Could personality profiling prove better way to understand clients?
Most wealth managers segment customers according to net worth, but would dividing them according to personality make more sense for firms promising a bespoke service?
Recently, Scorpio conducted an informal review of 24 wealth management websites to see how firms were communicating their proposition. Among them, 15 highlighted their “personal service”, 15 described being “driven by client needs” and 11 referenced the “bespoke solutions” they offer to customers.
As an industry, we profess to be highly client-centric. Yet often, our approach to identifying, understanding and managing client behaviours is not comprehensive enough, which means we do not always live up to the rhetoric.
Most wealth managers adopt strategy segmentation lite – dividing customers into groups based on arbitrary factors, such as net worth. This approach is intended to create cost efficiencies for the business model, ensuring the wealthiest clients receive the most premium service, while building economies of scale for those at the mass affluent end of the spectrum.
But the wealthiest clients may not necessarily be those who have the ability to bring the most value to a firm. And, even when they do, delivering a “personal service” and maximising the relationship potential is impossible if proposition preferences are determined by a rudimentary bank balance criteria.
Our client engagement research identifies six types of personalities, which are consistent across the global wealth clientele. These profiles each have different motivations for consuming financial advice and, as such, exhibit different product, service and delivery preferences.
For example, ‘Leaders’ are performance-orientated customers. They are typically corporate high-fliers who are time-poor, meaning that they value service elements that can streamline their experience. They have a strong desire for financial security and prefer a single point of contact.
By contrast, ‘Surfers’ generally have strong family relationships and are focused on the long-term financial stability of their family. They typically use wealth planning and advisory services but generally have shorter tenure relationships and more complex requirements.
Understanding these different behaviours can enable relationship managers to weigh up the risk and reward of targeting and serving certain clients.
Several firms are starting to experiment with more advanced segmentation techniques, such as behavioural analysis, to identify specific client profiles and insights into possible behavioural biases. With this additional layer of understanding, pioneering wealth mangers hope to be able to better tailor and target their value propositions to the needs of the customer.
Indeed, earlier this year DBS Bank adopted financial planning technology from IBM that intelligently combines multiple data points to analyse current client behaviours and predicts their various future needs. The system evaluates the interactions advisers have with their clients, scans social media accounts, and provides them with a dashboard identifying where their clients’ needs, traits and values map to ‘life-event detection’ cycles. This helps advisers save time day-to-day and keeps them ahead of the curve with clients.
Elsewhere, Merrill Lynch is emerging as a market leader in the behavioural finance field through a revamped focus on providing solutions that merge clients’ psychological needs with their monetary goals. Through an extensive Investment Personality Assessment, in which clients are asked to write down their feelings on topics such as ‘money’ and ‘investing’, advisers come to better understand the motivations behind their clients’ behaviours.
With today’s rapid advances in technology, data management and behavioural analysis, the timing has never been better to rethink traditional approaches to segmentation. Personality profiling presents an opportunity to build true efficiencies into the model by enabling us to anticipate customer and prospect behaviour. It also provides us with a chance to better live up to our industry mantra of providing “bespoke”, “personal service” that has been truly “driven by client needs”.
Ben McNeil is an analyst at wealth management think-tank Scorpio Partnership
