Embracing a digital world
It is fair comment that the wealth management industry has lagged behind other sectors when it comes to effectively deploying digital strategy. Gillian Carless explores why this is the case and why the industry must step up and embrace the digital world to ensure future success.
Success in some quarters
In the Australian marketplace, sectors such as the FMCG and retail arenas – particularly retail banking – have made some great headway with digital strategy in recent years. In these sectors, it has become standard practice to build brand and reputation, effectively engage with customers, improve service delivery and cross-sell products via a range of digital channels including websites, mobile apps, social media, email and SMS. The more tech savvy players have even begun to explore the use of smart watch apps, smart TV apps, video interfaces, digital billboards and digital TV as part of a multifaceted digital marketing approach.
Disappointing results in others
Unfortunately, the same cannot be said for the wealth management industry. In particular, super funds and life insurance companies have struggled to develop and implement digital strategy in a meaningful way.
In 2014, an IQ Group survey of the top 50 Australian retail, industry and public sector superannuation funds found that while most funds now offer a website, online member centric services were limited. According to the survey, most funds failed to capitalise on social media channels, with only 38 per cent having a Facebook and YouTube presence and only 36 per cent having Twitter. Only 36 per cent of funds delivered a mobile-optimised site, while only 14 per cent offered a mobile app for members.
Similarly, in 2013, an EY survey of more than 100 insurance companies globally found that while providers have high digital ambitions, they have largely failed to take action and embrace the digital world. Sixty-eight percent of respondents spent less than 10 per cent of their business and IT development budget on digital strategy.
Why is this the case?
There is no single explanation for the financial service industry’s slow uptake of digital strategy. Rather there is a number of interrelated factors at play.
Over the years, super funds and life insurers have come to see themselves as inherently conservative and serious enterprises. Undoubtedly, this self-image has served to reinforce a preference for conventional, safe and proven ways of doing things. It may also have contributed to a misconception that progressive, trend setting and popular methods – such as leading edge digital technology and social media – have little relevance when it comes to achieving their business objectives.
Service provider centric
Another key factor in the industry’s limited uptake of digital strategy lies in its adherence to a service provider centric business model that has paid scant attention to customer needs and expectations. Traditionally, the superannuation industry has focussed on servicing employers rather than developing and retaining direct relationships with individual members. Industry funds, in particular, have been handed large chunks of business without having to market themselves to their members in any concerted way. Similarly, life insurance providers have tended to adopt a prescriptive, top down approach that has seen them dictate one size fits all products and limited distribution methods.
Continued reliance on legacy systems
The industry’s ability to more fully embrace digital strategy has been thwarted by a continued reliance on legacy systems. Many providers operate simplistic, outmoded IT environments that cannot readily support multiple digital channels, big data and predictive analytics and the real-time, interactive digital and mobile service delivery experiences consumers have come to expect. They also battle on with limited and generalist IT skills, neglecting to recruit specialist staff who could assist them with the transition to the digital age and help maximise their IT investment.
In addition, many wealth management providers have baulked at transitioning to modern technology environments suited to digital strategy due to the perceived cost. Instead, they have pursued piecemeal, bolted-on solutions to their existing systems, hoping to get by without making a significant investment. Yet more often than not, these solutions are heavily customised and effectively lock providers out of the benefits of upgrades and enhancements. Despite the quick fix, they invariably prove unsustainable in the long term.
Why it matters
While the wealth management industry has tinkered at the edges of digital strategy and continued on with traditional ways of doing things, the world has not stood still. There have been fundamental changes in the broader consumer marketplace that demand attention.
Shift in power from provider to consumer
Over the past 10 years, there has been a fundamental shift in power across all businesses from the provider to the consumer. As a result, superannuation memberships and life insurance policies are increasingly bought not sold, with consumers demanding that providers meet them on their terms. Not surprisingly, consumers expect to receive the same sophisticated levels of digital service delivery from their super fund or life insurers as they receive from other service providers in their daily lives. In this new world order, providers without digital and mobile service offerings will be deemed irrelevant.
Simplified user experience
Across the broader consumer marketplace, there is an increased emphasis on simplifying the user experience. The less hurdles involved, the more likely it is that a consumer will transact. The more enjoyable, convenient and effective the user experience, the more positive the brand association and the greater the likelihood of customer loyalty and retention.
This trend has particular salience for the wealth management industry, which has been dogged by a reputation for being daunting, complicated and confusing. While the underlying complexity will always remain, providers must look for ways to simplify their products, easily engage with their customers and streamline the consumer journey.
Consumers today expect easy access to interactive, real-time self-service capabilities using any device, from any location. Whether checking their binding nomination, changing their investment portfolio, breakdown portfolio or reviewing their transaction fees, the ready availability of information at their fingertips and the ability to transact are a given. With the removal of many exit fees, providers who fail to offer these capabilities through digital and mobile service delivery will be deserted.
Personalised customer service
Consumers increasingly demand highly personalised, holistic customer service that directly addresses their needs. They expect businesses to communicate with them in real-time, using their preferred communication channels. In the back office, providers must harness the power of big data and predictive analytics to obtain a thorough understanding of the demographics, buying preferences and behaviours of individual customers. In the front office, providers must use this information to initiate personalised and responsive communications that resonate with the customer’s age, gender, life stage and current circumstances. In this new world order, well-developed digital capabilities are critical to meeting consumer expectations for service excellence.
Positive business reputation
In an era where social networks are so highly valued and consumers enjoy unprecedented power, social media is becoming crucially important in strengthening brand and building a positive reputation. Given that unresolved customer complaints can bring about considerable reputational damage through social media, wealth management providers must become socially aware and digitally savvy. A dedicated social media strategy must form part of a broader digital marketing approach.
Cross selling opportunities
In the digital world, everything and everyone is connected. This new landscape is providing consumer businesses across the board with unprecedented opportunities to cross sell. Once a customer is happy and satisfied with their initial purchase, the chances of signing them up for related products and services is greatly increased. From the consumer’s perspective, the ability to consolidate multiple products with a single provider delivers all important simplification.
Digital strategy in action
The true value of digital strategy is best appreciated when seen in action. Let’s take a look at a fictitious scenario to see how it works.
Meet John Smith who is 38 and has just become a first time dad. John is commuting to work when he decides to use this time to check his superannuation balance. Using his iPhone, he accesses his super fund’s website to find out the information he needs. The website features a responsive, personalised menu and John notices a category called “Get Protection”. As a new dad, John is more conscious of his responsibilities, so he clicks on the category to check it out. It offers him two choices – Life Insurance and Income Protection. John clicks on Life Insurance and is taken through a series of simple questions about his personal circumstances, health and the amount of cover he would like. Based on his answers, the screen recommends a policy to him. He then clicks on the Calculate Premium button and is told the premium would be $153 per month. He is invited to read the product disclosure statement for the policy, which can be downloaded and emailed to him at the click of a finger. John now has a few questions, which he is able to resolve online in real-time, with a qualified, certified advisor. The next screen invites John to go ahead and submit his life insurance application from his iPhone. In this case, John was able to use self-service, but in the case where he requires scaled advice, or full advice, he is able to be transferred through to the in-house customer support team, or, to a financial planner who will have immediate access to where John is at in his discovery process.
In the years ahead, converting a superannuation member into a life insurance policy holder will be that simple. Digital and mobile service delivery will provide unprecedented convenience for time poor consumers and boundless cross sell opportunities for tech savvy providers.
For the wealth management industry, it’s crunch time.
Only digital strategy is capable of responding to contemporary demands for highly personalised customer service, from any location, using any device. Only digital strategy supports the real-time, interactive and self-service capabilities consumers increasingly expect. Only digital strategy enables the predictive analytics needed to drive truly customer-centric products, services and distribution channels. Only digital strategy supports true member and customer engagement, and, a seamless transition between devices and distribution channels, which underpins satisfaction and retention. Only digital strategy provides unique opportunities to cross sell and grow a sustainable business.
In today’s modern and sophisticated consumer marketplace, digital strategy is no longer an option, it is an essential and invaluable prerequisite for business success.