Resistance to change to a Needs Based Segmentation Strategy cannot be the advisor anymore…

Last year I spend two blogs around the need for adjusted segmentation models and adjusted pricing and of business models for the private banking industry.

In the first blog I detailed the importance of a Needs Based Segmentation Strategy, but also outlined some of the challenges organisation faced:

“Changing your segmentation strategy impacts the complete way a firm needs to think and should operate. It is not only operational (cross business unit thinking) it is also a cultural shift in the organizational thinking and the position of the client in the operating model. While the relationship manager was in the middle of the operating model for years, the HNWI client wants to be at the center of the operating model now and uses the different facilities around them (e.g. branch, advisor, call center, online, mobile, social media, …). The HNWI expects these facilities to be available, because these clients have personal preferences and want to make the decision themselves. -“I would like to use the channel I want to contact my bank, not the channel I have been asked to use”. – Not all clients want to be fully in control, because they like to have everything managed for them, but even this group seems to be increasingly involved in managing their own wealth. These examples, again, show the different clients and the different way of being serviced (with a different price tag that should be expected from a cost to serve perspective)”.

I also outlined tree examples on how such a change could impact weath managers’ business models:

  1. “Other pricing around customer needs– Not every need can be valued the same, because needs are met in a different way. The need to renew the Platinum Credit Card is met in a different way from the need to support a wealth transfer plan. It isn’t sustainable to meet all these different needs against the same ‘price’ or ‘for free’. 
  2. Cheaper channels should be priced that way– If a customer prefers to use the online or mobile channels instead of meeting advisors face to face it would not be fair to charge the same rates for the services offered.
  3. It is the Customers’ choice – The clients increasingly need to make decisions themselves on how they want to manage (or be managed) in the relationship with their wealth manager. Their preferences become part of the price they have to pay for being a client.”

Based on the above mentioned, it became more clear that clients increasingly want to decide themselves what services they are willing to pay for. This is directly linked to the change I do expect in the industry from being Advisor Centric to become more Customer Centric. It seems obvious, but the actual change is something that happens as a ‘one-day’ change and is something that needs to evolve but needs to be facilitated by both the organisation as to be accepted by the advisor.

The change in the role of the advisor can become visible by (examples):

  1. Recognition – Storytelling to showcase how advice provided resulted in customer satisfaction
  2. Remuneration – NPS score based remuneration
  3. Process – Focus on Fiduciary Interest, but still easy
  4. Technology – Embedded in behaviour

In the second blog I referred to idea to service concepts. To not get into repetition, one of the key things indicated by people from the industry was the challenge to realise the change! The fact that financial advisors have the power to stop these kinds of changes that would improve customer experience, satisfaction and the relationships on the long run.

The reason for them to become a roadblock is the change and impact it has on their day to day operations and their role in managing client relationships. While these changes provide great opportunities for them they use their power to treat with leaving the firm and taking their portfolio of clients and assets with them. Clearly the organisation wouldn’t care about the advisor, but clearly does about the client portfolio and assets. This treat was the main key response I received from the industry. Organisations try to keep the advisors and their portfolio’s with  higher compensation for private bankers as these compensations are firmly coupled with high expectations by firms for the assets that these bankers are able to bring with them as outlined by Scorpio.

But not the most recent FutureWealth report presented insights, relevant for the UNHWI in Asia, that counter the concern of leaing advisors. In their latest research (Futurewealth Report 2015), they asked clients if their adviser were to leave their private bank/wealth firm, which course of action would they most likely take.

Overall, 66% of the clients noted that they would stay with the firm and not join the advisor. Of the remaining 34% just 14% prepared to move with their adviser (Please find more details in the Scorpio graph below). This doesn’t align with the initial response I received from the bankers I have spoken and this also does not stack up against the assets that bankers are required to transfer over.


Now we know the risk of clients and assets leaving the organisation is less high than initially thought by the industry, what would be next reason that will be raised to no go for a Needs Based Segmentation initiative?

The direct impact on the income model? Budget available to run these initiatives? Priority to investments on legacy platforms? Let me know!


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