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Clients Do Not Want Help. Until They Do.

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(This was originally published as a guest post for my friends at the management consulting and strategic communications firm Beyond the Arc: Understanding how customers really want help.)

On the same day I published a post about the sometimes disappointing allure of technology (Technology is Not a Silver Bullet), the always insightful Discerning Technologist Brad Leimer shared a a post from The Financial Brand on LinkedIn (Big Study Examines Retail Channel Preferences).

The study, sponsored by Cisco, showed strong consumer preferences for non-branch channels such as web, mobile, phone and ATM for many types of interactions. However, branches were the preferred channel for such things as “Apply for a loan” and “Support from banking representative”. (See below)

What explains the stark differences? First of all, as Ron Shevlin of Snarketing 2.0 says,  just because a person visits a branch for help or to complete a transaction doesn’t necessarily mean that they prefer to do it that way. It may mean that the web site or phone representative was inadequate to meet the client’s needs.

Secondly, and not to get all snarkety myself (that’s Ron’s sole province), but clients really don’t want your help. Until they do.

Results Not Process

Much has been written about the so-called “customer experience”– everything that a customer comes in contact with during their lifetime interaction with your brand; direct and indirect, obvious and subtle, conscious and unconscious.

Successful firms correctly attempt to measure the expressed and latent needs of clients. The best keep in mind the words of the great ad man David Ogilvy, who has been variously quoted as saying multiple versions of “People don’t want quarter-inch drill bits, they want quarter-inch holes.”

I have long found inspiration in the work of now-retired Harvard Business School professor David H. Maister, and I have been using some variation of his 2×2 matrix below for at least a decade.

Maister uses a healthcare analogy to describe the key operational and profitability metrics of different departments, and I have found it useful to help financial firms think through their various activities and how they provide value to their clients.

Pharmacy (Low Touch/Standardized Process)
For a financial firm, these are the things that just need to get done quickly and accurately. For the most part clients have little preference as to how.
–
• Account Opening
• Transactions
• Balance Reporting
• Transfers
• Basic Service Issues
–
Nursing (High Touch/Standardized Process)
These are items that might need a little more hand-holding, even though the processes and protocols are still well defined, and good client-service skills can go a long way to improving client satisfaction.
–
• Standard Credit
• Product Advice
• Estate Settlement
• Discretionary  Trust
• Complex Issues
–
Brain Surgery (Low Touch/Specialized Process)
These activities require specialized skills, but the real value comes from applying the expertise, not necessarily from the advisor/client relationship.
—
• Custom Credit
• Asset Allocation
• Basic Trust Admin
• Complex Assets
• Basic Estate Plans
–
Psychotherapy (High Touch/Specialized Process)
For financial firms (and especially wealth management firms), this is the top of the value chain. It’s what happens here that drives most loyalty/at-risk measures. Diagnosis is key, and it is from here where brain surgery may be prescribed.
–
• Goal Setting
• Financial Planning
• Complex Estates
• Succession Matters
• Nonfinancial Issues
• Moral Support
–

Bringing it All Together

Clients may well be willing to use your new app for certain things, utilize your web site to download transactions and contact your call center to change their address. Those things may improve your operating margins– as long as they work.

The face-to-face interactions that do the most to improve the client experience are not the ones that solve the issues that could have been (and should have been) solved via other channels (See two surefire ways to irritate your customers. It’s the ones where they are really receiving the time and attention from someone who understands their situation and their goals and is helping them get to where they want to be.

Clients don’t want your help. Until they do.

Top 10 Best Banking Blogs

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(Via The Financial Brand) Congratulations to all of the winners in The Financial Brand’s Best Banking Blog poll. I am honored to count several of the winners amongst my friends. It is a group of smart, kind and funny people– what more could you want?

1. JD Power & Associates Banking Blog – @JDPowerBanking

2. Snarketing 2.0 – Ron Shevlin —  @rshevlin

3. ACTON’s Financial Marketing Insights – @ACTON_Marketing

4. Bank Marketing Strategies – Jim Marous  @JimMarous

5. Banking.com –  @bankingdotcom

6. CU Insight – Randy Smith @CUinsight

7. Bank Innovation – @BankInnovation

8. Netbanker –  @netbanker

9. GonzoBanker –  @GonzoBanker

10. Financial Services Club Blog – @FSClub

Congratulations as well to the Write-Ins & Other Honorable Mentions, along with the nominees, where I again am fortunate to recognize another great group of smart, kind and funny people I call friends. I am also humbled and grateful to even be mentioned in their company.

Again, from The Financial Brand, Write-Ins & Other Honorable Mentions:

Read the entire article, including links to representative posts from the winners at The Financial Brand: Top 10 Best Banking Blogs – Readers Choice 2012 Winners | The Financial Brand: Marketing Insights for Banks & Credit Unions.

Other nominees:

I encourage you to bookmark these sites if you are interested in the future of financial services.

Related articles:

When the Affluent Become the Unbanked

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Concern about those who have been left behind in receiving financial services (“the unbanked” and “the underbanked” ) have been popular topics of conversation amongst bankers and regulators over the past few years.

An important thread of these conversations has been the fact that in many cases, it is the customers who are leaving the traditional financial service providers behind, not the other way around.

I spend most of my time working with the “overbanked”– affluent families who have no shortage of financial services options, and as I have written previously, they too can find a variety of services to borrow, hold, invest and move money without the need for a traditional bank.

Yesterday’s Wall Street Journal reported on an affluent family who has “…no need, desire or want to go to a regular bank,”

Footnote to Financial Crisi: More People Shun the Bank – WSJ.com

 

 

The Convergence of High Tech and High Touch in Wealth Management

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I wrote a piece for the popular fintech blog netbanker yesterday on how high tech and high touch are converging in wealth management, and what I will be watching for in that convergence zone next week at Finovate Fall 2012 in New York.

In the article, I mentioned that most of the notable traction to date has been in the payments space. One might not think that this “dumb pipe” portion of banks’ business models– moving dollars and data from Point A to Point B– would provide such fertile ground for disruptive innovation, but consider the impact and potential of players such as Finovate alums Dwolla and Simple, as well as Square, PayPal, and others.

I also noted in the article that innovative specialty lenders and crowdsourcing platforms are breaching what had long been banks’ deepest moat–  the ability to monetize their balance sheets. Most simply defined, banks’ primary function is to be a financial intermediary. Besides moving money from one place to the other, they hold excess capital when it is not needed for investment, and lend it out when it is; providing liquidity to all sorts of macro and micro markets along the way.

Oligopolists acting like oligopolists

Even though there are over 7,000 banks (plus a similar number of credit unions) in the U.S. alone, the industry has long operated as an oligopoly. For the most part, it continues to act that way despite disruptive threats from all around. After all, their primary product is the ultimate undifferentiated commodity, money. Bank A’s money isn’t better designed, sturdier or more portable than Bank B’s.

Parenthetically, oligopolists acting like oligopolists has a lot to do with the reason most consumers hold banks in just slightly higher esteem than they do the U.S. Congress. Banks integrated vertically and horizontally, they bought weaker competitors, they raised prices, they made up new fees, they cut costs and maximized profits for shareholders with scant regard to other stakeholders, like, you know, their customers.

Predictably, smart players from outside the industry have visions for better ways of doing business.

As frightening as any of these threats should be to any entrenched bankers who are paying attention, the ongoing march of innovation should be scaring them right out of their moire suspenders. Innovators are moving beyond solving the algorithmic problems of the industry and beginning to tackle more dynamic and heuristic areas, such as wealth management.

I continue to reference a recent American Banker article cited a KPMG survey that said 9 out of 10 banks were considering a major overhaul of their strategy, and that 40% said that wealth management was essential to growing revenue in the future.

Wealth management is an attractive business, and if done right, the business can also be a key differentiator, but it requires the ability to develop, manage and leverage intellectual capital beyond the commodity that is the bulk of many banks’ current business models.

Not all will be able to make the leap.

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Wealth Management 3.0 Is Here– Are You Ready? (Part 1 of 3)

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Most banks today have wealth management clients with an average age somewhere between 70 and dead (no offense, Mom). Their books of business were largely built in bygone eras, from fortunes made in companies and industries that no longer exist.

These clients (and many of their advisors) are really not sure about this whole “interweb” fad, and they think Betty White is a great young talent.

The fact is, the world has changed and most banks have not caught up. Most probably never will. They will instead quietly slide off into obscurity like Don Johnson. Or worse, Philip Michael Thomas. At least Don Johnson had Nash Bridges. (Warning: if you readily recognize those names, you may very well be part of the problem.)

The segment of financial services we think of as ‘wealth management’ in the U.S. banking and brokerage industries today has evolved over a couple of broad eras, and too many advisors and executives don’t even realize that we’ve already entered another new era– one I call Wealth Management 3.0.

The term ‘wealth management’  is, of course, Latin for ‘don’t lose my pile of money, and make it bigger if you can’. It is also a term that was coined by the industry without its clients’ permission. Multiple surveys show that clients don’t like the term. Surveys also show that most clients define ‘wealthy’ as someone who has a pile of money at least twice as high as theirs. Maybe that’s because, as P.J. O’Rourke says;

Everyone enjoys pretending to be what he isn’t. It’s poor men who wear flashy and expensive clothes, pretending to have money. Rich men wear sturdy and practical clothes, pretending to have brains.

Nonetheless, today we begin an exploration of this industry evolution that is rapidly becoming a revolution, and we will lay out some imperatives for firms and advisors who want to survive and thrive in the new era

Meticulous researchers and conscientious historians labor considerably to deeply understand precipitating events and underlying causes. Readers of this blog know that I am neither, and therefore not burdened with such inconvenient details. I am purposely ignoring the long history of true ‘private’ banking in Europe and lumping many generations and iterations of evolution into three distinct (if arguable) eras for purposes of brevity and general laziness. Besides, sweeping generalizations are real time-savers.

Wealth Management 1.0 (1853-1982)

In 1853, some 61 years after the stockbrokers first began trading under a buttonwood tree (and presumably had since moved to more sensible indoor trading floors), some of the wealthiest men in America decided that their control of their respective piles of money ought not to cease with such trivial nonsense such as their own deaths. So they founded U.S. Trust, the first financial firm to act in a fiduciary capacity on the behalf of its clients’ trusts and estates.

Wealthy men hate to be left out of good ideas to protect and grow their own piles of cash, so over the next hundred years, other firms sprang up to facilitate all sorts of services related to the accumulation, preservation and distribution of personal wealth.

The wealthy denizens at the turn of the 20th century had to endure such annoyances as trust-busting, the advent of personal income tax in 1913 and the stock market crash of 1929. These indignations created many opportunities for firms to put their best ideas into practice to help the rich stay that way.

Much to the chagrin of more than one plutocratic robber baron, the post-World War II financial boom began to spread the wealth. The number of millionaires mushroomed from a few thousand to more than a half million by 1980, and wealth management practices spread beyond the ‘white shoe firms‘. Even to, egads, mere commercial banks.

Key attributes of Wealth Management 1.0

  • Key characteristics: Fragmented offerings- banking, trust, investment, brokerage and insurance services provided largely by specialists
  • Key firm capabilities: Creating and selling proprietary products and strategies, stock-picking, trust administration
  • Key client goals: Preservation of wealth, with eventual distribution to family members or large endowments
  • Key advisor skills: Narrowly focused subject matter expertise, membership in the right private clubs
  • Key advisor activity: Client retention, tying their rep tie into a perfect half-windsor knot

Evolving to 2.0

Most firms have had to evolve their business models beyond 1.0 to survive to this point; but as we shall see, many still depend on revenue streams attached to legacy clients that is not self-sustaining. Depending on which research you read, anywhere between $18 trillion and $54 trillion of assets owned by the Traditionalist Generation (those born before 1946) and Baby Boomers (born 1946-1964) will pass down to Generations X and Y (no doubt with nary a trace of appreciation).

Business models and value propositions that worked for older generations are, at best, punch lines to the younger generations. At worst, they are powerful motivators to innovate their own disruptive start-ups to put grandpa’s firm out of business. Yet, many firms and advisors continue to whistle past their own graveyard.

Up next: Part 2– Wealth Management 2.0 (1982-2008)

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Wow, I’m Actually Leaving My Day Job!

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This week I celebrate an important anniversary in my professional career as I close this chapter and begin a new one.

Twenty years ago this week, I joined a small bank that would become one of the largest and most respected in the country. It has been an incredible ride, and I got the chance to work with some of the greatest people in the business. Not many bankers get to learn directly from an American Banker Banker of the Year CEO, but I have worked for two. At the same company. (Jerry Grundhofer and Richard Davis.)

During that time, we grew from $6 billion to nearly $350 billion in assets, and the market value of the company grew from $750 million to over $60 billion, with two 3-for-1 stock splits along the way. (More detail is available on My Day Job page.)

I know that the experiences and opportunities that I have had, the people I have met, and the things that I have learned will serve me well as I leave and begin a new chapter.

Where Do I Go From Here?

First of all, I will continue writing here about the intersection of leadership, advice and innovation. I started this blog as an outlet for my professional passions, and it has exceeded my expectations. It has been viewed thousands of times in over 30 countries, and my posts are also now available on www.bankinnovation.net and www.bankNXT.com.

New Opportunities

Secondly, I am thrilled with the new opportunities that have been presented to me so far–  and I haven’t even officially left yet! I feel very fortunate to have so many friends all around the industry, and very fortunate to know that I will have the chance to make a significant impact in another senior leadership role.

Hanging Out My Shingle

Among those current opportunities are some speaking and consulting engagements, so I will also add the titles Founder and CEO to my resume. I have started a new consulting firm called Clientific, LLC as a way to help others while I consider the right long term leadership role. The ‘intrapreneur’ gets to try ‘entreprenuer’ on for size– at least for a little while!

Let me know if you think I can help you or your firm.

Why Am I Leaving?

Simply put, the timing is right. I am proud of the work my team has done to help turn what was once a small regional bank into a competitive national platform. I have always called myself an “embedded entrepreneur” and said that I love to build great businesses with great people. That has certainly been the case here. The organization is ready for someone to pick up from here and take it to the next level, particularly with a deeper concentration on the high quality credit book we have built. I couldn’t imagine a more amicable and professional parting of ways, and I remain a fan and a friend of the bank and its leadership and teams. I wish them nothing but the best.

Stay tuned for details of my new adventures!

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The Valley of Despair and the Exodus of Talent

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In my June 14 post Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail? I examined the current trend of banks seeking greener post-Dodd Frank pastures by pursuing new wealth management initiatives.

In Ocean’s 14, I’m sure they’ll call this running a reverse Willie Sutton. Sutton, of course, was the man who robbed an estimated $2 million from banks and who apocryphally explained “because that’s where the money is”.

The top 1% hold 40% of the wealth, and banks need to find new sources of earnings… What could go wrong?

Plenty.

The Valley of Despair

Change management professionals often prepare organizations for the ‘valley of despair’ that usually follows the initial excitement that bubbles up when a change is announced. Anticipation and relief from the status quo typically give way to feelings of fear, threats, guilt and depression before acceptance and progress.

Similarly, Gartner coined the the term ‘hype cycle‘ and its similar ‘trough of disillusionment’ to describe the point where emerging technologies fail to deliver on their anticipated hype. (See my post Remember When Laptops Revolutionized Financial Services?.)

I suspect that many financial institutions that are currently so excited about the potential of the affluent, high net worth and ultra-high net worth segments are currently approaching the ‘peak of inflated expectations’, unaware of the rapid downward descent that awaits them on the other side. It’s not that those segments aren’t truly attractive. It’s that most organizations won’t be able to capitalize on the opportunity.

The Exodus of Talent

Readers of this blog know that I am a big believer in leveraging innovation and technology to enhance the advice provided by advisors to clients, but I am not among those who think that a better algorithm is all we need. Wealth management has been, and remains, a talent-driven business. This peak of inflated expectations comes with an often insatiable appetite for the ‘best and brightest’ talent.

There are already signs of firms rearming for another battle in the war for talent. Job postings in the wealth space are picking up. Headhunters are brushing off their cold-calling skills and smiling and dialing again. Consultants are preparing new decks full of advice.

At its worst, the war for talent becomes a mindless bidding war, and even the unproductive dolt down the hall swaggers in to dangle an unsolicited job offer in your face, nearly daring you to match it. If you feel threatened enough, and if you have not been treating talent management as the permanent part of your job that it is, you probably will match it.

At its best though, the market brings exciting new opportunities to bear and true talent, like capital, will flow to its most efficient use. And maybe the unproductive dolt down the hall will become someone else’s shiny new unproductive dolt for 30% more pay

Why Top Talent Leaves

So how do retain your top talent (even if you do lose a few dolts along the way)? Forbes had a great post this week on Why Top Talent Leaves: Top 10 Reasons Boiled Down to 1. The punchline is:

“Top talent leave an organization when they’re badly managed and the organization is confusing and uninspiring.”

The article goes on to describe two things to do to keep your best people:

1) Create an organization where those who manage others are hired for their ability to manage well, supported  to get even better at managing, and held accountable and rewarded for doing so.

2) Then be clear about what you’re trying to accomplish as an organization – not only in terms of financial goals, but in a more three-dimensional way. What’s your purpose; what do you aspire to bring to the world? What kind of a culture do you want to create in order to do that?  What will the organization look, feel and sound like if you’re embodying that mission and culture?  How will you measure success?  And then, once you’ve clarified your hoped-for future, consistently focus on keeping that vision top of mind and working together to achieve it.

I certainly agree with both of those recommendations, but I recommend starting with the first one. In this hype cycle, we are going to see a lot of high performing individual contributors become poor performing managers. Either because they aren’t really cut out for managing others, or because their organizations won’t support them in becoming the managers they need to be.

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Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail?

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In my June 6 post 9 of 10 Banks Are Mulling an Overhaul I linked to the American Banker article that cited the findings from a KPMG study that also said:

“Forty percent of the respondents said that asset and wealth management would be essential to expand revenue over the next few years.”

But another article in the same issue of  American Banker (Missed Opportunities Abound in the Bank Channel) reported from the Prudential Wealth Management Leaders Forum in New York, which I also attended:

“…banks haven’t exploited the opportunity too well. From 2009 to 2010 banks’ and insurance broker-dealers’ assets under management shrank to $600 billion, less than 5% of the $14.5 trillion wealth management market. Meanwhile, discount brokers grew to $2.5 trillion, cornering 19% of the market. Also growing in that time were registered investment advisors, which command 13% of the market, and private banks and trust firms, which command 8%.”

Buried in papers

Is Wealth Management the New Holy Grail?

Bankers seem to be acting like Indiana Jones in his Last Crusade (…well, last until he sought the Kingdom of the Crystal Skull, but that’s another post… OK, probably not.) in their pursuit of the Holy Grail and its promise of immortality.

A flat (and further flattening) yield curve, low loan demand and regulatory pressures on fee income and capital needs are causing bankers to seek new avenues for growth. (See also Is Bank Merger Mania Imminent?)

It’s easy to be attracted to the net overall growth of the affluent, high net worth and ultra high net worth segments and the impending transfer of $41 trillion in wealth from the baby boomers to younger generations.

But as the American Banker article points out, there is a huge gulf between “opportunity” and “success”. Over the past thirty years, a ‘build it and they will come’ strategy worked at some level for nearly everyone. Those days are long gone and they won’t be coming back.

No Easy Fix

Firms that want to gain market share from others will need to deliver true value to clients.

At the same Prudential Wealth Management Leaders Forum, Wallace Blankenbaker of the VIP Forum described the key drivers to loyalty– serve, tailor and teach. Clients want firms that are easy to do business with, firms that look out for their best interests and firms that can help them make better decisions.

If firms fail to deliver on those key drivers, funds will continue to flow from them to competitors that can deliver.

Wealth management isn’t the Holy Grail. It’s a specific set of services designed to solve the unique issues and meet the unique goals of a specific set of clients.

As I have said before, Don’t repaint the walls when you need to fix a cracked foundation.

“You must choose, but choose wisely. For as the true Grail will bring you life, the false Grail will take it from you.”

-The Templar Knight guarding the Holy Grail in Indiana Jones and the Last Crusade