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Connecting with Generation D Investors

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A new Accenture report identifies four key areas of focus for wealth and asset management firms to employ that are vital to attracting, engaging and retaining Generation D investors:
• Customer analytics.
• Self-directed tools.
• Community connections.
• Gamification.

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Connecting with Generation D Investors

  1. 1. Connecting with Gen D: Attracting, engaging, and retaining the next generation of investors
  2. 2. Page 2 | Generation D—How to attract, engage, and retain the next generation of investors In a recent survey of over 1000 current and future investors, Accenture identified a significant segment unlike any traditional demographic, and termed it Generation D (Gen D). These investors are not differentiated by their age but rather by their broad adoption of technology, especially their deeply ingrained use of digital and social channels in almost every aspect of their lives. While Gen D investors are skeptical toward financial advisors (FAs), wealth and asset managers can secure their foothold with this group by integrating digital communications into their relationships.
  3. 3. Actively seek financial advice B 59%From any source 40%From financial advisor O Overestimate investor knowledge “My client is extremely knowledgeable about investing” 12% 42% Gap Actual FA Assumption Actual FA Assumption Actual FA Assumption Investor Advisor Investor Advisor Misinterpret client’s investment style Aggressive investors 13% 28% Gap Moderate investors 51% 34% Gap Misjudge strength of relationships “We have a personal relationship” 38% 63% Gap “Takes time to know me” 67% 42% Gap Manage financial transactions and conduct research online using multiple devices Computer users 94% Smartphone users 78% Tablet users 39% Page 3 Connecting with Gen D: Attracting, engaging, and retaining the next generation of investors Chart 1. Bypassing Advisors Chart 2. Advisor Perception vs. Investor Reality Chart 3. Investors Always Connected The Accenture study revealed that 59% of these potential clients sought financial advice, but only 40% sought advice from their financial advisor (see Chart 1). Other sources of advice included investment websites, online videos, and webinars. The study also revealed that when Gen D investors do consult their FAs, a surprising disconnect exists (see Chart 2). Advisors tend to overestimate the investor’s knowledge, misunderstand investment style (advisors believe Gen D investors are more aggressive and less risk averse than they really are), and overestimate the strength of their advisor-client relationship. Gen D investors are “always on” consumers who have a high level of education, wealth, and positive attitudes toward technology in their lives. Based on insights provided by these investors and their advisors, Accenture has identified four key areas of focus for firms to employ that are vital to attracting, engaging, and retaining these investors: • Customer Analytics • Self-Directed Tools • Community Connections • Gamification
  4. 4. Page 4 | Generation D—How to attract, engage, and retain the next generation of investors Gen D investors’ needs and expectations are changing as they become more accustomed to a richer, more diverse, multi-channel experience for financial transactions and communications. They expect their FAs to be responsive and proactive. Wealth and asset management firms armed with real-time and predictive analytics can better address these investors’ needs and expectations, especially within the digital environment. Analytics can help firms and ultimately advisors gain a deeper understanding of their clients’ portfolio and help proactively identify the “next best action" based on their clients’ potential needs and key future life events. The four key areas pivotal to connecting with Gen D 1. Customer Analytics Through robust opportunity-based analytics, firms can leverage existing client intelligence to better target products to specific clients through enhanced data-driven segmentation, therefore, increasing existing client wallet share. Analytics can also provide account transaction information, as well as a deeper understanding of a customer’s risk profile, campaigns, and channel involvement, even the client’s interactions and behavior information. Additionally, by viewing assets and liabilities of current and future Gen D investors—compiled from internal data sources, credit bureaus, external vendors, and US census—a “Decision Tree” approach can help identify a client’s propensity to buy. On a smaller scale, a product, a distribution channel, and an offer can be created and tailored to each Gen D investor’s unique needs. Firms can prioritize this segment in the marketplace, then model how to speak to them. Regardless of a firm’s starting position on the analytics journey, a “Pilot and Assess” approach may make sense. Pilot and Assess includes assessing relevant data based on strategic alignment, completing a Proof of Concept, and prioritizing findings to develop a value-driven business case, which can help assess model development needs against an organization’s strategic priorities and then identify gaps. While many firms are reluctant to embrace analytics-based segmentation—it seems daunting to implement—the Pilot and Assess approach suggests starting simple and small. Some firms are taking this smaller-scale approach to prove the value of analytics to drive real-time insights and offerings before moving on to larger-scale initiatives. Wealth and asset management firms can leverage analytic tools to understand client needs, behaviors, and preferences. Firms have a unique opportunity to embrace and leverage the holistic view data offers, provide these tools to their FAs, and drive profitability to the digital front line.
  5. 5. Page 5 Field studies Customer Analytics in Action For a wealth-based Italian bank that was experiencing a high rate of account closings, Accenture helped to structurally improve its capability to “accelerate attrition attack” and reduce the closure of current accounts. Accenture developed actionable segmentation and “lost client” behavior analytics. We built rules and churn predictive models for each segment. A pilot test within 39 network branches resulted in: an 82% contact rate for wealth and small business clients; a 330% drop in churn rate among high-risk clients; and a 270% drop in churn rate among medium-risk clients. For a large US private bank, Accenture developed client-centric marketing programs for high net worth clients to increase “share of wallet.” Relevant, precise cross-selling led to a 25% growth in assets within two years. In addition, service channel realignment reduced cost to serve by 15%. This enabled the bank to win back 30% of lost assets and increase its “share of wallet” by 5%. The Pilot and Assess phase is the first step of a multi-phase analytics journey intended to bring the firm closer to its advisors, clients, and target profitability Chart 4. Pilot and Assess Identify Strategic Alignment Execute Proof of Concept Develop Value Proposition • Assess model development needs against key strategic priorities and discovered gaps • Execute Proof of Concept based on identified gaps • Identify quick wins • Develop the analytics road map and value proposition
  6. 6. Page 6 | Generation D—How to attract, engage, and retain the next generation of investors Many Gen D investors participate in self-directed investing. Of the investors surveyed, 65% view themselves as entirely self-directed or partially assisted, while only 35% stated they use an FA exclusively. With the growth of the Gen D market, the self-directed market will also grow. Investment firms that embrace this shift and offer effective, interactive tools for investing will be at the forefront of cultivating and maintaining relationships with Gen D investors, as well as building the firm’s brand and ultimately increasing their market share. 2. Self-Directed Tools Gen D investors expect their firms to provide online investment and education tools. Firms can provide these investors with an online tool kit—financial planning, portfolio insights, performance reporting, educational learning tools, webinars, access to research, thought pickers/ screeners, even “fantasy investing” (also see “gamification” on page 10)—to engage with clients in their preferred environment. This involvement enhances the firm’s brand and connects it to the investor in a distinctive way that can differentiate it from the competition. Gen D investors expect real-time service, and financial firms can win their loyalty based on how they handle self-directed interactions. The key is to provide options for the investor to interact and conveniently E-Trade and Fidelity—the leaders of Forrester’s Mobile Wealth Management Benchmark—and TD Ameritrade all enable clients to view their portfolio allocations against a target allocation and take action to rebalance. Fidelity’s new Guided Portfolio Summary goes the furthest, pulling in account information from other financial institutions to show the client’s total asset allocation and investing style across all the firms the investor uses.1 TD Ameritrade rolled out mega–drop-down menus that expose the site’s information structure early, enabling users to scan the contents of main menu categories to see where they’re likely to be able to complete their goals, and then get deep into the site quickly.2 Field studies Effective Self-Directed Tools link with their firm, such as contacting their FA through web chats, messaging, and other online channels, on their terms. As self-directed technology proliferates, firms leading this charge are also rebranding their products, refreshing their hardware, and adding infrastructure to enhance performance. With anytime, anywhere Internet accessibility, self- directed Gen D investors are driving an entirely new type of investment mindset and behavior. This segment offers a great opportunity to the firms who provide dynamic, engaging, and relevant tools, and to the FAs who embrace these tools.
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  8. 8. Page 8 | Generation D—How to attract, engage, and retain the next generation of investors 3. Community Connections Gen D investors will interact with a firm’s brand in ways the firm cannot control. This happens on social networks, the firm’s website, its competitors’ websites, and in blogs. Investors can share their firm and advisor experiences through social media by contributing to existing communities or creating a new community in which clients can interact. Successful firms continually reevaluate their social media strategy to ensure they are intentional about how they are optimizing brand experiences within the properties they own and those they don’t. It is important for investment firms to link with existing social channels when developing these communities. These Gen D “digital natives” are increasingly using blogs, forums, ratings and reviews, branded networks, and location-based services to engage with their communities. While they share investment knowledge and opinions, they also become more educated about investment opportunities and products. Firms have the opportunity to create a culture and provide the resources to interact directly with this Gen D segment. FAs can become an active part and, potentially, a facilitator in these communities. An important aspect for firms to remember is the need to be cognizant of the guidelines and compliance rules of engagement while navigating social media. In order to ensure compliance, many firms are adopting FINRA regulations, supervisory policies, and procedures for FAs who participate in social media sites for business purposes. For example, FINRA considers Internet and social media sites the same as written and in-person communication. Publicly available websites can be considered advertisements. Use of email, instant messaging, and password- protected websites can be deemed as sales literature or correspondence. Chat room discussions are considered public appearances.3 Firms that can implement a strategy, as well as provide guidance and a plan on how to leverage the new media for their FAs so they can actively engage with Gen D investors in this environment, will have a powerful way to engage this market.
  9. 9. Field studies Engaging Social Communities Page 9 Social media is any interaction where people are empowered to talk to each other through digital channels. Chart 5. Highly Engaged in Social Media Top four platforms used by Gen D investors surveyed Facebook 91% 31% 31% 31% Twitter Google+ LinkedIn Accenture developed a conceptual design and pilot project to address a large, global wealth manager’s overall social media monitoring strategy. The pilot project iteratively improved predefined services and output configurations to meet this firm’s unique requirements and integrated them into its business processes and organization. Subsequently, Accenture designed a multilayer operating model that defined processes, structure and technology components, and human resources needed to run the program. Together, this was brought to life as a fully functional social media- monitoring capability and deployed into market where the firm now performs the tracking on its own. Morgan Stanley was the first top-five US brokerage firm to allow financial advisors to use LinkedIn and Twitter. These advisors and agents can post updates from libraries of preapproved content to seed their social media interactions. TIAA-CREF uses social networks to demonstrate thought leadership on the markets and on financial topics of immediate interest to consumers and B2B clients. Bank of America, along with several other institutions, uses Twitter for customer service and customer outreach. Multiple tweets per day keep the firm top of mind.4
  10. 10. Page 10 | Generation D—How to attract, engage, and retain the next generation of investors 4. Gamification Gamification—creating simulation “games” to engage the Gen D investor—takes the essence of what makes games so compelling (and sticky) and applies it to non-game contexts. Gamification provides investment firms the ability to offer a more interactive and differentiated customer experience. This is achieved by incorporating a game-like range of features such as challenges, contests, and rewards into investment activities and simulations. Creative “fantasy investment” tools are a great opportunity to demonstrate the full range of services the firm provides and, in the process, connect the user with their brand. Based on the analytics leveraged to learn more about potential investors, a simulation trial can be offered to clients or prospects who meet certain investing criteria. Gen D investors can open trial simulation accounts to test the experience of interacting with the firm. Because self-directed tools are designed to create engagement and participation—part of the mix to the overall growth strategy—Gen D clients can receive messages prompting them to invest risk-free. Investors can measure these “fantasy investment” returns and see how they would have performed in the market without risking any real money. Fantasy investing is a great way to initiate a relationship with Gen D investors early in their investment life cycle, when they have fewer funds but high investing or investment potential. In addition to being an engaging way to connect with customers, gamification can provide firms with valuable investor insights. By creating an environment where investors can fantasy-buy, firms can gather insights and test products and services. Firms can benefit greatly from this enhanced repository of investor data gathered via gamification —data provided willingly and on an ongoing basis by the Gen D investor. Citi launched a social media credit card with a variety of game mechanics employed. Users earn points for rewards and compete for the top spot on the social leaderboard via a Facebook app. They can also check in at different locations for deals and share deals with friends via the app for more points.5 A good example of gamification outside financial services is Nike+. Nike+ measures and records the distance and pace of a walk or run, and that information is transmitted to the user’s iPod, where it is synced online and shared with the Nike+ community through social media. iPod software rewards users if they reach a milestone with congratulatory messages from celebrity athletes. In 2011, membership in Nike+ grew 40%, which helped boost revenues in the running category by 30%.6 In another example of non-financial services gamification, Marriott wanted to expand in less established growth markets and needed a way to engage and excite Gen Y users to fill tens of thousands of open positions. The company launched the “My Marriott Hotel” Facebook game, where players operated their own Marriott hotels. In 2011, the game educated over 12,000 potential hires on different career paths in hospitality, while creating significant brand awareness for Marriott. Field studies Successful Gamification
  11. 11. Page 11 Engaging the Gen D Investor Wealth and asset managers now have the ability to identify and actively market to this unique Gen D group— 75 million active investors with $27 trillion in assets—and engage them in their preferred environment, better armed with insights specific to their needs and propensity to buy. Whether it is by employing analytics-based segmentation, offering self-directed tools, creating compelling social channels, or offering no-risk gamification, firms can better position themselves to be relevant to the digitally sophisticated next generation of investors. Firms that provide the resources and touch point opportunities for their FAs to interact effectively with Gen D investors will have a great opportunity to earn and keep their business. In this digital age, financial advisors must be accessible to clients on their terms, including the channels and interactions through which clients are most comfortable engaging. Gen D investors also expect their advisors to take the time to understand their individual needs and offer them insightful advice on how to achieve their financial goals. If firms provide financial advisors the training and tools to engage this large and viable Gen D market where and when they prefer, both will benefit. If they don’t, Gen D investors will find someone who will.
  12. 12. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 246,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$25.5 billion for the fiscal year ended Aug. 31, 2011. Its home page is www.accenture.com. Copyright ©2014 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Notes 1 Forrester Research—“Trends 2013: Digital Wealth Management,” by Bill Doyle, September 24, 2013 2 Ibid. 3 FINRA website—FINRA.org 4 Ibid. 1 5 Tech In Asia, “The Social Credit Card, Will You Get One?” March 9, 2012. Retrieved September 10, 2012 from http://www.techinasia.com/clear-platinum- card-citibank/ 6 Nike, “2011 Letter to Shareholders,” July 13, 2011 Contacts Alex Pigliucci is the Global Lead for Wealth and Asset Management Services. alex.pigliucci@accenture.com George Korizis is a Senior Manager in Distribution and Marketing in Financial Services. george.p.korizis@accenture.com Jessica Townsend is the Global Operations Program Manager for Wealth and Asset Management Services. jessica.t.townsend@accenture.com About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com. This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

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