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Big Data Analytics Remains a Big Opportunity for Wealth Managers – Part I

Wealth Management firms are spending billions on IT to differentiate in the market place. Yet the question remains, can “Big Data” have a material impact on the business? Can it deliver business outcomes by reducing risk, increasing assets under management, driving profitability, client satisfaction, products per client, client and financial advisor retention, all while improving the cost/income ratio and return on equity?

These are questions that are being discussed in board rooms across the financial industry and topics that I will cover in this blog series.

In order to answer these questions we need to put the wealth client at the center and understand changing client needs and expectations around how the client wants to be served by the firm. We need to examine external factors such as the impact of game changing consumer technology and unprecedented client access to information, as well as understand how new market entrants are challenging the traditional financial advisor value proposition and business model as a new round of Robo-Advisors hit the market.

Up until recent years, banks enjoyed an account centric transactional business model. What is changing is the onset of unstructured social interaction data as smart mobile devices and mobile broadband Internet usage reach high penetration levels. Device proliferation is leading to the availability of “data exhaust” from mobile phones, tablets, automobiles, video cameras, and from sensors in buildings, streets, consumer wearables and footfall traffic counters. Correlation of such data to better attract, retain, and serve clients can create market advantage.J pagano Wealth Mgt Blog part 1

The “Big” in Big Data comes from the fact that worldwide data volume is doubling every two years with unprecedented volume, variety, and velocity. Ninety percent of the all data in the history of the world was created in the last two years (SINTEF)! The concept of Big Data is about the correlation and analysis of transaction data, social interaction data, and machine/sensor data in a way that can turn data into knowledge, knowledge into insights, and insights into actions in real-time.

So what does this all mean for wealth managers?

As a wealth manager, what impact would it have on your business if you were able to increase the understanding of your client exponentially? Actions derived from data are informed by highly personalized needs predictions that can arm wealth managers with deep insights about their clients, increase their relevance in every interaction, and directly contribute to business outcomes. Big Data can help wealth managers transform the client value proposition and re-imagine the client experience.

The new vision for financial services is that a firm must be present in the financial lives of its clients, any time, any place, on any device, and across any channel.

The firm can no longer wait for the client to come to it. It must be proactive in delivering highly relevant value-added services in real-time and anticipate client needs. The firm needs to aspire to creating a “market of one” experience for each wealth client, understand the needs of and the hierarchy within the household, and move to a client centric versus account centric go-to-market approach.

When it comes to Big Data in Wealth Management start with the foundation, put the client at the center, and define business outcomes. Focus on building capabilities around what is possible while re-imagining the client experience.

Wealth management firms can take concrete steps in the form of measurable business outcome based projects to significantly enhance the client experience. These include:

  1. Define a roadmap for wealth client data analytics maturity. This will identify gaps that can be addressed resulting in more relevant advisor-client interactions.
  2. Establish a wealth client listening system across all channels. Early detection of client behaviors can lead to the identification of issues and sales opportunities.
  3. Create a real-time single view of wealth client data with data virtualization. Substantial savings can be had by leaving disparate data in place while providing managers with a single view.
  4. Establish an analytics driven financial advisor collaboration platform. This helps create market differentiation by maximizing advisor productivity, sharing best practices daily.
  5. Deploy mobile virtual advisor video capability and establish branch analytics. This improves client experience and gives advisors more minutes per day with clients increasing cross-selling opportunities.
  6. Empower advisors with real-time client insights to drive business outcomes. This helps the advisor manage to client life events with much greater granularity and speed.

The choices that wealth management firms make around data analytics in the next two years will determine their position in the marketplace. Can Big Data help wealth managers? With a client centric and business outcomes solutions approach, the answer is an astounding YES!

I will discuss each of the above steps in more detail in my next blog. As always I welcome your suggestions, stories, and feedback!

 

 

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Connecting Experts to Customers with Omnichannel Delivery

Are you familiar with the bank of yesterday? One where trying to meet with an expert can translate into being required to travel across town or deal with lengthy wait times and lines? Where it can take days and even weeks to receive and sign documents to close a mortgage or open a new account? And yet many other aspects of your life can be addressed from the privacy and security of your home, at a time that is convenient to you.

I suspect many have encountered these or similar frustrations while attempting to gain valuable advice and support from a financial expert at a bank. However, these are becoming issues of the past thanks to the emergence of the omnichannel banking model.

The bank of now is here. Customers may make their own choice of when, where, and how they want financial service interaction. The omnichannel model orients the bank to focus on the customer, independent of product or geography, enabling customers to connect with the right expert at the right time at their preferred channel. One key to executing this strategy is recognition that a bank has to go beyond yesterday’s multi-channel integration by leveraging technology to virtually connect customers with the people who are best suited to address their needs. To get started down the omnichannel path, Read More »

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Next Generation Wealth Management: Mobile Technology Enhances the Customer Experience

The wealth management industry is under transformation. In an effort to win back trust, attract new customers and retain existing ones, firms are investing in new collaborative technologies that support their business model transformation from transactions to interactions focused on client centricity. IBSG Figure 4 GraphVarious McKinsey research and studies have shown that those who adopt more client-centric tools and processes can increase revenues up to 20 percent and profitability up to 2.5 times. Cisco’s own research has shown that wealth management firms that adopt client centric tools such as video can reduce client attrition, especially for the critical under-55 segment. Part of this transformation involves investing in video capabilities that enable firms and their experts to touch more customers, more often and in a more intimate manner than voice and email do today.

Getting the right expert to the right customer, at the right time is crucial in being able to offer superior customer service and improve cross-sell and up-sell rates. Another critical, competitive differentiator is embedding video capabilities into the mobile channels and applications customers already use. Read More »

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Reinventing Wealth Management with Technology-Enabled Video Services

The wealth management industry continues to face many challenges as it recovers from the financial crises of the past few years. And while financial markets have recovered most of their losses since 2008, investor confidence has not yet returned and volatility remains high.

Against this backdrop, investors now have access to a wide variety of investment information online, including analyst research, detailed company and sector financial reports, and data visualization tools previously available only to financial advisers. The combination of poor market performance, availability of information, and low-cost business models that put the investor in control are calling into question the fundamental value proposition of wealth management firms and their financial advisers.

To better understand the mind-set of wealthy investors, we conducted our first wealth management survey in January 2011. An important finding was uncovering a relatively young wealthy investor group we called “Wealthy Under-50s.”

As we shared the findings with our customers, new questions arose including:

  •  Is there a desire for technology-enabled interactions among younger wealthy investors?
  • Given that many clients value face-to-face meetings with their advisers, how often would they use a high-quality video option?
  • Is there a “right way” to deploy technology-enabled services and capabilities?
  • Would video services convince wealthy investors with no adviser to hire one?
  • What are the main barriers to the adoption of technology-enabled services?

To answer these questions and provide additional insights about wealthy investors, we conducted our second survey 18 months later, in April 2012.  The findings show rapidly shifting attitudes about wealth management and technology-enabled services. Specifically, we found:

  • After only 18 months, the behaviors and attitudes of the Under-50s in the first survey now extend up to age 55 (“Wealthy Under-55s”).
  • Although Wealthy Under-55s meet more often with their financial advisers, they are less satisfied with those interactions than older investors.
  • Wealthy Under-55s want more personalized investment recommendations, access to more diverse opinions and expertise, and more frequent access to their financial advisers than they currently receive.
  • Wealthy Under-55s believe that technology-enabled services that feature video-enabled access to financial advisers would provide them with better advice and more satisfying interactions than they receive right now.
  • Wealthy Under-55s are much more willing to change advisers.  Twenty-percent of them indicated they were likely to change their primary adviser in the next year, compared to only 4 percent of investors over the age of 55.

And perhaps most important for financial services firms looking to capture a share of this market, Wealthy Under-55s are willing to move at least some of their assets to firms that provide these services (57 percent in the United States, 54 percent in Germany, and 51 percent in the United Kingdom). Read More »

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What’s on the Minds of Financial Services CIOs?

Earlier this week, I participated in the Financial Services CIO Summit, which brought together CIOs and other senior technology business leaders from global as well as regional financial services institutions to share insights on the industry’s evolution. The dialogue was rich, compelling, and creative. The leaders grasp the challenges before them and see solution pathways that will help their banks capture new opportunities. So what was on their minds?

Four main forces are driving change in the banking industry: 1) rapid technology development that is providing a new business reality; 2) increasing customer demands that require banks to rethink how they have historically approached customers; 3) heightened competition, not just among financial institutions, but from companies outside their industry; and 4) burgeoning regulation that will require banks to track and store data disseminated to customers, including text messages, emails, and other interactive forms of digital information.

Overwhelmingly, the CIOs agreed that their challenges are not about technology per se; they have a plethora of technology choices. Instead, the main challenge is how to apply technology to maximize business benefits. The role of the CIO is no longer to serve primarily as a transactional technology guru. Management now expects CIOs to identify business problems and apply the right technologies to drive new business and serve customers better—while at the same time helping the bank become more productive and cost efficient.

One of CIOs’ biggest challenges is serving new customer segments with tailored approaches. Banks want to appeal to the younger generation of customers in a more differentiated and adaptive way. Gen Y consumers expect banks to use the web, social media, interactive games, and ubiquitous mobility in their customer interactions. CIO Summit attendees agreed that they need to create greater brand presence in social media circles to stimulate conversations with this key customer segment regarding home ownership, retirement savings, and other personal finance issues.

For high-net-worth clients, CIO Summit attendees pondered two “virtual expert” scenarios based on two-way high-definition video: (1) utilizing virtual advisers in wealth management branches to broaden availability of subject-matter expertise; and (2) home-based solutions that enable clients to reach their financial advisers when it is most convenient.

The CIO Summit offered a glimpse at several great opportunities. To capture them, I think CIOs should consider three steps: 1) conduct research and analysis to identify and prioritize strategic options; 2) define the appropriate business architecture (business strategy, people, processes, and organizational structure); and 3) create the technology architecture that enables successful implementation.

Financial services CIOs face some interesting battles. However, they now have the opportunity to become even more business-critical to their organizations than ever before.

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