Keeping the Customer Satisfied!
6th April 2004

Written by Chris Read, Chairman of Dunstan Thomas

Advisers across the land are examining how they will present themselves to customers in the light of imminent depolarisation and the greater transparency around charging instilled by the long-awaited menu card.

But Dunstan Thomas believes change is extending way beyond deciding to be ‘multi-tied’ or going fee-based, to a fundamental examination of work practices with a view to serving customers better. And to this end both IFA and tied agents are starting to look at technology to help them achieve this. Many firms now realise that new technology is available which can be deployed to increase productivity and customer retention. The signs are positive according a wide-ranging survey of financial services providers and intermediaries that Dunstan Thomas commissioned earlier this year.

The recent study which explored uptake of Customer Relationship Management (CRM) found much confusion about what this phrase really means. Nearly a third of respondents (30 per cent) saw it as bringing all customer information together into one place which is certainly one important step in any CRM programme. Nearly a half (45 per cent) saw it as the ability to listen and respond to customers’ needs and requests. One in five (21 per cent) respondents saw it as the ability to use every communication with customers as an opportunity to sell. The truth is CRM is a many-headed beast incorporating all these elements but at its heart is a desire to serve customers better than they do today.

Figure 1: What does CRM mean for you?

Much of the world of financial advice has been too heavily geared to the one-off sale rather than building long-term relationships with clients. We all know from our own dealings with suppliers that we tend to gravitate towards organizations which try to understand our needs and then respond to them with customised offers. This tendency accelerates as the product we are being sold becomes more complex. The more difficult it is to understand the merits of the product or service, the more we rely on trusting the adviser to have our best interests at heart i.e. the more face-to-face advice is required. Sadly there are too few companies that realise this, and financial advisers are no exception.

But advisers that can get customer management right, particularly those that have high net worth individuals or companies on their books, are likely to do much better in this new, more transparent age. Their emphasis on face-to-face communication already places them in a strong position.

Although our survey of a wide-cross section of the market found only 15 per cent of respondents had actually implemented CRM systems, most were investing in activities which must be described as crucial stepping stones to effective management of customer relationships. For example 10 per cent of those responding are sorting out content and database management systems. Effective database management is a crucial aspect of CRM because it is these customer databases which store the data which can then be analysed to help adviser firms understand what customers are likely to need and then target the right individuals with the right offer.

Another area of clear progress is in electronic business processing. The gradual move towards processing new business electronically should now bring big advantages to advisers. The fact that tasks like quotation sourcing, illustrations, new business application completion and confirmation, contribution analysis and valuations can and will be increasingly done via computer is very significant. Put simply it is now possible to put technology to work to do a lot of the work that previously would have tied after large parts of the adviser’s day. This leaves the adviser, supported by his para-planner, with more time to spend preparing for meetings with customers, and ultimately serving his customers better. So these technological changes will lead to better customer management in time.

To this end the Dunstan Thomas CRM survey also gauged the activity of providers and intermediary firms in the area of electronic processing. Again the results are encouraging. Nearly a quarter (22 per cent) of respondents are building extranets. Extranets are already being used by IFAs to access product information, seek quotes and process new business electronically. As many as 28 per cent of respondents are forming links to existing IFA portals or other internet-based operations including consumer-oriented personal finance websites. In the meantime providers are rolling out new Point of Sale systems for their tied agents. These systems are designed to help advisers organise their day in a more effective way – again helping them to serve their customers better.

Figure 2: E-Processing Projects Ongoing in 2004

Wouldn’t it be great if we could get to a point where your computer helps to organise your day? Reminders of annual reviews of policies could be pre-populated into the Calendar section of Microsoft Outlook for actioning that week. E-mail shots to relevant clients affected by an imminent tax change could be set up and sent following analysis of your customer database to find out which clients are affected. Your database could be continually refreshed by pre-qualified leads generated by ‘click-throughs’ from a particular investment website that you have connected to.

The opportunities presented by the arrival of the internet and the computer age are many and various. More progressive IFAs are already beginning to see this. Technology simply makes it easier and quicker to do things that a small minority of IFAs have always done. But the automation that is now possible means that more time will be freed up by more firms to carry out the sort of sophisticated customer analysis that was only done by the few in the past. Again the survey has some interesting findings here as well. Sixty per cent of respondents already analyse customers according to what products they bought previously.

This arguably is not a particularly sophisticated piece of customer analysis. But 40 per cent of respondents also conducted analysis of their customer data according to income bracket. Thirty per cent study life stages for insight. With CRM systems and strong database management it is possible to dice and slice data in multiple ways to target very specific groups of clients with new products which have a higher likelihood of being appealing.

Some firms are already taking this new knowledge of what their own customers want and putting it to work to become designers and manufacturers of products for specific target groups. Other IFAs have developed expertise in administration of relatively complex schemes like SIPPs and are now reinventing themselves as third party administrators for IFAs and providers that do not want to take on the administrative burden.

Firms that are able to use the power of the internet to take some of the administrative and regulatory pain out of doing business will do well. Those that can realise the power of their crown jewels – their customer records – through more sophisticated data analysis and funnelling of relevant information through to their desktops to help them manage their day in a way that serves customers better, will transform their fortunes.

Providers and IFA firms are clearly worried about the impact of all this change on their businesses and our survey revealed that few financial services companies are immune from change. (See Figure 3 below for a view of key regulatory concerns which are likely to most impact customer relationships.) But for those that use the opportunity to explore some of the new technologies and ideas that are already out there, to help them change the way they work and re-engineer their businesses to serve their customers better, depolarisation will be their renaissance.

Figure 3: Impact of regulatory change on Customer Relationships

Dunstan Thomas provides software components to the life, pensions and investment communities. It already offers solutions for illustrations, contribution analysis, annuity calculations and review valuations. In March 2004, it launched its Imago:CRM solution, built using Microsoft’s CRM:Server platform, designed to enable providers and IFA firms to use back office data effectively to drive up productivity and enhance communication with customers.