Written by James Wood, Consultant at Simplify Consulting
As digital evolution continues at pace from the way we shop to the way we interact with other people and service providers, clients expect the same personalised, seamless and technology-driven experiences from their Wealth firms.
Client segregation, whether it’s demographic, geographic, behavioural, or value-based, helps firms personalise and deliver good outcomes for their clients, but is it inevitable that over time this segregation will become more and more layered and complex, until it becomes fully personalised?
The Future
As a core part of Consumer Duty, client segregation helps firms deliver tailored services, mitigate risks and demonstrate fair treatment. In a continually developing and data driven environment enhanced solutions, providing more sophisticated, and, by extension, more complex models allow firms to go further and further.
Consider correspondence. Many firms already personalise client contact using a range of variables on pre-defined templates, but what if hyper-personalisation allows firms to tailor the correspondence so it’s unique to each client? Not only adjusting content, tone and language each time, but also included specific information, actions required, or risk warnings associated with their investment choices. Reducing generic and repetitive wording would make it much easier for firms to demonstrate a greater adherence to customers understanding outcomes under Consumer Duty.
This could also be applied to investment strategies. Firms could use larger sets of client data managed by algorithms to create bespoke models based on each individual’s circumstances and risk appetite, rather than being based on generic criteria. Whilst one person may want to invest in Company A which prioritises diversity at company boards, another may want to invest in Company B who has a low carbon footprint. Both may score equally well at an ESG level but for different reasons and this may influence how a customer decides to invest their money.
A more personalised approach to investments would not only better align customer goals with the associated risk vs reward of the investment portfolio but would also allow wealth managers to offer superior products and services leading to higher client satisfaction and increased business.
The Challenges
For Wealth firms to embrace the concept of hyper-personalisation they must gather the right client data. However, this comes with its own challenges. The comprehensive GDPR (Global General Data Protection Regulation) legal framework that governs how firms must collect and use personal information is but one hurdle. However, if firms gain consent from the client to capture granular information such as browsing behaviours, past interactions or personal preferences, where does the line stop before it becomes ‘creepy’? In our recent research around how wealth providers can boost data sharing and better outcomes for clients, we found clients are reluctant to provide their data and have growing concerns about how it’s used. Until greater trust is instilled between clients and their provider, more personalised journeys will be difficult to progress.
Another key challenge is whether firms have the right technology in place. which can be an expensive investment. But customer relationship management systems and personalisation AI programmes are available that analyse vast amounts of data quicker than humans to help them develop and deliver superior client experiences.
And having the right processes to adapt in a timely manner is also a hurdle. An individual’s circumstances or goals can change over time, so firms will need sophisticated models to monitor and adapt to these. Firms would also need to be acutely aware of where these products and services may not deliver good outcomes, such as for some types of vulnerable clients.
While technology helps improve the processing of information, the risk of providing emerging technologies with this amount of power is also not fully understood and implementation will have to be carefully considered, with strict controls in place.
Conclusion
Enhancements to client segregation at Wealth firms in an ever-evolving technological environment is inevitable, as good outcomes today are not going to be the same in three, five- or ten-years’ time, but is hyper-personalisation feasible?
Its very essence is to create highly individualised customer outcomes for firms aiming not just to meet but exceed customer expectations. AI solutions predicting customer preferences and offering investment recommendations before customers themselves even express the need is surely desirable, and likely why firms are already looking into personal investment strategies.
Creating more engaging services where each interaction feels uniquely tailored is achievable, but firms will need a strong commercial case in today’s climate and confidence that any investment in people and technology will bring meaningful financial growth. You’d expect higher fees and charges to be introduced to generate more revenue, although firms will need to make sure their services are still affordable.
Hyper-personalisation is a fundamental shift in how firms will interact with clients in the future. It might be limited by technology adoption and risk appetite, but firms should look to embrace it on some level and start the journey now.
