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
Economics• Relationship
capital• Experience &
value
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
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
• BehaviouralEconomics
• Relationship capital
• Experience & value
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
1/26/2012 www.engage.uk.net
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
Behavioural Economics
1/26/2012 www.engage.uk.net
Automatic• Uncontrolled• Effortless• Associative• Fast• Unconscious• Skilled
Reflective• Controlled• Effortful• Deductful• Slow• Self-aware• Rule following
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
• 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
• BehaviouralEconomics
• Relationship capital
• Experience & value
Behavioural Economics
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
1/26/2012 www.engage.uk.net
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
• BehaviouralEconomics
• Relationship capital
• Experience & value
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
• BehaviouralEconomics
• Relationship capital
• Experience & value
Context• Consumer
view• Behavioural
Economics• Relationship
capital• Experience &
value
Solutions
26m active users (42% of pop.)
5m active users
17m active users
4m active users
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
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
• BehaviouralEconomics
• Relationship capital
• Experience & value
1/26/2012 www.engage.uk.net
Relationship Capital
Social
Technical Ad-hoc
P
1 1
1
70 70
70
1/26/2012 www.engage.uk.net
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
1/26/2012 www.engage.uk.net
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
• BehaviouralEconomics
• Relationship capital
• Experience & value
Outcomes not process
Financial planning
Risk capacity
Succession planning
• Consumer view
• BehaviouralEconomics
• Relationship capital
• Experience & value
Future = Virtual Client• Consumer
view• Behavioural
Economics• Relationship
capital• Experience &
value