By David Howard, Founder and CEO of WealthTech Pros
Mark Mortimer gave an overview of the cost-to-serve model which provides a framework for categorising the work you do serving clients into two categories:
- Value demand: things you do for your clients that add value, strengthen relationships, and drive profitability.
- Failure demand: is the opposite and are interactions or processes that create unnecessary workloads and drive avoidable costs.
In this article, I will focus on how firms can encourage clients with modest investments to engage digitally to reduce avoidable contacts. This cohort of clients presents a huge challenge to the available capacity of your staff. By reducing or diverting avoidable contacts to digital channels staff capacity is freed up to work with clients on the interactions that create value for both parties. One way of thinking about avoidable contacts is the analogy with “empty calories” gained from stuff you eat that creates flab with no nutritional value”. The first steps in avoiding the “empty calories” are:
1. Could you clarify your proposition to bring the target customer base into sharp focus at all stages in their lifecycle throughout accumulation and decumulation?
2. Creation of personas for each customer segment and define their:
- Characteristics.
- Goals and challenges.
- Motivations.
- Behaviour patterns.
The combined understanding of the above provides a foundation for designing empathetic and efficient ways of working, client communications, and engagement. The next steps are:
- Definition and analysis of customer journeys and pain points that drive repeated contacts (e-mails, calls, face-to-face) that create “busy work” that adds no value. lead to unnecessary work.
- Removal of barriers to make information available online. In a digital world, every firm should aim to provide clients with a portal or app that is their primary source of information). Streamline and simplify client reporting and communications to maximise understanding and pre-empts clients' questions or concerns. Don’t damage comprehension by making the compliance stuff front and centre.
- Development of the Target Customer Experience that creates meaningful and positive interactions for each customer persona that don’t consume precious operational capacity but leads to increased satisfaction, loyalty, and advocacy. Finally, this must be tailored to the needs of vulnerable customers where exceptions may be required to protect them.
Once the above is in place the really hard part begins; changing understanding and behaviour to adapt to the new ways of working. This starts with contracting with your clients to explain the benefits for them and you as a firm. Until your customers understand the value of greater digital engagement, they won’t be motivated to adopt. Once this has been achieved you need to provide the technology, educational tools, support, and nudges to create and sustain digital engagement.
So, what if some clients don’t budge and refuse to engage? There are a few options; you can suck it up and accept; change the fee model or, make a plan to “retire” those clients. Some firms are willing to take on clients with modest pots and in drawdown. However, in my experience advisers find this hard because of the relationships which have often been built up over decades.
Looking forward technology solutions will emerge in 2024 that provide an alternative. The buy now, pay later group Klarna announced on February 28ththat they have partnered with OpenAI to develop an AI-powered chatbot. This is handling two-thirds of customer service inquiries, doing the equivalent work of700 FTEs. Klarna claims that their chatbot has the same level of customer satisfaction as human interactions but is much faster. The chatbot solves atypical request in less than two minutes, compared with 11 minutes for a staff member to respond. It also provides more accurate resolution, leading to a 25%drop in repeat inquiries. If solutions targeted at wealth management can bring similar benefits, combined with ongoing monitoring of clients’ investments to create proactive communications, then even the most die-hard digital detractors will find unexpected value.
Advisers will often say it costs more to serve a client with a £100k pot than one with a £1m. I have tried to outline an approach in this article that could reduce the avoidable workload whilst offering the same or better client outcomes and experiences. The first step on the journey is to quantify the workload. Once visible it will be much harder to ignore and I hope, create the motivation to act.
