Several recent articles and pieces of news pertinent to robos and advisors create an interesting mosaic of the current state of human and machine advice:
The image created by these items depicts the struggles in the advisory business to settle on a clear, promising strategy for integrating advice channels.
The Limits of Disruption
When robos appeared on the scene several years ago, they were heralded as the future of wealth management, a democratizing blow for the industry, and a mortal assault on traditional financial advice. Any who have seen the hype machine movie before won’t be surprised that none of those things turned out to be true. In the real world, the biggest “robos” in terms of assets are those of Vanguard and Schwab that operate as hybrids while the “pure play” B2C robos have struggled to accumulate assets and breakeven on customer acquisition costs.
The reason for this discrepancy between reality and hype is simple: Irrational as it may sometimes be, most people want humans involved in their financial planning. A 2016 survey conducted by EMI and Boston Research Technologies showed not only that most want human involvement, but also that those who were more open to algorithm-driven investing didn’t neatly map to pre-conceived demographic categories. The bottom line is that you can’t will customers and prospects into following your vision for a service offering. Moreover, making assumptions about their behavior based on intuition and truism doesn’t create a strong foundation for success.
The truth is that the majority of customers want a hybrid model. Many of the leading wealth managers understand this and have implemented or will implement various forms of hybrid offerings. In fact, as I mentioned earlier, the largest robos are actually those launched by existing wealth managers Vanguard and Schwab.
But any business heading down the hybrid path needs to recognize that their old models of and assumptions about client management and messaging will likely need to change. Specifically:
- If portfolio management is outsourced to machines, it becomes a commodity and value must be defined in terms of relationships and communication—an idea that has been around for some time but which has not gained universal acceptance because it is hard to execute.
- If you are advocating for clients to use your automated platform, you need to recognize that you are now responsible for their adoption of and satisfaction with the investment management software. Firms and their advisors need to be ready to assist clients onboard, answer their questions, and help them realize the full value of the software.
- Pushing the wrong clients towards a robo solution is a lose-lose situation that will cost time and assets. Firms and their advisors need to have ways of identifying where clients are likely to fall on the spectrum of interest in and comfort with automated portfolio management, recognizing that age and net worth will likely not be great proxies.
According to a recent survey of RIAs by Trust Company of America and TechValidate, advisors are not satisfied with the value they receive from their software. Almost half said that they couldn’t use it to its full capacity and more than a third complained that it couldn’t be customized to meet their needs. This data highlights the fact that even if you believe you have designed a product to target a specific market segment, there is no less of a need to properly set expectations in the sales process and invest in engaging and onboarding customers.
For the advisor market—especially RIAs, who may not have much of a technical staff to support them—the profile of the user makes this need particularly acute. Smart, used to moving quickly and strapped for time, these customers will have little patience for inefficiency and delays in going live and in finding out they were given misleading promises in the sales process. The actions and communications pre- and immediately post-sale will either put these customers on a positive trajectory for success and strong lifetime value or on a path to dissatisfaction.
In our experience, the keys to reaching and influencing RIAs are:
- Demonstrate an understanding of them and their business.
- Respect the fact that any time not spent working with existing clients or finding new ones is time wasted.
- Communicate in plain language and facts, not marketing-speak and fluff.
SaaS businesses, obviously including those targeting RIAs and other niche customer groups, need to ensure customer success to maximize the retention and upsell opportunities that are necessary to turn a profit on acquisition. But like any revenue generation opportunity, this requires investment—in time, personnel, and money. In a niche segment, it doesn’t become easier to satisfy, but rather harder as the bar gets higher for the knowledge and experience necessary to “talk the talk” and “walk the walk”.
On April 29th, the Boston-area Customer Success community gathered at the offices of Crimson Hexagon. On the agenda was a discussion with Dana Miller, SVP Client Services at Crimson Hexagon, and Barry Daitch, Global Leader of Customer Success at Autodesk, on how they have steered their respective organizations to deliver results in environments in which “customers” aren’t always the same as buyers or even influencers and where many factors impact customer retention.
Because Autodesk and Crimson Hexagon serve very different markets and customers, and both deal with highly complex environments, their methods of achieving customer success varied. The discussion offered an interesting range of ideas across the following key areas:
- Standardizing operations
- Managing customer relationships
- Hiring CSMs
- At Autodesk, very large accounts with many users and many different products require standardized processes for nurturing, monitoring and growing customer relationships. A “Client Engagement Plan” developed by the CSM focuses on deepening relationships and delivering value while an Account Manager’s “Account Plan” sets growth goals and milestones, and an “Adoption Plan” defines opportunities for product cross-selling and usage. [view video clip]
- At Crimson Hexagon, the company’s rapid growth and combination of large and small accounts has necessitated the development of “playbooks,” or standard processes for addressing frequently recurring customer situations, as a way to drive faster ramp-up and more consistency among CSMs. Additionally, because the company’s diverse customer base thwarts a “one size fits all” understanding of and approach to customers, the organization takes a disciplined approach to identifying drivers and mitigants of churn. [view video clip]
Managing customer relationships
- For Autodesk, ensuring the health of their complicated customer relationships requires a combination of disciplined expectation-setting and risk-mitigation. The organization’s “governance model” defines the responsibilities of the Autodesk team and those of the customer team, as well as scopes and reinforces the boundaries of Customer Success and Professional Services. [view video clip] Because even satisfied customer relationships are threatened by the departure of key customer personnel, Autodesk also strives to strategically build bridges throughout the customer organization and to identify and capture customer success stories that can be used to highlight value delivered. [view video clip: 0:00-2:10, 5:50-]
- Crimson Hexagon’s offering—delivering insights for brands on their social media presence—leads them into customer relationships with marketing agencies that can lose accounts and in-demand social media leaders [view video clip, 2:10-5:50]. As a result, they spend more time and effort on finding ways to identify churn risk outside of application usage, which isn’t strongly correlated to non-renewal [view video clip: 0:00-3:15], and are planning to invest in resources for building and leveraging customer advocates [view video clip: 1:21-].
- At Autodesk, CSMs play the role of a business consultant to customers—advising them on best practices and opportunities for efficiency gains. As a result, Daitch places significant weight on candidates’ industry knowledge to ensure they will be credible with demanding customers. [view video clip: 0:00-4:48]
- At Crimson Hexagon, application complexity, lack of clearly established ways to quantify the value of social media monitoring and rapid growth all drive an emphasis on customer-centricity (the ability to see things from the customer’s perspective) and project management capabilities among candidates. [view video clip: 4:49-]
Taken together, Barry Daitch’s and Dana Miller’s discussion [access all the clips] offered disparate but valuable examples that organizations could apply to their own CS teams as well as be part of a blueprint for the questions to ask and issues to address.