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Financial Advisory in a Social WorldGiven the ubiquity of social networking, financial advisory firms must focus on creating a technology platform using social networking concepts, which will allow them to interact with clients in a 24x7 environment.
Executive SummaryFinancial advisory is a high-touch, client-facing business. In today’s complex financial invest-ing world, the financial advisor’s role in helping customers manage their finances has become extremely critical. This fast-moving world also calls for advisors to be available for their clients at all times to be able to engage, educate, focus and reassure them. We believe that the financial advisory business will need to adopt a socio- business view to bring customers together, and also closer to their advisor, using Web 2.0 tech-nologies that will enable them to share, interact with and benefit from social networking.
In this paper we propose a socio-business frame-work for financial advisory firms to understand the enterprise benefits that a social networking technology platform can bring to their businesses.
IntroductionStacey Gilbert manages the treasury operations of a mid-tier technology company. She has been on the lookout for a good investment opportu-nity for the unused cash pile that her firm has amassed over the past couple of years. She wants to invest this cash in assets that are safe, liquid and short-term. Mark Kemble, her financial advisor from ABC Bank, proposed some money
market instruments as possible investment options. However, Stacey realizes it will take further meetings with Mark to fully understand the products and decide if they meet her needs. Unfortunately, Mark will be away for the next cou-ple of weeks and will not be available to discuss the products with her. From her past experience with the bank, she knows that once she finalizes the product, there will be plenty of paperwork to complete before she can actually invest. Time is running out as she has been under pressure from her management to reduce the cost incurred on the idle cash.
In the not-too-distant future, we believe, profes-sionals like Stacey will be able to conduct busi-ness with their financial advisors using social networking platforms. This will allow them to interact and transact with their advisors in the manner and at the time they want.
Social networking has been around for several years. Fuelled by Web 2.0 technologies, it has now become arguably the most popular means of interacting, collaborating and networking with people and organizations. Over 66% of all adult Internet users are connected to one or more social media platforms,1 spending on average about 400 minutes per month on popular social networking sites such as Facebook and Pinterest.2
cognizant 20-20 insights | july 2013
• Cognizant 20-20 Insights
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The central idea for financial advisors is to create a “blue ocean” capability by fashioning a technol-ogy platform using social networking concepts, which will allow them to interact with clients and run business operations.
Current Business LandscapeA financial advisor to individual and institutional investors is responsible for establishing the liquidity needs, return needs and risk appetite of the investors, based on which appropriate goals and objectives are decided and an overall finan-cial plan is drawn up.
The process flow in Figure 1 provides a simpli-fied overview of traditional financial planning as practiced by most financial advisors.
To start the financial planning process, the client is expected to provide all financial information right at the beginning, or else multiple appoint-ments and meetings are scheduled until all the relevant information is obtained. The linear financial planning model makes the data gather-ing exercise daunting for the client and could lead to procrastination on the client’s part.
From a financial advisory perspective, it is inter-esting to note that most users on social media platforms are over 25 years old and the fastest growing segment is over 50 years of age. Today,
clients are getting used to a collaborative and inter-active way of life that is driven by social networking technology. The next gen-eration of clients will take this for granted. Therefore, it is important for financial advisors to offer a full set of services via media that clients are accustomed to.
Social networking presents a unique business opportu-nity for financial advisory firms to not only connect advisors, clients and other stakeholders with each other in a 24x7 “always
on” environment, but also to provide products and services to clients and perform internal processes.
The central idea for financial advisors
is to create a “blue ocean” capability
by fashioning a technology
platform using social networking
concepts, which will allow them to
interact with clients and run business
operations.
Traditional Financial Planning Process of Financial Advisory firms
Figure 1
Objective
Generate Financial Plan
Current Financial State
FutureFinancial State
Describe Gap
Develop a Plan
Gather Relevant
Information
Information on Current Income, Expense, Assets
and Liabilities
Short-term and Long-term Financial
Needs
Financial Needs and Current
State Deviation
Finalize on the Plan to be
Implemented
AnalyzeInformation
Strategy Process Flow Experience Outcome
Fix appointment & schedule multiple interviews
Share hard-copy of document
Review materials, preparequestions for interview,
gather information
Conduct interview, have multiple in-persion
discussions
Analyze current and future state to identify the needs,
shortfall
Prepare and share an outline with recommended financial
products
Discuss and get feedback & views
Make modifications as per discussions
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After the exhaustive data-gathering exercise, the financial advisor completes financial planning projections for the client. Financial advisors may take several days or weeks to analyze the client information, and schedule an appointment to present the results. During the presentation, if the client shares new information or wishes to look at a different version of the projections, further analysis takes place for several days or weeks, which is followed by another meeting. Such an experience discourages clients from testing the plan with multiple possibilities in terms of life
events. Instead of providing clients with a positive inter-active experience, financial advisors end up providing a slow, back-and-forth itera-tive process.
Financial planning is no longer about delivering the ”plan” as an end product. It is about continually align-ing the clients’ money with their goals, as their lives and circumstances change. This means that the value of financial planning is
rooted in the ongoing experience that the client has while engaging in the planning process.
We believe that the continuing maturity of the financial advisory profession, advancements in technology and changing customer behavior patterns will define the “future of work” for the financial advisory business.
We propose a “socio-business framework” for financial advisory firms. We believe this framework will enable firms to use social media concepts to enable a more efficient, interactive and collaborative association between internal and external stakeholders.
Socio-Business FrameworkThe socio-business framework allows advisors to be responsive, attentive, willing and able to provide the information or assistance that clients need. Clients who have a positive experi-ence interacting with the advisor are more likely to buy a product or service, recommend the advi-sor and/or continue with the existing relationship.
The basic elements of the socio-business frame-work for the financial advisory business are:
We believe that the continuing maturity
of the financial advisory profession,
advancements in technology and
changing customer behavior patterns
will define the “future of work” for the financial
advisory business.
Social Experience
Figure 2
Info
rmati
on
Gath
erin
gF
inan
cial P
lan
nin
g
Gather Client Info
Assess and Evaluate Client Data (Risk
Appetite, Financial Health, Age Group, etc.)
Interact(Text/Video)
Plan Sign-off
Discuss Financial Plan
Client-Advisor Private Network
Client Network(Peer/Expert)
Interact (Text/Video/Chat)
Upload/View Cash-flow Projections
Disclosure Agreement
Advisor
CreatePlan
Advisor
Client
Peer/ExpertView
Client PeerNetwork
Client
Experts
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Social Experience
The social experience is all about information seeking and information dissemination. It is driven by:
• Exploring the advisory marketplace looking for resources and information that will help clients chart the financial course to meet their objectives. This includes connecting clients to each other to enable peer support and to make clients feel connected to and a part of the organization.
• Formulating a plan to achieve the desired outcome through interactions with the finan-cial advisor, peer groups and expert groups.
• The course of action selected by the customer is validated by objective evidence. Reinforce-ment may come in the form of expert reviews, peer comments and other trusted sources.
Connect and Collaborate
Customer interactions with an organization typically do not make it past the employee speak-ing with the customer. In a social business frame-work, the customer can connect with a wider group, involving peers and other employees. When the customer submits a request or gives feedback on a product or service, these can be discussed internally within the employee network for viability and feasibility, and a response can be sent to the customer. Also, the feedback or request can be debated and discussed within the client’s peer group.
Objective-Driven Networks
Clients view the organization as one entity and expect it to function as a single unit and not
as functional silos. The socio-business frame-work provides mechanisms that make everyone in the organization responsible for collabora-tion. For instance, financial advisors, the client management team and the marketing team can collaborate in a social network for the customer onboarding process.
Technology
Social technology is about communication using electronic devices and networks. Socio-business for financial advisory can benefit by:
• Choosing social tools based on the way the business communicates, whether it is one-to-one conversations or broadcasting, text or audio, feeds or streams.
• Enabling individuals to use the device best suited to their needs and keeping them connected everywhere and at all times.
• Adding social collaboration capabilities to the applications employees use to do their jobs, and allowing information sharing within the context of business processes.
Compliance
In order to comply with most industry and government regulations, including FINRA, all company data including electronic communica-tion traffic over blogs, discussion forums, private chat and message broadcast are archived and stored. Social technology can enable these to be easily retrieved for regulatory compliance and legal discovery.
The goal of the socio-business framework is to create an environment where clients feel that the
Event/Campaign Management
Figure 3
Even
t M
an
agem
ent
Advisor
A client can be part of at least one event network. An example of this would be segmentation based on risk appetite, financial goal, etc.
EventNetwork 2
Creates
ClientNetwork
Assigns
Client
Assigned to
EventNetwork 1
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journey to their desired outcome is easy and rel-evant to their needs.
ConclusionConducting financial advisory business over a technology platform built using social networking concepts will become as ubiquitous as Internet
and mobile banking are today. The time is ripe for financial advisors to understand, evaluate and embrace a technology-driven socio-business culture. They need to understand and assess the impact of this culture using the socio-business framework and then create a roadmap of how to transform their business operations to emerge as leaders in the industry.
Figure 4
Pro
spec
ts M
an
agem
ent
Advisor Look-up
Search for Advisor
View AdvisorProfiles
Convert a Lead
Exchange MessagesWithin Lead Network
(Private/Public)
Interact with Advisor
(Private Text/Video)
ViewDemo
Handle Queries/SupportCall
Center
Manage a Campaign
Launch Campaign
Interact Within Campaign-Specific Network
Join & Participate in
Campaign
Publish MarketingMaterial
Track CampaignClient
Volunteers
Request to Register(Directly)
Add Prospect to Lead Network
Request to Register(Through
Campaign)
Advisor
Advisor
Advisor
Prospect
Prospect
Prospect
OtherLeads
OtherProspects
Prospect/Lead Management
Footnotes1 http://pewinternet.org/Commentary/2012/March/Pew-Internet-Social-Networking-full-detail.aspx
2 http://www.blogherald.com/2012/06/07/social-networks-broken-down-by-demographic-infographic/
References
• Information on usage of social media, http://ansonalex.com/infographics/social-media-usage-statis-tics-2012-infographic/.
• Social media and decision-making, http://dssresources.com/faq/index.php?action=artikel&id=225.
• Gilder, G., “Metcalf's Law and Legacy,” Forbes ASAP, September 1, 1993, http://www.discovery.org/a/41 and http://www.gildertech.com/.
• Usage of social media for investments decision-making, http://mindfulmoney.co.uk/10057/investing-strategy/incorporating-social-media-into-investment-decisionmaking.html and http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/01/31/investors-increasingly-tap-social-media-for-stock-tips.
• Making a case for socio-business network, http://www.altimetergroup.com.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 162,700 employees as of March 31, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world.
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About the AuthorsSathish Thiruvenkataswamy is a Senior Manager within the Cognizant Business Consulting (CBC) Practice. He has over 11 years of technology and consulting experience in the banking and financial sector. Sathish holds a post graduate diploma from IIM Calcutta and earned his bachelor’s degree from National Institute of Technology Silchar. He can be reached at [email protected].
K B Venkatasubramaniam is a Senior Consultant within the Cognizant Business Consulting (CBC) Practice. He has over nine years of technology and consulting experience in the banking and finan-cial sector. Venkat holds a post graduate diploma from T.A. Pai Management Institute and earned his bachelor’s degree from Sri Venkateswara College of Engineering (University of Madras). He can be reached at [email protected].
Sumit Srivastava is a Senior Consultant within the Cognizant Business Consulting (CBC) Practice. He has over six years of technology and consulting experience in the banking and financial sector. Sumit holds a post graduate diploma from IIM Lucknow and earned his bachelor’s degree from Delhi College of Engineering. He also cleared the financial risk management (FRM) examination in 2009. He can be reached at [email protected].
• Traditional Approach in the financial advisory business, http://www.bellaonline.com/articles/ art9351.asp, http://www.fa-mag.com/, http://www.bargaineering.com/articles/interview-with-a-finan-cial-advisor-jlp.html, http://smallbusiness.chron.com/core-business-processes-financial-services-780.html and http://www.riabiz.com/a/7166554.
• Improving customer experience through social technologies, http://socialenterprisetoday.com/blog/posts/how-social-technologies-contribute-to-a-better-customer-experience/, http://www.mycu-stomer.com/ and http://www.supportindustry.com.
• Impact of socio-business model, http://futureofcio.blogspot.in/2012/01/seven-business-visions-social-business.html.
• Financial planning process, http://www.kitces.com.
• Business Benefits, http://www.zdnet.com/blog/hinchcliffe/assessing-the-business-benefits-of-social-business/1487.