One Stop Shop

The trend toward offering more holistic solutions continues to accelerate among leading wealth managers. Two recent developments that add traditional banking services to wealth offerings are worthy of mention:

○ The addition last month of the Cash Account to Wealthfront’s investment offering

○ The announcement last week by Carson Group of its partnership with fintech payments firm, Galileo, to offer Money+, a bank-like checking and savings accounts in the third quarter

For both firms, accounts are FDIC insured, offer high interest rates, charge no fees and have low minimums. Wealthfront’s Cash Account, however, is online only. It does not include an ATM card or a checking account version, although Wealthfront promises new features to be added “over time.” For now, it is meant as a high yield cash savings tool more in line with traditional sweep accounts. The planned Carson Group products, in contrast, are designed to replace clients’ need for a bank relationship. They include debit cards, ATM access, online bill pay, and checking features and are intended for everyday transacting.

Regardless of their differences, both developments have been facilitated by technological advances in payments processing and in the familiarity with, and acceptance by, the market of online banks. Both also represent moves by wealth/investment managers to keep more client money in-house and under control and to address the competitive advantage of large brokerages with built in bank affiliations. 

What’s in a Name?

The world was abuzz recently over another royal birth, but there seemed to be even more breathless anticipation of the prince’s name than the birth itself and the significance of each potential naming option. That got us thinking about the importance of names and what to keep in mind when you’re naming a new product, service, process, or any intellectual property.

Make it descriptive. A name should quickly communicate what the business proposition is. Make it easy on your audience to understand what you do. Take, Ticketmaster, for example. Quick and clear.

Make it benefit-oriented. What’s in it for the customer or user? Does Rocket Mortgage leave any doubt? Goodbye red tape, hello approval.

Make it memorable. Ideally, a name makes an immediate impression and is easy to recall. When turbo is combined with tax, the seemingly disparate terms combine for an alliterative name with high impact.

Make it your own. A name needs to fit your culture and emanate naturally from it. If your corporate personality is formal and conservative, your name should align with that.

Survival of the Fittest

The chart below, from the Summer 2019 Morningstar Magazine, is a stark indication of the hurdles asset managers face in the Post-Crash investment environment. 

Source: Morningstar Direct-U.S. Open-End Fund (excluding Money Market and Fund of Funds), ETF, Separate Account, and CIT Historical Data. 

In the early 2000s mutual funds and ETFs enjoyed strong cash inflows. Performance mattered, but even offerings with mediocre Morningstar rankings (2 & 3 stars) attracted net new money. Following the 2008 Crash, success has not been so easily achieved. By 2010, only 4 and 5 star rated products attracted net inflows. After 2013, virtually all positive flows have gone to 5-star offerings only. 

To make matters worse, investment management fees in the Post-Crash period have been consistently declining while net contributions to DC plans, long a staple of steady contributions to mutual funds, have turned negative for the first time since 2000. 

The secular forces that are stressing the asset management business show no signs of letting up any time soon. To survive, managers will have to increase efficiency and cost containment, while providing higher quality and/or lower cost products to the market. In addition, managers must be able to tell their story in a clear and logical manner and demonstrate repeatability of their approach and process.

The Millennials Are Coming!

There are many factors that affect who we are, how we think and what we want out of life. Sometimes, these influences are so great that they shape a generation. Millennials have faced unique challenges and world events that have impacted what they want and need from financial service organizations, and it’s time to begin providing those services.

What defines this generation?

Millennials (1981–1996) grew up during the 2008 recession. Times were tough when they became young adults, and many had to live with their parents longer than prior generations. They got a late start building up wealth and have been slower to marry and start families. It is estimated that this generation will change jobs at least 8 times before they retire.

Why they are a force to be reckoned with

The oldest Millennials are now approaching 40 years old. They are currently the largest generation in the U.S. labor force and stand to inherit an estimated $30 trillion in wealth over the next twenty years.

What they seek from financial service organizations

Millennials are interested in financially preparing for the future, and want to establish relationships with financial service organizations that can provide:

1.Cutting-edge technology

Studies have shown that most Millennials check their cell phones within a minute of waking up for the day. They are dependent on technology and demand apps and software that make financial transactions quick and easy. When marketing to this segment, they prefer to be reached digitally or via social media platforms.

2. The ability to invest according to their values

Millennials, more than any other generation, say they want to use their wealth to change the world. They believe that a company’s environmental, social and governance (ESG) track record is important and factor this into their investment decisions; they also seek relationships with financial organizations that are socially responsible. 

3. Thought leadership

Millennials get a bad rap for being irresponsible. As it turns out, they are just as in control, financially, as prior generations, and are eager to learn. They want meaningful thought leadership that helps address their concerns.

Need help winning millennial clients?

Millennials look to financial service firms they can trust to help them tackle their financial issues, including making up for a late start in saving for retirement and rolling over retirement savings in accounts left behind after each job move. Organizations that provide them with the services they demand, including technology, options for socially responsible investing and compelling thought leadership, are more likely to win their business. 

Avoiding Bias

Making the best decisions about financial service products can depend on effective market research. But, to get an accurate read, it’s essential to minimize the research biases that often arise. Below are a few common biases that we often see and guard against:

Self-fulfilling prophecy

Researchers, often spurred on by clients, may have a subconscious bias toward a desired outcome and ignore findings that refute that outcome. This leads to studies designed with a self-fulfilling result, known as an observer-expectancy effect.

Selection bias

This bias occurs when the research universe is not properly randomized in the selection process. It leads to findings that do not accurately represent the intended population.

Survivorship bias

An acute form of selection bias, survivorship bias is the tendency to include only subjects that are easily available because they have “survived” and exclude those that have not. For example, when looking at customer satisfaction, including only current customers may be misleading if their views are not balanced by those of former customers.

Order bias

Information we are initially exposed to often influences subsequent opinions and actions. To prevent inappropriately influencing responses, through what’s known as anchoring, researchers need to be sensitive to how survey questions are framed, in what order they are asked, and whether to vary the order from respondent to respondent.

Unpleasant experience

Negative events tend to make a deeper impression than those that are positive or neutral. As a result, respondents are more likely to assign a higher value to an unpleasant customer experience than a positive one, which can skew or overemphasize certain results.

The Client-Centric Trend Continues

A couple of items on firms entering new territory to note.

○ First, Goldman Sachs is reportedly developing a wealth management offering to append to Marcus, the firm’s retail banking platform. The offering is expected to be a hybrid robo/advisor-based service that will round out Marcus’ banking, lending and soon to be insurance and retirement savings products.

○ Next, Envestnet announced that it is adding lending to its growing advisor platform through a partnership with Advisor Credit Exchange. Envestnet plans to offer consumer loans by the fourth quarter of this year and commercial loans by 2020.

Both of these developments underscore the continuation of the trend for leading financial service firms to provide increasingly comprehensive service packages designed to meet the broadest range of consumers’ financial life needs. Often, as is the case with Goldman, these packages are built with the specific needs of target segments such as the mass affluent in mind, and with reference to growing databases of client interests, activities, consumption patterns and preferences.

In the words of Envestnet’s CEO, the addition of the lending solution to Envestnet’s wealth management platform is “crucial for Envestnet to provide advisors with the most comprehensive financial wellness service to their clients.”

We expect the trend toward relationship-based, integrated multi-product packages to continue as markets increase their demand for customized offerings built around their needs rather than vendor defined product silos.

It’s All About The Client Experience

Your clients represent your most reliable source of growth, so consider them your greatest asset.

In wealth management, one of your greatest drivers of sustained growth is not the solutions you offer or even the advice you give. It’s how you can make your clients feel about you. Improve their experience and bottom-line growth will follow.

Enhancing the client experience is 100% within your control. Here are four drivers that can create an enhanced client experience:

1. Technology That Engages. Today’s technology platforms need to do more than meet expectations around portfolio management and reporting. They need to leverage client information to exceed expectations through personalized touches and interactions. Through CRM, they can inform and deliver technology-enabled, data-driven touches efficiently and unobtrusively.
2. A Customer Journey Worth Taking. Every stage of the customer journey needs to be examined with a client-benefit focus:
○ Frictionless onboarding. Tech savvy companies are raising the bar on client interactions. Make it easy, even pleasant, to become a client.
○ Retention begins on Day 1. Don’t ignore your clients once they’re a “captive” audience. Curbing attrition isn’t an activity, it’s a mindset.
○ Client communication and interactions need to be proactive and regular. This lets your clients know you’re constantly thinking about them.
3. Organizing Around the Client
Put the client at the top of your company’s organizational chart. That will mean everyone in the organization works for the client, and everyone, no matter what their role, will know it. When a client calls, it’s the boss calling. Make client satisfaction a lead item on your compensation scorecard.
4. Clients as Brand Ambassadors
○ Organize interesting, enjoyable events and ask your clients to invite their friends and colleagues. It’s less aggressive than an outright request for referrals but serves the same purpose.
○ Involve them. Consider setting up an advisory council that you invite your top clients to join. Even if they turn you down, they’ll give you credit for asking them.

Your clients represent your most reliable source of growth, so consider them your greatest asset.

A Good Brand is Good for Business

If it’s been awhile since you’ve adjusted your brand, it may be time. Your brand defines who you are, distinguishes you from the competition, helps determine how your organization is perceived in the marketplace, and can help you win or lose new business.

Data shows that a strong brand is good for the bottom line. From April 2006 to April 2018, the top 100 brands outperformed both the S&P 500 and MSCI World Index, growing 172.1% versus 102% and 50.3%, respectively.*

Often, you may need only a tweak here or there, not need a complete rebranding – but, how can you determine what, if anything, needs to change? Ask yourself these three questions:

Question 1: Does your brand celebrate your value?

The way you serve clients may have evolved over time to better suit their needs. Periodically, reassess your value proposition to gauge whether it continues to reflect the value you provide and resonates with your target audience. Make sure your message is not about the products you provide, but the role you play in filling client needs, underscoring key points of differentiation. Your brand should promote your value proposition and the benefits you provide, drive your market positioning and, ultimately, grow your business.

Question 2: Has your market changed?

You should reassess your brand any time your organization enters a new market, introduces new products, expands its footprint or acquires another organization. Even if none of these events has occurred, the world around you is changing (think Robo Advisors and Millennials, who stand to inherit trillions and transact very differently from their parents).

In addition, because communication is increasingly delivered digitally – even for traditional financial service organizations – you need to ensure your logo and visual brand work well across platforms. Many financial organizations have simplified their logos to work well on the smaller scale of digital. American Express and MasterCard are good examples.

Question 3: Does your organization aspire to be more?

When Starbucks first branded, they sold coffee, tea and spices and that’s what their logo indicated. Since then, it has expanded its product line extensively and refined its logo accordingly. Consider your organization’s long-term goals and make sure your brand messaging, look and feel put you in a good position to take advantage of future opportunities.

Finally, maybe because it’s been so long since you’ve updated your brand, it has become stale. Have you delivered your message in the same way so many times the market simply isn’t hearing you? If your messaging, market or organization has changed, or you want clients and prospects to look at you differently, it may be time to refresh your brand.

*Source: BrandZ Top 100 Most Valuable Global Brands, 2018

It’s All In The Delivery

In marketing and client communications, how you deliver a message is as important as the message itself. Too often, when trying to make a point, it’s easy to get caught up in an industry or company point of view, rather than looking at it from a client benefits point of view. In addition, a message that previously worked may lose its effectiveness over time or in a different financial or market environment.   

Post-financial crisis blues

A classic example we have seen is the discussion and justification for the importance of asset allocation, diversification and rebalancing. The post-financial crisis era was an emotional time, when confidence in the market was low and investors felt they had been let down and not “protected” by their advisor. The conversation and message (appropriately for the time) revolved around advisors setting a framework that would keep investors on track and prevent them from making “irrational” investment decisions.    

Memories are short

Fast forward ten years, and many investors have “forgotten” the pain of the financial crisis. In addition, a whole new generation of investors has entered the market, with different attitudes about investing and what they expect from their advisor. The message of “protecting investors from themselves” may now be perceived as patronizing by investors. 

Your message must evolve

While asset allocation and diversification remain at the core of long-term investing, the message around them needs to evolve. Investors want to feel like their advisor is working with them to understand and develop a strategy that reflects their goals, situation and values. They want to feel a sense of inclusion and empowerment with tools and knowledge, not that they are being classified as “portfolio model x” or that their advisor is operating in a black box on a “need to know” basis. 

Of course, above all, your message must be a true reflection of your firm, your core beliefs and approach. Regardless of the market environment, trust remains central to what investors look for in an advisor. 

Everyone Needs Marketing

In case you haven’t heard, the final season of Game of Thrones (GOT) starts April 14, 2019. HBO has been marketing the show aggressively. You might think they really don’t have to considering (almost) everyone is talking about it, not to mention 47 Emmy awards, 98 thousand social media mentions in one episode and over 10 million viewers.

There was a co-branded commercial during the Super Bowl for Bud Light(if you don’t watch GOT, you may have been wondering why there was a giant knight and a dragon in the commercial). HBO started the Bleed for the Throne blood drive, working with the American Red Cross. Recently, the new buzz is the #ForTheThrone campaign in which there are seven thrones throughout the world waiting to be found.

Add in cast interviews on every possible late-night talk show plus microsites, blogs and every conceivable hashtag, not to mention countless numbers of Instagram and Twitter accounts dedicated to the show. The Super Bowl and World Series do not get such enthusiastic buzz.

If HBO is putting that much marketing effort into the most popular, most talked about, most played on demand show ever, shouldn’t all companies be putting at least some effort into their marketing? Marketing is essential in the competitive wealth management environment; brand is paramount; and digital is a must. And, if you don’t have something of interest to say on social media you may not be considered contemporary to your prospects and COIs versus more “socially” active competitors. There are 67 episodes to watch before April 14th. If you start tonight (March 26th) and watch about 3.5 episodes a night, you’ll be ready for the big night. If you want to accelerate your marketing, Optima Group can help with informed content, social media, marketing plans, creative strategies, and stand out campaign ideas (but without dragons; they are actually pretty hard to get.)