creating client relationships that count

Better to Best

Creating client relationships that count

• Consumer view

• BehaviouralEconomics

• Relationship capital

• Experience & value

Now = Consumer View• Consumer

view• Behavioural

Economics• Relationship

capital• Experience &

value

Future• Consumer

view• Behavioural



value

• Consumer view




Evolution of financial service

1/26/2012 www.engage.uk.net

Product

Consultancy

Technical

Behavioural

Success was know your offering and how to position it

Success is Understanding your clients and deliver to their broader needs

• Consumer view




Standard Economics„homo economicus’

What piece of work is man! How noble in reason! How infinite in faculty! In form and moving how express and admirable! In action how like an angel! In apprehension how like a God!

William Shakespeare Hamlet

Act II scene II


• Consumer view




Behavioural Economics


Automatic• Uncontrolled• Effortless• Associative• Fast• Unconscious• Skilled

Reflective• Controlled• Effortful• Deductful• Slow• Self-aware• Rule following

• Consumer view




• Consumer view




• Bounded Rationality

• Herbert Simon (Nobel prize, 1978)

– Most decision-making is less than rational.

– The decisions made in organisations conform poorly with those predicted by theories of "rational" decision-making.

– Our decision-making is constrained by “bounded rationality”, and we make decisions not by “maximising” but by “satisficing”.

• Prospect Theory

• Daniel Kahnman (Nobel prize 2002)

– Decision-making is emotive

– The decisions made through heuristics and framing.

– Anticipated memory

– Our aversion for loss is a huge driver behind decisions made.

• Consumer view




Behavioural Economics

• Consumer view




Resist impulse

to buy

Resist impulse

to sell

Euphoria

Excitement Anxiety

Optimism Denial

Scepticism Fear

Desperation

Panic

Hope

Relief

Scepticism

Capitulation

Despondency

Depression

“ Everyone has been

making great returns

- I’d better get involved” “ it’s okay, I’m

investing for

the long term”

“ I’d better get out

of this now”

• Consumer view




Behavioural EconomicsCognitive bias Industry example Every day example Influence norm strategy

Overconfidence Underestimate risk/size of task

Ability pay off loans/mistaking luck for skill

3rd party consultancy

Inertia Credit cards Take path of least resistance

Transparency, Simplification, auto-pilot

Status Quo Change aversion Short term gain Long term consequences

Dissonance Buyers remorse Emotional buy Counter-intuit: Sleep on it

Loss/Regret Financial Crises Hold poor performers, sell winners

Due diligence and knowledge

Mental accounting Segment each part of wealth

Highlight Good & ignore Bad investment

Accounting, budget planning best practice

Shortcuts Ignoring risk-return Using rules of thumb decision making

Business/wealth coachAsk healthy questions

Information Financial news Price anchoring Recognise emotional laden judgments

Herding Copying others Investment tips Seek experts council

Narrow frame Investing without considering the consequences

Placing your financialeggs in one basket

Diversification, consider all options

• Consumer view




Context• Consumer

view• Behavioural



value

Solutions

26m active users (42% of pop.)

5m active users

17m active users

4m active users

• Consumer view




Work with the right clients

Financial

Capital

Relationship

Capital

RevenueA simple division of clients on

the basis of how much

revenue they bring into the

business on a recurring basis

(trail or trail and commission)

Profit / Value

The amount of revenue a client

generates measured against

the time it takes to service.

Segmentation based on the

client’s value to the business

Revenue or Profit PotentialOne of the above models but

also takes account of the

potential for the client to

provide new business i.e.

referrals

• Consumer view





Relationship Capital

Social

Technical Ad-hoc

P

1 1

1

70 70

70


T 60

A50

A54

S68

T56

“The value of all relationships that all people within an organisation bring to that organisation.”

P70+

“The value of all relationships that all people within a network bring to that network.”

“Its about relationships that deliver value, value to business and value to the consumer

Impact of the sales process


54%

9%

19%19%

Perc

enta

ge o

f co

ntr

ibu

tio

n t

o c

ust

om

er lo

yalt

yN = 2,400

Source: Customer Experience Diagnostic: Corporate Executive Board. 2010

• Consumer view




Outcomes not process

Financial planning

Risk capacity

Succession planning

• Consumer view




Future = Virtual Client• Consumer

view• Behavioural



value

creating client relationships that count

Economy & Finance