The holy grail in marketing today is relationship building. Almost all companies not just financial firms—have shifted their emphasis from one-time transactions to ongoing relationships. Financial firms whose sales reps possess personal, one-on-one relationships with the client have a built-in advantage when it comes to relationship building. And yet, many organizations that have the good fortune to have strong ties between their customers and their sales reps are trying to nudge the salesperson out of the picture. Many brokerage firms, for example, are “migrating” clients with lower assets to online and phone channels. At Merrill Lynch, for example, clients have to invest at least $100,000 before they qualify for their own full-service broker. Below that amount, they are serviced by a call center, whose three hundred brokers serve one million retail customers. It is understandable that firms such as Merrill are seeking to change the relationship between client and broker-adviser. For one thing, there’s the matter of cost—each full-service client costs the firm an estimated $500 a year, more than some smaller clients provide in profits. Second, the cost of brokers at the call center is much lower, both in commissions and in overhead. More crucial for the firm, the goal is to redirect the relationship from client-broker to client-firm. The broker model has always presented a problem for firms with commissioned sales forces. If the broker decides to leave, in most cases the client will go along.
To counter this, companies have put complex systems in place to initiate communication with clients as soon as a salesperson resigns. Firms know they have very little time in which to retain the client. To many clients, the salesperson is the company. If clients are happy with the advice being received, they will follow the adviser. The reality is that there is no way to prevent clients from moving their accounts to other firms if they so choose.
This perception that the broker “owns” the client makes brokers hard to manage. Firms that attempt to cut commission rates may see a massive outflow of their top salespeople, who can always find another brokerage that will give them a bonus for making the move with their book of business. These individuals can also become independent and collect 70–90 percent commission payouts on sales compared with the 25 to 45 percent they typically get at a major Wall Street firm. In a situation such as a change of ownership, this exodus can have major repercussions. For example, sales of products by Prudential Securities brokers declined an estimated $50 million in the first five months of 2003, following the sale of its brokerage division to Wachovia. Wachovia lost nearly 15 percent of Prudential brokers, who jumped to rival firms following the acquisition. As a result of all these factors, brokerages and other commission-driven firms are looking for ways to move clients to a new relationship with the institution, not the broker. Even high-value clients are encouraged to use all available transaction channels, including online and phone, as well as transacting through their broker. Brokers are getting new tools that enable them to work with clients over the Internet on an instant messaging model. While these tools are designed to improve broker productivity, they also loosen the bonds between brokers and their clients. The more tied-in the client is to a given company’s systems, the less likely the client is to follow a broker to another firm.
Ironically, while commission-based companies are trying to wean customers off personal relationships with brokers, commercial banks are heading the other way. Chase, for example, has instituted a personal “relationship manager” to service its small-business customers who combine personal and business balances. Why? Because small-business owners often have significant personal assets that can be captured by building a relationship based on business banking. That bank salespeople may not be quite up to the task is borne out by the results of a “mystery shop” conducted by American Banker in 2002. Visiting several Chicago-area bank branches, the reporter and a consultant asked to open a minimum-deposit checking account, but also dropped broad hints at additional assets (buying a home on the Gold Coast, owning a small business). While some bankers did pick up the hints, the response seemed haphazard at best. Half the bankers did not ask their names; none asked for a follow-up visit or phone number to contact the prospects.
So which way is best? Encourage or discourage personal relations between clients and salespeople? The data are mixed. On the one hand, a 2002 survey commissioned by Dow Jones & Co. found that “while affluent investors did not regard any financial firm over whelmingly as a trusted partner, almost two thirds reported a significantly high level of trust and reliability in their primary broker.” Buttressing the finding that clients still seek advice from their own brokers is a Hartford Financial Survey in 2003, that found that even though their portfolios were down significantly, 56 percent of those surveyed were satisfied with their current financial adviser. And this was despite the fact that 33 percent had not talked to their adviser in the last six months.
Advisers who keep their client relationships strong are likely to benefit their firms as well. When UBS initiated a major ad campaign announcing its brokerage’s name change from UBS PaineWebber, its financial advisers were required to contact each client to explain the change. The result was few client defections and more asset inflow. On the other hand, surveys show that clients want better service from their advisers and are willing to use the Internet as a substitute. A survey by Nationwide Financial in 2002 found that 35 percent of affluent investors had used the Internet for financial planning assistance. Of those, 11 percent used the Internet as their only source. The survey showed a significant drop in the use of advisers. The use of stockbrokers, for example, dropped from 54 per-
Why Clients Change Advisers
cent in 2001 to 32 percent in 2002, although this figure was not supported by other studies.
How Sales Can Help Marketing Help Sales
The relationship between sales and marketing is a little bit like the relationship between teenagers and their parents. Parents (marketers) try to guide the teens (sales force) in the right direction, and prevent them from making mistakes. Teens resent parents telling them what to do and insist on making their own decisions. But also like teens, the sales force may be too focused on the present and not always have the best interests of the organization in mind for the long term. For example, marketers complain when their in-house salespeople create their own client materials rather than use the materials so expensively crafted by the marketing department. Salespeople claim they know better what will appeal to their clients. What they fail to understand is that the marketer is looking at the best interests of the firm. Sales-created promotions can trigger a number of potential problems:
Like parents, marketers can be good or bad. Good marketers support the sales force with essential information and client materials, including prospecting tools, lead-generation campaigns, help with developing successful sales techniques, product training, generic promotional material (brochures, ads, newsletters), customized material (proposals, sales letters, client reports), and trade show and seminar marketing. In return, good salespeople give feedback to marketing, letting them know what works and what doesn’t, what they need, and how marketing can best support them. Many traditional sales organizations have begun asking the sales force to think more like marketers. For practical demonstrations of how sales people can use marketing techniques and tactics, see the appendix, “Applying Marketing Principles to Sales Practice.”
Financial Services Marketing Related Interview Questions
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