Who owns the customer in a digital world? (Part 5/6)
Let’s have a look at how super brands in other industries have changed the game. There’s a common theme running throughout...
- Alibaba is the world’s largest retailer, yet it carries no inventory
- Facebook is the world’s largest marketing platform, yet it creates virtually none of its own content
- AirBnB is the world’s largest room provider, yet it doesn’t own any property
- Uber is the world’s biggest taxi company, yet it doesn’t own any cars
- Apple and Google are the world’s largest tech companies, yet the apps we use are not made by them
Something interesting is happening. Our relationship is no longer with the end service provider but with the aggregated interface.
If you own the interface, you have significant control over the ongoing customer relationship.
However to achieve this in FS, you need to start with the problem that the customer wants us to solve and that’s to help them organise and manage their finances more easily. You begin by helping them understand their financial position today. All of their finances in one place. The concept of Account Aggregation.
What you also need to understand is that you cannot immediately monetise it. That’s a really difficult thing to accept in our industry but here’s what you can achieve...
Online financial adviser Personal Capital are truly hybrid in their approach to customer relationship management. They give away free account aggregation tools to anyone that wants them. They use Account Aggregation as a ‘freemium’ service to lower the cost of acquisition. In the last 3 years alone, because of the huge level of convenience and appeal they offer, they have amassed a user base of over a million people.
Now it may not sound like a lot but they have turned 1% of those users into a profitable relationship.
Peronal Capital have done this by not only aggregating investment accounts and valuations, but also the associated fees and performance across those accounts, in order to identify whether the client could be better off in their own Central Investment proposition. That 1% accounts for over $2bn in AUM.
...they have turned 1% of those users into a profitable relationship. That 1% accounts for over $2bn in AUM...
Now just think about how quickly they have amassed those assets, the captive market they have created and the cost of acquisition compared to traditional means. In the UK, the cost of acquisition is typically £200 per customer (source: Lucian Camp Consulting). Personal Capital have done this primarily by putting a high utility digital experience in front of the customer BEFORE introducing their advice proposition.
The other thing to note is that these guys are not in the UK yet, although they want to be. They can’t crack the UK because of their inability to easily access data on advised assets.
You however are in a prime position to deliver a service like this to your own clients. Firstly because you have already acquired the relationship and secondly because of your unique position of being authorised to retrieve information on your client’s behalf. In other words, you have the all-important agency code with platforms and product providers.
You ALSO possess something these guys did not have… existing clients.
Let me show you who is truly being successful in the new digital age. It’s not necessarily the new boys in town…
Traditional players have reacted by acquiring the new digital companies or building out their own tech, which is then giving them an incredible return on investment. Examples are Vanguard and Schwab. Their AUM on their digital propositions DWARF that of Personal Capital and wealthfront.
UK Banks have already started to react by building out their own innovation hubs (Barclays and Santander). Why? Because they know they can switch many of their existing client books onto a shinier new platform and they have a lower cost of acquisition than the new entrants.
You have a trusted brand and existing clients. What you need is a platform valuable enough so your clients have no need to go elsewhere to manage their finances. You can then capitalise on the data to earn more from your existing clients and help attract new clients.
In my next article, I’ll give you some suggestions on key areas to think about if you want to build a digital strategy for your business.
Mik Cons - CEO
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