates might mean for a customer’s portfolio over several decades. For advanced customers, you could model rate changes by sector so they could rebalance their portfolio to hedge against interest rate risk.
Understanding what keeps customers up at night, whether it is concerns about outliving their pension savings, inflationary pressures during retirement orhealth concerns with sensitivity, respecting their privacy while also providing objective data and advice can build trust. Creating anonymized case studies on how financial planning has helped other clients allay their fears and feel confident in planning their financial futures is possible using data. For example, you could visualize how a client used her concerns about the rising cost-of-living to create a retirement savings action plan. Advanced financial analytics can help her visualize how her specific investment choices can succeed to achieve her objectives under different economic scenarios, making her feel empowered.
Leveraging award-winning financial analytics to analyse your customer data promotes trust and confidence in your wealth management service. Customers don’t want to be bombarded with doomsday predictions of runaway inflation nor do they wish to receive rosy forecasts of double-digit growth. They want to believe in the advice they receive, and therefore it is crucial to ensure that the analytics you use meets the latest industry standard.
Customers want to feel confident, in discussing financial plans and making decisions. One technique to engender confidence is to uncover unconscious bias, such as confirmation risk, which might steer a customer to make a bad decision. Another way to deliver value to customers is to understand where they are in their lifecycle, and what significant events are on the horizon. When customers are facing milestones such as marriage, the purchase of a home, the birth or adoption of a child, a change in employment, the sale of a business or an inheritance, they need to consider their financial position.
There is a gender gap in wealth management providers. Nearly all the models of financial planning were developed for men. Women have different understandings of risk and return and need slightly different forms of advice. In a BCG study, 63% of female respondents said their wealth manager needed to improve its proposition. Women tend to need more detail on individual stocks before making an investment decision, and they are also more likely to be concerned about ESG rankings. With Outrank, we use Refinitiv data to allow users to calculate their portfolio’s aggregate exposure to ESG factors.
Once you have connected with customers, earned their trust and inspired their confidence, you have arrived at the stage when they are ready to make investment decisions. Bringing simplicity to complexity is how you can inspire customers to take action. Starting small, with one fund or one asset class makes the process less daunting than constructing an entire portfolio.
Engaging with customers can be intuitive and investor-friendly, making planning accessible to all.
Differentiating yourself by integrating technology into your service offering and including non-financial factors, such as attitudes towards risk, longevity, etc., in your customer’s profile can help you understand how they make decisions at different points in their lives and under various market conditions.
Following the cycle of connectivity, trust, confidence and action is essential to attracting and retaining customers, and indeed motivating customers to refer their friends and colleagues. By creating a feedback loop, and assessing data you receive from customer conversations on a regular basis, you can drive your company to make continuous improvement to your offering. Meaningful customer dialogue is the best market research you can acquire.
Does it have to be all or nothing: a big digital transformation or no change to existing functionality? Or can you take a step-by-step, incremental approach?
At Kidbrooke, we believe in thinking big, but acting small and fast. The goal of customer-centricity is to provide a seamless customer experience, even if your organization is siloed. Using technology can help promote the experience of an integrated offering while the actual integration is taking place behind the scenes.
Building a digital journey can start with a simple integration of a financial planning API into your existing technology stack. With OutRank, we keep it simple, transparent and dynamic, helping wealth managers create an integrated, holistic customer experience across their lines of business.
To learn more about how Kidbrooke can help you differentiate your wealth management offering, please get in touch.