The financial services sector is undergoing a seismic shift. On the one hand, more stringent regulatory requirements, such as the second phase of the client relationship model and point-of-sale (POS) disclosure, are creating significant and immediate compliance challenges for traditional mutual fund companies and financial advisors. On the other hand, new digitally-savvy market entrants are challenging the industry’s status quo as they cater to evolving investor behaviour and preferences.
With various regulatory, consumer and competitive forces now converging in the investment landscape, it’s increasingly clear that it’s not business as usual for fund companies and advisors in relation to investors. In particular, investors today — notably the Millennial generation — expect much more. Empowered by technology and easy access to information, including a plethora of competitive options, consumer expectations have never been higher. Conversely, their tolerance for poor experiences from organizations they deal with has never been lower.
In this increasingly complex and challenging environment, traditional fund companies and advisors who hope to attract, retain and engage investors should view compliance as an opportunity and as a catalyst for enhancing the investor experience. It is this focus on both greater disclosure and transparency and a commitment to an investor-centric experience that will solidify the client/advisor relationship and create added value going forward.
The financial services sector is not immune to technology’s influence on consumer behaviour. A recent survey of European investors conducted by Accenture PLC indicates that 27% of respondents have switched their wealth-management firms to get a new digital tool or service. And another Accenture survey determined that 71% of respondents considered their relationship to be transactional rather than relationship-driven.
Clients are increasingly demanding a tailored experience that’s relevant to their particular needs, situations, behaviour and more. The requirements of regulatory compliance, including more stringent disclosures, can and should be woven into a better investor experience. However, this requires a multi-faceted and cross-disciplinary approach that combines core competencies in data and analytics-driven insight, engagement strategy and tactical execution excellence.
Evan Wood, president of Pivotal Contact Inc., a Toronto-based firm specializing in data-driven engagement marketing, suggests that financial services institutions looking to enhance their investor experiences — either directly or through the advisor channel — need to consider the following elements as a central part of this approach:
Mapping the journey. The ability to deliver an exceptional experience hinges on understanding the client’s journey — that is, the series of interactions and touch points that investors have with the organization or advisor in question — and the underlying motivation and expectations of those interactions.
Tailoring the conversation with content. A one-size-fits-all approach does not fit the new investor dynamic. Every investor is unique and expects to be treated as such. Personalization and customization of relevant content at key “moments of truth” — such as interactions that are deemed more important than others — reinforce the value of the experience and relationship.
Optimizing channel communications and engagement. Clients today are engaged actively in a variety of online and offline channels. Communication preferences vary by media, activity, time of day and many other variables. They expect these preferences to be acknowledged, applied and respected as part of the client/advisor relationship. Managed effectively, channel optimization can not only enhance the level and quality of investor communications, but also drive cost efficiencies through a more effective use of lower-cost digital channels.
Measurement, data and analytics. The growth of digital media and communications represents enormous opportunity to connect with clients across the spectrum of channels. Not only are the options more numerous and varied, but each digital property generates an increasingly prized asset in the form of data. The ability to deliver superior client experiences is predicated on a continually growing knowledge bank of investor needs and preferences. This, in turn, requires a concerted effort to track and measure their engagement activity, analyzing the data for actionable insight that can enhance the relationship.
Leveraging technology. Although the notion of providing exceptional client experiences may be appealing to advisors, many are constrained in their ability to deliver this. Challenges range from a lack of time and the right digital skillset to being overwhelmed by cumbersome operational processes and simple inertia. Leveraging the right technology —particularly in a self-service capacity — that addresses both POS compliance and investor experience requirements can help advisors overcome these challenges.
Financial services firms in Canada are at the threshold of an era marked by growing regulatory requirements and evolving investor expectations. The latter is especially pronounced for the Millenial generation who have grown up in a technology and information-rich environment and who expect their experiences with financial services organizations to adapt to their needs and preferences.
Regulatory compliance and delivering investor experience excellence are not mutually exclusive concepts and, in fact, should be viewed as complementary opportunities to engage investors. Those firms that successfully embrace this new dynamic stand to gain significantly in the form of increased investor retention, engagement and revenue.