Effective firms in the Financial Services industry, both suppliers and financial institutions, have taken their vertical marketing and sales to include more and more products.

Insurance and pensions have become almost a standard part of financial services firm offering, with healthcare creeping slowly into financial services.

Three or four years ago the sales approach to clients was either very generic or so verticalized that the overlap between Insurance, Healthcare and Financial Services was not immediately seen.

Today healthcare and insurance have so much in common that innovative banks will consider adding healthcare as a product offering to their clients portfolio of assets, pensions and insurance.

Once healthcare becomes a banks offering, then the next wave of products to the client might be fitness memberships.  Client and wealth management then transforms the bank into a true client partner, creating a longer client relationship by motivating the client to stay healthy.  

A few innovative healthcare and insurance firms have added fitness memberships in their package as a way to keep their client healthy.

The Private Banking, Wealth Management or Retail Banking firm will then create a client perception of having the client's financial health and personal health as priority number one.  This would build an even greater trust between the bank and the client.

These could become a standard offering, and cross-selling tool for banks that are looking to differentiate by adding more services.

While travel services may not be a clear fit within financial services today, getting a bigger share of the clients wallet may require banks to broaden outside of their legacy product offerings and introduce new products that may not immediately seem logical.

The headache this would create from an IT perspective is the managing of more client data and a client report / statement having to include more information then exists today.

Rather than banks purchasing firms that offer these other services, they would need to partner with healthcare, fitness membership and travel firms.

This creates an even bigger IT headache because they would have to integrate client data from systems they do not control.

So how would the management of more complex client data and parter IT systems be managed?

Web-based interfaces to legacy systems would be web-enabled by the use of workflow and BPM as well as Master Data Management process/technology to handle issues like data de-duplication, data cleansing and data migration.

The shift from periodic data de-dup / cleansing / migration to real-time data quality should be powered with IT Governance and Data Governance processes.

The above-mentioned processes and technologies have not been adopted by Financial Services firms at the pace of consumer goods, manufacturing and home-building industries.

There are enough proven processes and technologies in place today to have the CIOs / CTOs / COOs of banks to put more focus on data quality projects as a priority over CRM and Back-Office replacement.

This is part two of the 16th, November 2007, blog that I posted as feedback following the 11th Annual Client Reporting & Servicing event in London.

This blog ties together the topics of CRM and Client Reporting, with my recent blog regarding Master Data Management (MDM).

Wraping up the year of 2007 gives me some perspective of the projects I have been involved with the past 12 months: Innovative Financial Services firms are those that have Client Reporting, MDM and IT Governance as their technology center-piece as compared to less flexible Financial Services firms that have CRM and/or their Back Office as their technology center-piece.

The industry pressure and trend is to consolidate data sources, achieve single view of client, and provide consistent data for accounts and contact.

The methodology to improve client retention, create organic growth, implement successful marketing programs and build brand loyaly is by extending IT Governance through Client Reporting and MDM technologies.

Rather than considering the replacement of current CRM, Back Office, or Data Warehouse, the market-leading Financial Services firm will be the one that uses Workflow, Business Process Management (BPM), Client Reporting and MDM to tie all of the existing systems and client data together.  The result will be validation of client records and duplicate records being a thing of the past.

This is especially advised for the small and medium Asset Management, Wealth Management and Private Banking firms that are facing increased competition from the global Retail Banks that have branched out into Wealth Management.

Wealth Management is often used for niche Asset Management and Private Banking firms or a division of a major Retail Bank, but it is now extending into the lower tiers of Mid-Net-Worth (MNW) individuals.

The smaller firms won't be able to compete with the larger firms on technology, unless they are able to keep existing infrastructure in place and web-enabling their front-office by tying together systems and data with Client Reporting, BPM, Workflow and MDM.  Using a Client Management System through an outsourced Front Office or Service Bureau may be the step to take before considering the purchase of a data warehouse, new back office or CRM system. 

The business risk of not following this approach: The loss of current clients due to inability of giving real-time bespoke service and spending too much time on manual processes instead of cross-selling to current clients.

The Finextra article speaks for itself, but why is it that Abbey understands the importance of brick and mortar branches while others are jumping the bandwagon of digital natives, IP, web, internet, blog council, mars and robo-client?

I find it peculiar that the UK is now sniffing the same glue that Silicon Valley sniffed, choked on and threw out in the late 90's. 

I spent 2003, 2004, and 2005 fixing messes at U.S.A. banks while working at Mercury Interactive, and now that I have been in the UK for the past 24 months I see the exact same problems. 

Is the technology chernobyl of mid-90's Silicon Valley just arriving in the UK, and are people so caught up in the hype that they can't see through the thick techno-babble cloud?

Time to wake up people, otherwise in 24 months the same domino effect that happened in the U.S.A. will happen here and everyone will point fingers as to why they wasted their time, money and energy with impulsive technology purchases.

Modernize the client relationship with people and process before investing a penny in IT. 

The Finextra article on "P2P lending to pay credit card debt" sheds some light on what is happening globally.  The ridiculous and borderline-illegal method by U.S.A., UK and other western banks of maximizing profits is driving consumer behaviour away from banks.  I'm talking about credit cards going from 7.9% to 30% interest because of one late payment, $50 late fees and $2.50 transaction fees for U.S.A. debit cards.

This is a risk for the financial services industry because what used to be a trusted relationship between the bank and the consumer is shifting towards a consumer feeling of being used by the bank.

As our industry and global economy has focused on shareholder value, stock prices, P/E ratios, market share growth and compliance, the financial services industry has lost focus on their clients.

With the recent discussions and debates as to client touch points and branches, the consensus seems to be that the client is no longer getting the level of client service they used to and a threat to banking is emergence of services like PayPal and P2P-lending.

I envision a eFinance equivalent of eBay where consumers stop going to banks for high-volume transactions and loans, instead going back to the bartering methodology that existed before we had currency and a banking system.

With Web 2.0, secure-mobile technology, email and blogging becoming the chosen communication method for both consumer and business relationships communities are popping up that fill the client service void which is left by the banks.

Another online community, for lending, small business seed money, co-signing loans for friends that don't have credit, etc. might be a sight like LinkedIn that is geared towards low-value, high-volume transactions: This site my be called FinancedIn pulling together a supply and demand of global consumers and small business owners.

The opportunity for the banks is to sponsor and build an eFinance and FinancedIn type community acting as the communication broker for individuals that need help managing their debt, starting a small business, getting over the hump when starting a family or simply getting some breathing room by having a low-interest loan.

The risk is that the banks will be perceived as the bad guy because of consumers feeling like they are being pushed so the bank can squeeze out an extra percent of profit. 

I've recently began a consulting project for a global brand consumer-products company and couldn't help but notice the parallels between this financial juggernaut and niche wealth management firms: Data accuracy, control and efficiency issues being solved with Master Data Management (MDM).

My client has had a stellar year in consumer-goods, closing in on 15 billion Euros in annual sales and its stock price about to run past the 100 Euro mark.  The challenge, though, is that data processing has been so manual-intensive that it is embarking on a multi-million Euro project centered on MDM.  This project will allow this firm to increase its revenues and increase shareholder equity.

How?

MDM is being used to improve profitability by removing manual processes, better servicing the clients with more accurate information and the efficiencies being realised allowing this firm to invest in client-centric business processes and projects. 

While CRM has been at the heart of its universe for the past 48 months, this firm is now considering the same approach that the small wealth management firms are taking: To better connect its front office systems, client-centric processes and back office using MDM as part of its IT Governance strategy. 

MDM will become the heart of this firm's universe instead of CRM, making it more agile if it were to replace its CRM or modernise other client-centric applications.

Smaller firms are able to follow the same strategy without having to invest millions of Euros and are better able to compete with the larger firms. 

While many companies claim to offer MDM services and technology, very few have proven that they can have real-time data matching, de-duplication and cleansing for web-based, CRM and batch load processing.

In terms of MDM, the main difference between a larger global firm and niche wealth management firm has been the following:

• The bigger firms that have embarked on MDM seem to have a data warehouse / data mart as a core piece of their MDM strategy with a single golden record of a client.  They are forced to consolidate data marts, CRM and front office applications in order to achieve a real-time golden record of client;

• Smaller firms are able to use MDM process and software to connect all of their separate front office and back office systems by using workflow and Business Process Managment (BPM) to power data accuracy without a data warehouse.  This allows them to be more agile and responsive to client needs as compared to their larger competitors.
  

This leads me to ask, are data warehouses / data marts really needed now that MDM is solving data accuracy, data control and data efficiency issues?

Should the larger firms go through the exercise of consolidating databases and data marts or should they use MDM, BPM and workflow to connect all of the systems together without a data mart? 

The business pain of a European Private Bank, Investment Bank, Insurance provider, Pension provider, Retail Bank or Asset Management firm are all the same: Driving client retention and organic business growth.

Why not stoke the clients ego by investing in client-centric processes before improving the back-office infrastructure? 

The challenge facing the banking industry, especially in the European Union, is a mad dash to acquire new technology, performing open-heart surgery by replacing the back-office, and most software/consulting firms being back office focused instead of end-client and front office focused.

My vote is to take existing channels of client communication, client interaction and client service by taking IT Governance approaches to Client Insight (e.g. M3CI as the term I have coined and have been blogging about).

M3CI = Measure, Manage and Maximize Client Insight 

M3CI is a business process and philosphy that suggests how a financial services firm can leverage existing technologies and client communication channels to improve client retention, drive client loyalty and organcially grow their business.

Front to back is the business process that needs to be followed, but instead the EU banking industry has taken and will continue to take a back to front approach unless they wake up and realize the errors of their way.  As they say in the U.S.A. this is Bass Ackwards!! 

Before investing in IP infrastructure and new technology, a five step M3CI process should be followed:

Step 1: Measuring, Managing and Maximizing Client Insight (M3CI)

Use existing Back Office, Front Office and Information Systems to drive client insight throught IT Governance.

Step 2: Gaps and Risks identified by M3CI

Improve business processes, IT processes and communication processes before investing one penny in yet another piece of technology.

Step 3: Business Process definition to drive New Technology Acquistion

Start with the client and the IFA/consultant/intermediary, then the physical touch point (branch and phone), then the electronic touch point (email, web, mobile) and then the front office systems that support client insight and the client experience.

Step 4: Techology Acquisition driven by M3CI

Focus on Client Management System acquistion (e.g. CRM + Client Reporting + Order Mgmt. + Performane Meas't + Trading) answering how client retention and insight can be improved by Measuring, Managing and Maximizing Client Insight (M3CI).

Step 5: Verification and Validation (V&V) of Technology Acquistion aligning with M3CI goals

Monthly IT Governance and Corporate Governance reports to have V&V of technology acquired and continually assessing if the technology still fits with the business goals of driving client loyalty, improving client retention, increasing organic growth sales and differentiating from the competition.

In conclusion, while there are many quality standards and quality management approaches to technology, the TQM (Total Quality Management) process to improve client retention is missing.  Following M3CI-type processes should be followed before the concept of new technology is even considered.

Go on, stroke your clients ego so your business can improve client retention.

So much talk of IP and little discussion on the client.

Retail banks will not improve client loyalty, grow organically nor retain clients by switching from a brick and mortar foundation to an IP foundation.  IP needs to be a secondary step, with the first step being a new business philosophy and process around client retention.

The client has not been the foundation of a retail bank for 30 years and this is where the problem exists.  Retail banks are stagnant in business process innovation.  The recent research findings by Lloyds TSB speak to the business reasons why clients are not leveraging the retail branch more properly.

People and process improvements are needed before buying new products.  The rush to IP all of the brick and mortar will fail if the people and process improvement do not happen first.

A modern and sophisticated banking system is no good if the bank does not know how to modify their way of servicing clients and more proactively communicating to the customer.  Investing in training every retail bank employee to give excellent client service is the area to start.  They need to go through the same training that hotel management and staff go through.  IP will not change how people service clients during face-to-face, phone or email interactions.

Spending millions of pounds to change the foundation won't change the fact that retail banks are struggling with differentiation, keeping clients and cross-selling more effectively to current clients.  

The business process is the methodology to shift the retail banks focus back to the client.  IP is an enabler of the new business process.

Today's news story on Finextra, highlighting a study released by Lloyds TSB, gave some interesting insight into why a branch and bank manager are not being more fully utilized by the client:

• "....customers still prefer face-to-face advice from high street branches...."
• 10% of customers  "are too embarrassed to discuss their money matters...."
• "....fear of financial jargon," as a reason, "for avoiding the bank manager."
• 10% of clients "fearing that their financial aspirations would not be taken seriously."
• "As a result customers are switching to alternative sources of financial advice."

Simply put, the risk of not giving personalized, face-to-face and proactive service to clients results in business risk because of lost revenues, profits, market share and brand-perception.

It should be a no-brainer for any bank, be it a retail bank, investment bank, private bank, asset management firm or wealth management firm to give more personalized and face-to-face service to their client otherwise clients will move on. 

The high street strategy has missed an opportunity the past 30 years by not thinking of the branch as a cross-selling and lead-generation touch point with clients and prospects.

Payments and transaction should be offered at branches only as self-use kiosks.  A good analogy is the Tesco self-use check-out stands.  Remove the tellers and bullet-proof window, allow clients to pay their gas, electricity, council tax and tv license through a kiosk and only transactions in excess of 1,000 GBP to be done with a human teller.

Card-based transactions and identification would all be done at kiosks and the rest of the retail branch services should be done at desks with tellers becoming branch relationship managers.  When a client first sits down with a branch relationship manager, the client would put their chip and pin into a card reader giving the branch relationship manager a single-view of client with a client dashboard.  This would allow tailored service and have alerts as to suggested up-selling services that should be offered during the branch visit and/or as an email follow-up to the client's visit to the branch.

The methodology to move forward is to better define and manage the client relationship process by focusing on client retention and bespoke services based on client profile.  The branch is the key, with IP as an enabler.

The initial steps to take are to do with process, training of employees and turning the branch into a full-service bureau with transaction banking only to take place through internet kiosks.  Too much energy is spent on acquiring new technology and discussing IP strategy, with very little effort put into upgrading tellers to become branch relationship managers and changing the appearance of the branch from a transaction center into a relationship center.

The branch relationship managers that become star performers would then be trained to become a wealth manager.

Migrating the retail branch to this new way of retail banking has more to do with the business processes that are lacking rather than the IP-infrastructure which is missing.  I happen to agree with the 04/12 comment by Philip Knight that discussed the potential new venture of Virgin Money/Northern Rock.  This may be the first UK bank that will try to turn the branch experience upside down and adopt the methodology I am talking about.

The Virgin subsidiaries all seem to follow a common business practice: To give extra value-added services to prospects and clients using the human touch.  This happens when a client first checks-in for a flight or steps in to the Virgin Active healthclub.  Retail banking has to give the same type of client service, at the branch level and other touch points, as clients receive when travelling, checking into hotels or buying high-quality consumer merchandise at Apple, Harrod's or Timberland.

IP is used as the enabler to the branch experience, with mobile, email, web, telemarketing and other communication vehicles being secondary peripherals to a retail branch.

The first step should not be a branch-based IP strategy, but instead a branch-based client insight and client retention strategy that uses improved business processes.

For all you VP's of Sales, Marketing, Client Relations, Investments and Fund Management: WHY ARE YOU LETTING OPERATIONS PUSH YOU AROUND WHEN DECIDING FRONT-OFFICE PROJECTS?

With the topic of Business Technology Optimization (BTO), used by vendors like Mercury Interactive and now HP, I am perplexed at the lack of control by the business units when deciding how to better service to clients, how to grow organically and give bespoke client reports that are actually valued by the clients.

Operations and IT have been pushing around the various heads of business for too long and it is time to reign in the technology side of the bank by having client centric processes and technologies.

How can the business do this?

One method is to have the Product Management department report directly into the Heads of Investment / Client Relationship / Sales / Marketing, etc.

Another method is to have Corporate Governance as the driver of IT Governance projects by having Business Analysts report directly into the business units.

A third method is to have all business processes mapping, RFP/RFI processes and vendor selection being done by a committee that is three parts business and one part IT/Operations.

The alternative is to wait for IT and Operations to always react to the needs of the market, the client and the front-office staff rather than the Business units proactively giving value-added services that will drive client retention.

The pressure is massive for CIO's, COO's, CTO's and MD's to innovate, innovate, innovate without the vendors or consultants looking at the impact on Client Retention Risk Assessment.

Before writing a business plan, an RFP or acquiring new technology the Financial Services firm needs to implement documented and repeatable process to optimize the client relationship by leveraging the current technologies first.

After recently completing interviews with leading global and EMEA-based Wealth Management, Retail Banking, Asset Management and Private Banking firms some interesting trends have come up: 

• Two-thirds of firms that I have interviewed in the past 30 days gave indications that they are struggling with measuring client retention and do not conduct a Client Retention Risk Assessment;
• Nearly 90% do not measure and manage client retention through process and technology, instead using manual methods and rely heavily on spreadsheets;
• None of the firms interviewed measure, manage and maximize client retention;

Using a process of client retention and client insight, such as M3CI (Measure, Manage, Maximize Client Insight), will allow a firm to better understand where they are underserving their clients, extract value from the goldmine of client data for lead generation / cross-selling, and have a client dashboard that indicates what the health of the client relationship is with the banking firm. 

A good example of the impact on client loyalty and client satisfaction is a recent debacle by a leading UK retail bank in rolling out a new type of innovative credit card.

The technology adopted was tremendous, but the lack of process in rolling-out this new credit card, the lack of client communication regarding this error and the spotty audit trail has led to many UK consumers being disgruntled with this retail bank.

NEW TECHNOLOGY ADOPTED WITHOUT OPTIMIZING PROCESSES WILL RESULT IN THE LOSS OF CURRENT CLIENTS!!!!! 

LACK OF PROCESS = RISK 

Below is a letter received by one of the retail banks client, trying to explain why two credit cards were issued by accident, one never delivered and inadequate proof that this floating credit card had actually been destroyed.

This retail banking client had to call numerous client services departments to find out what happened with the first credit card, found out that there was a bank error made towards hundreds of their clients, never received a proactive phone call from the bank informing the client of the error and left frustrated that this new/innovative type of credit card was just a big waste of time.

Here is the letter: 

"Dear Mr. *****

Thank you for contacting us.

I am writing with regards to our telephone conversation on the the **/11/07 to confirm that card number 4*** **** **** ***9 has been cancelled and destroyed.

I have contacted our Special Mail services team who have confirmed that they attempted delivery on the **/10/07.  However after no response they contacted you in writing on the **/10/07 advising how to rearrange delivery for a more convenient time.  After no action was taken regarding this, the original card was detroyed and we were notified of this on the **/11/07.

If you have any further queries with *** you can write to:

*********

I hope this information has been helpful.  Please accept my apologies for any inconvenience you have been caused......" 

Hindsight is 20/20 on how this problem could have been solved.  Rather than having all banks buy into the hype of a new piece of technology, use a process like M3CI before even considering new technology adoption.

While I am into space travel, science fiction and am a NASA ARC alumni I think of how to simplify and personalize the robotic approach that banks use to manage the client relationship.  It is easy to complicate the business process by making innovation sound like Star Wars.  After all clients are not droids with electronic pulses, but instead warm-fleshed creatures that want to be desired / fought-after by the banks.

M3CI is a simplified and personalized process that puts the responsibility on the bank to innovate processes before acquiring new technology. 

The pains experienced by small and mid-size Asset Management and Wealth Management firms have similar parallels to that of Retail Banks.

Lack of process and client dashboards that give educated insight into exisiting clients.  The risk of losing current clients to competitors exists because of the lack of insight, tailored marketing and tailored reporting to existing clients.

Too much emphasis is put on acquiring new technology before having the correct business processes and IT Governance systems in place. 

The cost of acquiring new business is substatially more expensive then leveraging existing client relationships, but the difficulty in understanding and segmenting current clients blocks Financial Services firms from innovating the client relationship.

M3CI is a process that takes an IT Governance approach to client retention and client insight without getting stuck in too much technology that exists in the front office, back office and information security.

Think of M3CI as a hybrid of Six Sigma, CMMi (Capability Maturity Model), client surveys, gap analysis and client retention risk assessment.

The common thread is looking at current client relationships, both from a direct sales perspective and indirect sales through consultants, intermediaries and IFAs (Independent Financail Advisors).

M3CI = Measure, Manage and Maximize Client Insight 

This process would have an internal project manager or business analyst and/or an outside consultant look at the Front Office, Back Office, Information Security and IT Governance and identify the gaps in Client Insight, identify if the bank is Measuring, Managing and Maximizing Client Insight, and take steps / introduce new KPIs (Key Performance Indicators) that center on client retention, client cross-selling and organic growth. 

Rather than having retail banks or asset management or wealth management focus on new business acquistion, they need to put their energy into what they already have in-front of them: A goldmine of client data as to purchasing behaviour, life events that should trigger a service offering (e.g. graduation, marriage, selling of a business, enheritance, etc.) and profiling client behaviour by segmenting the current clients that are most likely to be business entrepreneurs or HNW / UHNW individuals.

Many niche wealth management and private banking firms are taking business away from UBS and Barclays Wealth because they are taking on clients that are on the lower end of the HNW spectrum and give a personalized services that the large players such as UBS and Barclays Wealth are not able to give.

Because of the various silo'd systems, processes and employees the retail bank needs to take a macro-view of client retention and get client insight by following a proven process to see how the client relationship can be better leveraged for organic business growth.

Very interesting press release on the Finextra website regarding Barclays and mobile banking. 

The recent push by Barclays with the mobile banking, online security access with PINsentry and the Barclaycard oyster are great examples of how a long-standing bank is leveraging new technologies while maintaining their branch presence.

In fact, just the past 24 months of my monthly travels to Paris has seen nearly a dozen Barclays branches pop-up in the center of Paris' most expensive and high-affluent areas.

Could Barclays be a step in-front of the rest of retail banking in the UK and demonstrating the vision that I have been blogging the past three weeks??? 

The vision I have for branches is very different than most people who have worked in this industry for 10/20/30 years.  My perspective is that of the front-office staff, client servicing teams, the end-clients and the prospective clients.

With so much emphasis being put on the web, especially in the UK and France, the strategy that most people are missing is how to transform the branch and use it as the key piece of the puzzle rather than just one of many peripherals.

Take Barclays for example.

The Barclays Wealth division, which competes with niche wealth management firms such as Williams de Broe and Insinger de Beaufort among others, has an opportunity to tap into the hundreds of Barclays branches in the UK and the dozens of branches that are popping up in Paris.

If Barclays Wealth wanted to tap into the lower end of High Net-Worth (HNW) individuals, the place to start would be the retail banking branch.

Many small and medium businesses come and go everyday at the Barclays branch in London and Paris and yet those SMB's are not being treated as a potential HNW or Ultra-High Net-Worth (UHNW) prospect of the future.

The retail branch is the cornerstone of retail banking and is being undervalued and worse underserves their prospects.

Treat the retail branch as a lead-generation tool for building a sales pipeline of HNW and UNHW individuals which today are managers of SMB's, children of wealthy parents, or grandchildren of UHNW families.

The 17 year-old grandchild will have a debit account and credit card at the retail bank, while their parent or grandparent is a client of Barclays Wealth or Williams de Broe.

This 17 year-old is the prospect of the future, and the face-to-face experience with the retail branch will set their mind as to who Barclays is for the rest of their life.

I have been working in sales, marketing and business development for 20 years with 10 of those years being in financial services.

People make a decision about me and my company based on that first 60-second experience face-to-face.  Why should the retail bank not treat each and every-one of their prospects the same way my business does??

After reading a recent blog post on Finextra Communities discussing how flawed the bank strategies are for the branches, I put myself in the seat of the consumer and the wealth managers of the retail bank in writing this blog posting. 

Rather than forcing UK consumers to go online, an area that is not innovative at all in the UK, retail banks need to leverage retail branches as though they were IFA or Intermediaires to the retail bank.  Think of how AXA services their clients in their hundreds of AXA branches worldwide.

Rather than spending so much time arguing with the MD's, COO's and CIO's that they need to force their clients to go online, instead the retail bank branch can be transformed into an Investment Management or Wealth Management center.

While I am for innovation, optimization and cost efficiencies for the retail bank what retail banks may have missed is the opportunity to transform and modernize the branch into a service bureau for clients.  This done in parallel with online banking improvements will give the clients the choice, rather than forcing them to go online by closing down the branches.

A good analogy is the example of food delivery giant / .com bust called WEBVAN.  They tried to force grocery stores to move online with giant distribution centers and worse WEBVAN tried to force consumes to go online only to see their company go under.  The lesson? Brick and morter with online presence is a one two punch that will drive client loyalty, client retention, organic growth and cross-selling opportunities.  Why repeat the mistakes in the UK which have historically failed time and time again in other regions of the world????

People buy from people.  People don't buy from computers, unless the computer gives the consumer a bespoke and personalized service which nearly all UK retail banks have not done so far. 

Lets extend theory to a dose of reality and use Mr. XYZ as case study of what should be done within retail banking in the UK and mainland Europe: 

Mr. XYZ has a savings account, debit account, mortgage, health insurance and credit card with Barclays.  Mr. XYZ also has his personal fortune of 200,000 GBP of assets, which is in his mind alot of money, invested in financial services firms in Paris, London and Vienna.

Each time Mr. XYZ comes to the retail bank branch he is not even asked nor given any personal service.  Instead Mr. XYZ feels like he is a serial number and worse profit center for Barclays.  When he travels from his home country, in this case England, to Paris he stops at the Barclays branch near the Franklin Rossevelt Metro station.

Now, take the example of Mr. XYZ's financial advisor in London, business partner in Paris and capital markets banker in Vienna. 

Why is it that they give Mr. XYZ the time of day, bespoke service and cup of warm tea when he walks into their office but Barclays treats him like a number in line??????

THE ANSWER: BECAUSE THE RETAIL BANKS ARE PUSHED TO MAKE PROFITS, INCREASE SECURITY AND REDUCE FRAUD AT THE EXPENSE OF CLIENT SERVICE.

This short-term approach to clients will hurt bank loyalty, will result in the loss of long-term profits and leave the UK consumer feeling they were used by the bank and had a noose around their neck by being forced to go online because the branch disappears. 

So I'm in Paris this week discussing the goals of some European based retail banks and pension providers and noticed that their needs are the same as that of private banks and asset managers worldwide: CLIENT INSIGHT, as a project, IS NEEDED TO GROW THE BUSINESS.

While walking near La Defense and the Tour Eiffel I wondered to myself if there is such a big difference after all between a wealth management firm and insurance provider.

THE ANSWER IS NO!! 

While the business processes and volume of clients differ with the various micro-verticals of Financial Services, the business challenge is exactly the same.

Not enough client knowledge is at the finger tips of the Insurance Broker or Client Relationship Manager or Account Manager or Fund Manager or Private Banker and the struggle to differentiate one bank from another is more difficult than ever.

Simply put, the financial services firms that have the highest and consistent levels of client retention are those that are best at cross-selling to their current clients.  No coincidence that these firms have the best business intelligence processes and technologies in place.

Some financial services firms label CLIENT INSIGHT as customer intelligence or customer centricity or business intelligence or MIS or.......the list goes on.

Adopting new technology is not the first answer to this client insight problem. 

Instead firms need to measure, manage and maximize client retention by optimizing their current silo's of technologies and documenting their business processes in change management applications.  Once this first step, of measuring client retention, take place than a retail bank or asset management firm can better manage the client relationship, and even better maximize revenues and profits from existing clients rather than chasing after new business.

Once a firm is able to innovate and maximize their current technologies for client insight, including BPM, workflow and client reporting, then they should take the second step of acquiring new best of breed technology.  More often than not a vendor will push the technology down a prospects throat without adding much value because yet one more piece of technology has just been added to the rats-nest of silo'd technologies and processes.

Phew, got it out of my system.  Time for a French espresso, baguette and the nice smokey air of the Paris La Defense hotel cafe.

Recently I interviewed a number of CEO's, COO's and Head of Operations within Asset Management and Wealth Management and found a trend in London, Paris, Lisbon and Amsterdam: The most innovative and agile businesses were able to better serve their clients by adopting best of breed technologies and innovative processes.

One firm spoke of their long-standing relationship with a leading back office provider and described how they were able to grow their business by 30% per year by following a best practice technique: Working with their back office vendor and front office vendors to fund new functionality in their systems rather than building functionality or modules in-house.

The result has meant more focus by the operations and IT staff on providing new services to existing clients and always being one step ahead of the client / front office staff requests.

This has translated into very low client loss-rates, improved integration between the front office and back office and operations being a profit center rather than a cost center.  Straight-through processing from the front office to the back office has become more automated and as a result lead time for client reports has been cut in half.

More importantly this Wealth Management firm has been able to innovate their client and IFA web-portals because of this innovation and spend time adding more client-valued services rather than building functionality in-house.

Only a small percentage of EMEA-based Asset Management and Wealth Management firms have innovated like the firm above.  The small and mid-tier financial services firms need to adopt this methodology to compete with the larger players, otherwise they will always be adopting technology and processes two steps behind the big players.

For you baseball enthusiasts and purists I ask the question of why is it that Major League Baseball, Barry Bonds and the rest of the baseball gods are expected to adhere to strict personal and business governance and yet Financial Services firms are not held to the same standard?

Sure steroids and other techniques to cheat the system exist in professional baseball, but how come the Financial Services industry is not put under the same scrutiny that Barry Bonds and the rest of the accused baseball greats must deal with?

The US Federal government recently indicted Barry Bonds for "apparent" steroid use, and yet a large software firm like Salesforce.com or a large UK Financial Services firm losing/misplacing client data is barely given a slap on the hand!

The FSA and SEC have pushed many firms to keep to strict guidelines around MiFID and SOX, but the IT and Corporate Governance that should exist in their vendor systems are desperatly lacking.

The recent examples and excuses of how client data is lost is absurd.  Laptops with 1,000s of consumer records being left in the car overnight?  100's of IFA records lost on the train? Consumer credit cards being duplicated, without the consumer being told of the error?  Internal employees being duped by phishing scams?

ALL EXCUSES AND NO ACCOUNTABILITY.

As both a consumer and contributor to the Financial Services industry I am perplexed at how much pressure is put on individuals being vetted for things like Anti-Money Laundering and yet the firms they are working for are not put under the sufficient scrutiny that is needed.

A recommendation to any buyer of technology, be it an Asset Management or Retail Banking firm: Properly verify and validate that the software vendor you are doing business with has proper controls internally of their IT Systems.  This is especially warranted for the mid-tier banks that outsource their back office and/or front office.  Control of the client data is the responsibility of the Financial Services firm.  Pointing the finger at the vendor will not make your High-Net Worth individual or average consumer accept the excuse.

Having an SLA (Service Level Agreement) and/or contract with the vendor will not protect the firm from legal damages once a client(s) data is gone due internal employees stealing the information or any other way that private client data leaks from the network.

Innovative technologies MUST have two-factor authentication and access control, both for interal employees and external clients/partners/intermediaries/IFA's.  Hopefully the rest of the vendors in the Financial Services industry will learn from the GRAND mistake by Salesforce.com

Some further information regarding phishing scams of hosted-CRM vendor Salesforce.com.  The use of static user name and password????  Has Salesforce.com not heard of two-factor authentication, OTP (One Time use Passwords) or smart cards?

Read on............. 

http://www.crn.com/security/202804065

"Salesforce.com Responds To Phishing Scams

Earlier this week, Web-based CRM software provider Salesforce.com issued a letter on its trust.salesforce.com Website, warning employees about imminent security threats, which it said were "on the rise."

The letter, which was signed by Salesforce.com VP Parker Harris, stated that an employee had fallen victim to a scam in which a phisher tricked the worker into revealing a password. The password then gave the phisher access to a comprehensive customer contact list that contained first and last names, company names, e-mail addresses and telephone numbers, as well as other administrative data.

The letter went on to state that "a small number of customers began receiving bogus emails that looked like invoices," and were subsequently fooled into revealing passwords. Salesforce.com said that its support and security teams have been working with the affected customers in order to increase their own security. In addition, the company said it is working with "law enforcement authorities and industry experts in an effort to trace what occurred and prevent further attempts."

Salesforce.com also disclosed that it recently experienced a new wave of phishing attempts which included attached malware -- software that secretly installs viruses or key loggers. This new series of attacks seemed to be targeted at a broader group of customers, the letter maintained.

"That's why we warned our system administrators last week of this new, more malicious phish and why we are sending this letter now with the goal of increasing awareness," the letter stated.

Among other security strategies, the letter urged administrators to "modify Salesforce implementation to activate IP range restrictions," tell employees not to open suspect e-mails, use security solutions from leading vendors and designate a security contact to more effectively ensure communication. The company also is offering an educational Webinar in which security personnel discuss recommended changes and best practices.

As a result of the phishing scams, Salesforce.com maintained in its letter that it has been collaborating with security vendors, implementing "take-down" strategies on fraudulent sites, evaluating and developing new technologies, reinforcing security education and tightening company access policies, according to the letter.

While salesforce.com noted that phishing and malware scams were becoming more prevalent, the company asserted that the attacks were not the result of flawed security in its application or databases."

I am shocked by how quickly vendor news travels when they have success stories, revenue spikes and profit gains, but when a major problem exists it is swept under the carpet!

I seriously question how Citi or Merryll Lynch are going through vendor selection of CRM, especially when they go with a vendor that has had major security breaches both from external phishers and internal employees that have compromised their clients data.

While Salesforce.com has been off to a great start in Financial Services, there seem to be Microsoft-sized security flaws which are not covered enough by the media outlets.

Client data within the Financial Services industry is 1,000 times more precious and sensitive then the large manufacturing or construction firms that use hosted-CRM, and yet the security vulnerabilities are barely addressed.

PKI, smart cards, OTP tokens and anti-phishing software are technologies that are easily found in the market place, and yet hosted CRM vendors, such as Salesforce.com, have yet to understand the signficance of a security breach for banking clients.

Congratulations on the Citi client win, I just hope Citi knows what they are getting into.

Here is the security information covered by Finextra News today:

"However the release of the glowing results follow an embarrassing incident last week when the vendor admitted that it had been targeted by cyber fraudsters and hit with a number of phishing and malware attacks designed to get end-users of its software to divulge confidential financial data.

In a letter to customers, the vendor said one its staff had been taken in by a phishing scam that resulted in a customer contact list being copied after the worker handed over a password.

Information on the contact list included first and last names, company names, e-mail addresses, telephone numbers and related administrative data. As a result of this breach, a number of customers began receiving phishing emails that looked like salesforce.com invoices."

Related story: http://www.finextra.com/fullstory.asp?id=17740

After recently attending Osney Media's, 11th Annual Client Reporting event I came away scratching my head as to why wealth management firms, private banks and institutional asset management firms have yet to look at their clients from a single view?

In listening to the dozens of presentations, participating in the round-table discussions and talking to people at the vendor booths a common theme emerged: Servicing the client and managing the client relationship through an Intermediary / IFA requires better integration of a client reporting solution and CRM package.

There are a countless number of client reporting vendors and even more so CRM vendors that all claim they will improve client retention, give better control of the client relationship and give efficiencies through automation.  But why haven't any of these firms created a single front office solution, that integrates client reporting, CRM, performance measurement and order management?

Yes there are some vendors that have tried to this through powerpoint slides, but when it comes time to vendor selection and implementation the solution falls apart. 

Rather than having separate funded projects happening in separate silo's, software vendors need to be able to demonstrate how a complete front office package integrates into existing systems, especially CRM, client reporting and performance measurement.  This way, a Fund Manager / Relationship Manager will be able to give more bespoke service to their client and be able to cross-sell / up-sell relevant services that the client actually needs.

Finextra coverage of Forrester report:    http://www.finextra.com/fullstory.asp?id=17694

Blog I created on Finextra.com Communities on the 8th of November, 2007:

I disagree with the Forrester recommendation that says UK Retail Banks need to provide incentives for clients to do more electronic and online banking.

Per their research, 31% of Brits use the Internet for online banking, but two-thirds of Brits use the Internet regularly.

The reason, in my opinion, that only half of online Brits do online banking is the lack of innovation by the Retail Banks.

Rather than reacting to clients demand for innovation, which clearly has not happened yet in the UK, Retail Banks need to lead the way for their clients through technology and process innovation.

The Forrester research discusses the proportion of UK online users as compared to Germany and France.  Why is it that the UK, a leader in the Financial Services industry, is trailing countries such as Germany and France?

Simply put, it is because short-term goals are being focused on and investment into infrastructure, applications and process and not being done with a long-term strategy in mind.

With the recent turmoil in consumer lending, Retail Banks need to allocate more of their profits into process innovation and multi-channel client dashboards as compared to short-term projects and profitability targets.

Otherwise, emerging markets within Eastern Europe, Middle East and South East Asia will begin to take UK-clients away because of their innovative approaches.