“Culture eats strategy for breakfast.”
— Gideon I. Gartner, founder of Giga Information Group and Gartner Group
For better or for worse, strategy and culture are inextricably linked in the minds of business leaders.
Strategy provides a framework to define a company’s goals and helps orient people around them. Culture expresses these goals through a firm’s values and directs activities through shared assumptions and group standards.
While many wealth management firms do a decent job creating strategies, the ability to leverage culture is more elusive because much of it is anchored in unspoken behaviors, mindsets, and social patterns.
I recently sat down with Doug Fritz, founder of F2 Strategy consulting, to discuss some of the terrific ideas and insights from a recent webinar he hosted called, “Delivering Actionable Insights: How Wealth Managers Can Leverage Technology and Data to Meet Client Demands”. Fritz interviewed Alex Perovic, Head of Strategic Initiatives & Digital at RBC Wealth Management. This event was in conjunction WealthManagement.com.
Fritz said that the webinar grew out of his conversations with Perovic about what large firms are doing, and how to be innovative and encourage change within an organization that isn’t structured to move the ball down the field. This post is a summary of my discussion with Doug about the key takeaways that I got out of the webinar.
Know who you are and what you’re good at
This perspective comes both from Fritz’s own experience and his perspective as a student of history. Great client experiences — across all industries — are simple to understand and authentic through the entire relationship. His first employer, First Republic, is a very good example of the idea that “We’re going to be good at two or three things and no one is ever going to come close to us on these few things. That’s who we are. That’s the type of people we hire. That’s how we price and deliver our services. That’s how people experience us before, during, and after a transactional relationship.” It all resonates around those simple things of who they are and why they exist, he explained.
The employees get it, the clients get it, and all the experiences rally around that. And no one beats us because we’re going to be the best at those three things.
In our industry, both large and small firms have struggled to tell that story of: why are we different? why are we unique? why would someone come work with us?
And it’s an embarrassing question, but it’s the first question I sit down and ask our clients, the president so of the wealth firms we work with. Why do people work with you? Why do people stay with you, as clients and as employees? And more often than not, they can’t answer that question authentically or in a way that makes sense, that you could build technology or a digital experience around.
So we start with that. In a lot of our experiences we start with digging into why your people are here. What is it about you, and how can we establish the words and the language for the context around that. Because once we have that, we can kick ass. Once you have that, the tech you have, its functionality, the digital experience— all of that is going to be a way to amplify those qualities and those differences that your firm has. And if you don’t have that, you’re going to be mediocre and you’re going to spend a ton of money being mediocre. (See 19 Ideas from the T3 Advisor Conference That Your Boss Needs to Know)
Don’t Try to Become Amazon Overnight
A lot of large financial services firms, like banks, have employees that have been there for forty years in the same or similar roles. You can’t turn that kind of entrenched organization into an Amazon overnight! But companies continue to search for quick fixes, Fritz explained.
Some firms try to short-circuit the process by acquiring a digital advice platform provider in the hopes that innovation and different creative ways of thinking are going to catch on in their office like a cold, or like COVID-19.
But you can’t “catch” innovation, Fritz warned.
He also has seen banks setting up innovation labs, but staff them with people hired from outside. They are not able to spread their innovative ideas to the rest of the organization, so it doesn’t change the bank’s culture. If you don’ get the teams from legal and regional and operations and compliance and finance into the lab to think differently, you’re not going to be able to change your culture at all, he emphasized.
It takes a long time and a lot of small steps to get an entire organization moving in the same direction. There’s this saying that “culture eats strategy for breakfast.” According to Fritz, this means that a company must be ready to accept and act of new ideas and strategies or they will fail.
The Leader’s Guide to Corporate Culture from the Harvard Business Review wrote:
Unfortunately, in our experience it is far more common for leaders seeking to build high-performing organizations to be confounded by culture. Indeed, many either let it go unmanaged or relegate it to the HR function, where it becomes a secondary concern for the business. They may lay out detailed, thoughtful plans for strategy and execution, but because they don’t understand culture’s power and dynamics, their plans go off the rails.
What is impactful about Amazon is that the experiences clients have with them in terms of transaction predictability, focus on value for spend, aren’t only kept there, Fritz noted. Those experiences spill over into what they expect in other interactions— it’s called liquid expectations, when someone expects all of their transactions to be as seamless as Amazon and they don’t understand when they aren’t. When people say, “why can’t we be more like Amazon?”, they’re recognizing that the expectations of clients are being set by retail consumer companies, not by the firms that we consider our competitors. (See The Jedi Masters of Client Experience)
First, Get Your Data in Order
We have a number of clients where we walk in the door and see pipes everywhere, Fritz said. Not literal pipes as in PVC or brass, but data pipes that move information between applications. There are tech teams plugging away and developing pipes that connect one system to another and they think, “We’re awesome. We are the best pipe builders ever!” he recounted.
Then the architecture team wants to talk about the next project which could be a digital onboarding process that needs to pull data from five different systems, Fritz describes. They say: “No big deal— we know how to build pipes in all 500 of those place.”
But they do not fully understand the costs associated with building and maintaining all of those separate pipes, Fritz notes. And what happens if there’s a leak, or there’s bad data flowing out of one— where does that data go? How do you know that the system receiving the data from that pipe after it’s been combined with all the other data knows what it means and where it came from? And there’s no one in charge of that, he pointed out.
All those things are important, and Fritz has to sit the firm down to get them to say: “Okay, for twelve months we’re going to focus on our data. And that means we’re not going to do the digital onboarding project, the client portal, advisor portal, single sign on… all of those things. We’re just going to get really good at building out a centralized data warehouse that we can actually leverage.” Once all of the client data is in one place, every other project can go incredibly fast.
According to Salesforce.com, having access to an effective enterprise data warehouse (EDW) provides a number of significant benefits including:
- Storing as much data as needed with a large variety of parameters that can be drawn from multiple, often-unrelated sources.
- Working hand-in-hand with other analytics programs to promote company growth. Around 37% of businesses state that data analytics processes facilitate growth.
Data is an asset that increases in value the more it is organized
There’s a psychological shift that happens after a company has organized their data, Fritz believes, and they’re able to start asking the right questions and deploying it to improve margins. While he’s not a fan of customer segmentation in the classic sense, but it can be a valuable guide for creating different levels of service. It creates the opportunity to mine that information and do more, better, faster cheaper, that you wouldn’t have always been able to do, he said.
Understanding Business-Ready Data
“You can have data without information, but you cannot have information without data.”
– By Daniel Keys Moran
A Data Lake is a pool of unstructured and structured data, stored as-is, without a specific purpose in mind. Many financial services firms have built these, but not necessarily to support a CRM, customer statement or advisor alerts. It’s just data for the sake of data, Fritz noted.
But just building a giant data lake is not the same thing as having a business-ready data, Fritz pointed out. This would allow visibility into the information and make it easier to change user experiences. Just because a firm has built a lot of pipes that go into this lake, they can’t go back to the individual sources and make changes without spending millions of dollars, he said.
Without data being business-ready you won’t be able to deploy the data and assets to the processes that support your clients and advisors. It is frustrating for leaders who heavily invested in building their data lake but can’t extract the value that was expected when the budget was approved. (See #ItzOnWealthTech Ep37: Superior Views of Industry Data with Jean Sullivan)
You need a culture of innovation to stay relevant
Waiting and following what the leaders of the industry do worked until around five years ago, Fritz described. The leaders not only get the benefit from what they innovate, they’re also benefiting from the strength of being able to innovate faster. A third or half of the projects will probably fail, he noted, but firms that are leaders often leverage an agile lab-based approach that allows them to fail quickly and at a low cost.
It all comes back to culture, Fritz insisted, the culture where rewarding innovation is a core value. Encouraging people to take risks with ideas that might be crazy and not ultimately workout.
Abby Johnson at Fidelity is Fritz’s prime example of someone who’s been able to build a culture of innovation with a lab, championing thinking differently, allowing people to step outside their comfort zone, and acting on what they believe is right for the company and its clients, he stated.
Fidelity is like the Amazon of our industry, Fritz stated, followed closely by Merrill Lynch and to some extent, Goldman Sachs. They have technology innovation as a cornerstone in their culture. The firms that try to follow them don’t realize that these aren’t just projects and they aren’t just tools you can buy. What they’ve done is build a technology-based culture. And you can’t be a fast follower to technology culture. You have to commit to being in the modern era or realize that people that are ahead of you will drink your milkshake and absolutely will crush you, he warned.
“Fail cheaply!” was one of my favorite quotes from Fritz’s webinar. Companies can start with a small team and give them all ten hours a week in the lab for three months. If at three months, they can prove that it’s worth an “angel round” then the company will invest for another three or six months. And then at the end of that time they have to prove that it’s still viable, and if it isn’t, then its fine because you didn’t spend a lot of time or money on it, he explained. (See #ItzOnWealthTech Ep 33: Mike Zebrowski, CEO Advisor Innovation Labs)
What are the benefits to streamlining your onboarding process?
My consulting firm, Ezra Group, has done a lot of work for clients around onboarding systems. This includes evaluating current systems, managing RFPs to replace those systems, vendor selection and implementation.
According to Fritz, there’s three benefits that firms receive from automating and streamlining their onboarding process. One is accruing fees sooner, which is real money in the bank. Second is the improvement in client experience in those first ninety days. Humans have a ninety-day psychological anchoring period to cement how they’re going to thing about something long-term, he said. That makes it vitally important to build dazzling experiences that will anchor clients’ perception early in the relationship.
The third is reducing overall client attrition. Anecdotally, around a quarter of clients that say that they will do business with you don’t, either in full or in part, Fritz reported. And to reduce that number is to see a significant increase in revenue of just getting clients working with you that otherwise would not have. (See Advisor Group’s eQuipt is a Quantum Leap in Onboarding Technology)
We’ve seen the industry move beyond a fragmented environment for onboarding solutions to a more tightly integrated approach. And the change has been dramatic in terms of usability and client experience. It’s like moving from a word processor to Google Docs or upgrading your flip phone to a new Android. (See The Secret Sauce in the Top 6 Client Onboarding Vendors)
Financial advisors only providing money management are only doing half their job
It was Perovic’s opinion that financial advisors need to look beyond money management and provide more holistic advice. He was thinking through the client experience beyond what advisors have historically thought of themselves as accountable for— investing money and telling you how the money did.
But when thinking about clients and their financial needs, the way that they think about their world, their markets, and their other needs, such as loans, insurance, cash management, legacy planning are all changing. Advisors who do not adjust the way they deliver advice could see clients slowly start to leave to find ones that are providing the services they now want.
The big question that Fritz insisted every wealth management firm needs to answer is, “So What?” Take stock of your current client offering and ask, “So What?” in terms of how clients will see your services from their point of view. What will move the needle for them? Do you have the latest technology that clients will see as providing added value?
Another “So What?” area is client reporting. It has to be more than just a list of assets and their value, Fritz warned. Reporting should include an overview of what’s at risk, what’s coming down the road along with the plans the advisor has to address them. More proactive clients will want to know what others did that were in a similar position.
How do we empower advisors to be stronger relationship managers?
Fritz suggested that the challenge is to get older advisors to shift their mindset from money managers and become more like rabbis and psychologists, listeners and providers of advice, in ways that they’re not historically used to. Planning-first companies do the best job, but they often leave behind generating alpha and complexity of portfolios.
Older investors adopting new technology will significantly impact how they want to interact with advisors, Fritz proposed. Many advisors believe that their clients don’t want an app, but there has always been a gap between what advisors think clients need versus what they actually say they need. How can we close this gap?
Clients are demanding more digital interaction, instead of just saying that they’re important on surveys. Fritz said that what he thinks is really happened is that their existing preferences are just coming to the surface faster.
But it’s more fun to say that we’ve experienced ten years of digital transformation in the past three months, according to Fritz. And it’s left a lot of large wealth firms with underfunded digital tools and under-built innovation, with tougher times ahead.
Most clients don’t leave their advisors in the middle of turmoil, Fritz stated. They leave their advisors around six months later, which puts us into the end of this year. He expects there will be a lot of clients voting with their feet when it comes to their advisor’s ability to serve them.
Client Reporting is the Red-Headed Stepchild of Wealth Management
When it comes to the overall experience of wealth management clients, Fritz believes that reporting has been seriously neglected. Vendors have invested significant resources to build out every other stage of the wealth life cycle, while reporting plays second fiddle.
Client portals have received attention, but not too much thought has gone into how, when or why the data is displayed the way it is. Online reporting is often just a digital version of the standard paper-based statements rather than a dynamic, intuitive experience that can anticipate client needs for data.
I believe what Fritz was talking about was that client portals should be more personalized for each client. Why can’t they learn each user’s preferences, life events, and other needs and morph itself into a completely customized interface that is perfectly responsive to each individual?
A lot of this personalization is dependent on the firm’s underlying data architecture, because if you don’t have everything organized, it will take hours of manual effort to pull it all together for each client, Fritz estimated. It should be able to be done so easily, possibly through an Alexa, Siri or Google Home, a texted request or a phone call. It’s not something that we see a lot of folks investing in, and we certainly don’t hear them talking about it, he noted. (See 13 Reasons Advisors Should Be Emperors of Their Technology Domains)
Digital Transformation for Financial Advisors
While it’s hard to estimate exactly how much digital transformation we’ve seen this year, it’s at least an order of magnitude above where we would be without the COVID crisis. But I think most would agree that there is still a long way to go, especially around digitizing the end-to-end client and advisor experiences and making them more intuitive and personalized.
You can reach Doug Fritz through his company’s website, F2 Strategy.