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Financial Advisory in a Social World


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Financial advisory firms need to make use of social networking technologies to manage customer relationships, financial planning and client retention.

Published in: Economy & Finance, Business

Financial Advisory in a Social World

  1. 1. Financial Advisory in a Social World Given the ubiquity of social networking, financial advisory firms must focus on creating a technology platform using social networking concepts, which will allow them to interact with clients in a 24x7 environment. Executive Summary Financial advisory is a high-touch, client-facing business. In today’s complex financial invest- ing world, the financial advisor’s role in helping customers manage their finances has become extremely critical. This fast-moving world also calls for advisors to be available for their clients at all times to be able to engage, educate, focus and reassure them. We believe that the financial advisory business will need to adopt a socio- business view to bring customers together, and also closer to their advisor, using Web 2.0 tech- nologies that will enable them to share, interact with and benefit from social networking. In this paper we propose a socio-business frame- work for financial advisory firms to understand the enterprise benefits that a social networking technology platform can bring to their businesses. Introduction Stacey Gilbert manages the treasury operations of a mid-tier technology company. She has been on the lookout for a good investment opportu- nity for the unused cash pile that her firm has amassed over the past couple of years. She wants to invest this cash in assets that are safe, liquid and short-term. Mark Kemble, her financial advisor from ABC Bank, proposed some money market instruments as possible investment options. However, Stacey realizes it will take further meetings with Mark to fully understand the products and decide if they meet her needs. Unfortunately, Mark will be away for the next cou- ple of weeks and will not be available to discuss the products with her. From her past experience with the bank, she knows that once she finalizes the product, there will be plenty of paperwork to complete before she can actually invest. Time is running out as she has been under pressure from her management to reduce the cost incurred on the idle cash. In the not-too-distant future, we believe, profes- sionals like Stacey will be able to conduct busi- ness with their financial advisors using social networking platforms. This will allow them to interact and transact with their advisors in the manner and at the time they want. Social networking has been around for several years. Fuelled by Web 2.0 technologies, it has now become arguably the most popular means of interacting, collaborating and networking with people and organizations. Over 66% of all adult Internet users are connected to one or more social media platforms,1 spending on average about 400 minutes per month on popular social networking sites such as Facebook and Pinterest.2 cognizant 20-20 insights | july 2013 • Cognizant 20-20 Insights
  2. 2. cognizant 20-20 insights 2 The central idea for financial advisors is to create a “blue ocean” capability by fashioning a technol- ogy platform using social networking concepts, which will allow them to interact with clients and run business operations. Current Business Landscape A financial advisor to individual and institutional investors is responsible for establishing the liquidity needs, return needs and risk appetite of the investors, based on which appropriate goals and objectives are decided and an overall finan- cial plan is drawn up. The process flow in Figure 1 provides a simpli- fied overview of traditional financial planning as practiced by most financial advisors. To start the financial planning process, the client is expected to provide all financial information right at the beginning, or else multiple appoint- ments and meetings are scheduled until all the relevant information is obtained. The linear financial planning model makes the data gather- ing exercise daunting for the client and could lead to procrastination on the client’s part. From a financial advisory perspective, it is inter- esting to note that most users on social media platforms are over 25 years old and the fastest growing segment is over 50 years of age. Today, clients are getting used to a collaborative and inter- active way of life that is driven by social networking technology. The next gen- eration of clients will take this for granted. Therefore, it is important for financial advisors to offer a full set of services via media that clients are accustomed to. Social networking presents a unique business opportu- nity for financial advisory firms to not only connect advisors, clients and other stakeholders with each other in a 24x7 “always on” environment, but also to provide products and services to clients and perform internal processes. The central idea for financial advisors is to create a “blue ocean” capability by fashioning a technology platform using social networking concepts, which will allow them to interact with clients and run business operations. Traditional Financial Planning Process of Financial Advisory firms Figure 1 Objective Generate Financial Plan Current Financial State Future Financial State Describe Gap Develop a Plan Gather Relevant Information Information on Current Income, Expense, Assets and Liabilities Short-term and Long-term Financial Needs Financial Needs and Current State Deviation Finalize on the Plan to be Implemented Analyze Information Strategy Process Flow Experience Outcome Fix appointment & schedule multiple interviews Share hard-copy of document Review materials, prepare questions for interview, gather information Conduct interview, have multiple in-persion discussions Analyze current and future state to identify the needs, shortfall Prepare and share an outline with recommended financial products Discuss and get feedback & views Make modifications as per discussions
  3. 3. cognizant 20-20 insights 3 After the exhaustive data-gathering exercise, the financial advisor completes financial planning projections for the client. Financial advisors may take several days or weeks to analyze the client information, and schedule an appointment to present the results. During the presentation, if the client shares new information or wishes to look at a different version of the projections, further analysis takes place for several days or weeks, which is followed by another meeting. Such an experience discourages clients from testing the plan with multiple possibilities in terms of life events. Instead of providing clients with a positive inter- active experience, financial advisors end up providing a slow, back-and-forth itera- tive process. Financial planning is no longer about delivering the ”plan” as an end product. It is about continually align- ing the clients’ money with their goals, as their lives and circumstances change. This means that the value of financial planning is rooted in the ongoing experience that the client has while engaging in the planning process. We believe that the continuing maturity of the financial advisory profession, advancements in technology and changing customer behavior patterns will define the “future of work” for the financial advisory business. We propose a “socio-business framework” for financial advisory firms. We believe this framework will enable firms to use social media concepts to enable a more efficient, interactive and collaborative association between internal and external stakeholders. Socio-Business Framework The socio-business framework allows advisors to be responsive, attentive, willing and able to provide the information or assistance that clients need. Clients who have a positive experi- ence interacting with the advisor are more likely to buy a product or service, recommend the advi- sor and/or continue with the existing relationship. The basic elements of the socio-business frame- work for the financial advisory business are: We believe that the continuing maturity of the financial advisory profession, advancements in technology and changing customer behavior patterns will define the “future of work” for the financial advisory business. Social Experience Figure 2 InformationGatheringFinancialPlanning Gather Client Info Assess and Evaluate Client Data (Risk Appetite, Financial Health, Age Group, etc.) Interact (Text/Video) Plan Sign-off Discuss Financial Plan Client-Advisor Private Network Client Network (Peer/Expert) Interact (Text/Video/Chat) Upload/View Cash-flow Projections Disclosure Agreement Advisor Create Plan Advisor Client Peer/ Expert View Client Peer Network Client Experts
  4. 4. cognizant 20-20 insights 4 Social Experience The social experience is all about information seeking and information dissemination. It is driven by: • Exploring the advisory marketplace looking for resources and information that will help clients chart the financial course to meet their objectives. This includes connecting clients to each other to enable peer support and to make clients feel connected to and a part of the organization. • Formulating a plan to achieve the desired outcome through interactions with the finan- cial advisor, peer groups and expert groups. • The course of action selected by the customer is validated by objective evidence. Reinforce- ment may come in the form of expert reviews, peer comments and other trusted sources. Connect and Collaborate Customer interactions with an organization typically do not make it past the employee speak- ing with the customer. In a social business frame- work, the customer can connect with a wider group, involving peers and other employees. When the customer submits a request or gives feedback on a product or service, these can be discussed internally within the employee network for viability and feasibility, and a response can be sent to the customer. Also, the feedback or request can be debated and discussed within the client’s peer group. Objective-Driven Networks Clients view the organization as one entity and expect it to function as a single unit and not as functional silos. The socio-business frame- work provides mechanisms that make everyone in the organization responsible for collabora- tion. For instance, financial advisors, the client management team and the marketing team can collaborate in a social network for the customer onboarding process. Technology Social technology is about communication using electronic devices and networks. Socio-business for financial advisory can benefit by: • Choosing social tools based on the way the business communicates, whether it is one- to-one conversations or broadcasting, text or audio, feeds or streams. • Enabling individuals to use the device best suited to their needs and keeping them connected everywhere and at all times. • Adding social collaboration capabilities to the applications employees use to do their jobs, and allowing information sharing within the context of business processes. Compliance In order to comply with most industry and government regulations, including FINRA, all company data including electronic communica- tion traffic over blogs, discussion forums, private chat and message broadcast are archived and stored. Social technology can enable these to be easily retrieved for regulatory compliance and legal discovery. The goal of the socio-business framework is to create an environment where clients feel that the Event/Campaign Management Figure 3 EventManagement Advisor A client can be part of at least one event network. An example of this would be segmentation based on risk appetite, financial goal, etc. Event Network 2 Creates Client Network Assigns Client Assigned to Event Network 1
  5. 5. cognizant 20-20 insights 5 journey to their desired outcome is easy and rel- evant to their needs. Conclusion Conducting financial advisory business over a technology platform built using social networking concepts will become as ubiquitous as Internet and mobile banking are today. The time is ripe for financial advisors to understand, evaluate and embrace a technology-driven socio-business culture. They need to understand and assess the impact of this culture using the socio-business framework and then create a roadmap of how to transform their business operations to emerge as leaders in the industry. Figure 4 ProspectsManagement Advisor Look-up Search for Advisor View Advisor Profiles Convert a Lead Exchange Messages Within Lead Network (Private/Public) Interact with Advisor (Private Text/Video) View Demo Handle Queries/Support Call Center Manage a Campaign Launch Campaign Interact Within Campaign-Specific Network Join & Participate in Campaign Publish Marketing Material Track Campaign Client Volunteers Request to Register (Directly) Add Prospect to Lead Network Request to Register (Through Campaign) Advisor Advisor Advisor Prospect Prospect Prospect Other Leads Other Prospects Prospect/Lead Management Footnotes 1 2 References • Information on usage of social media, tics-2012-infographic/. • Social media and decision-making, • Gilder, G., “Metcalf's Law and Legacy,” Forbes ASAP, September 1, 1993, and • Usage of social media for investments decision-making, strategy/incorporating-social-media-into-investment-decisionmaking.html and http://money.usnews. com/money/personal-finance/mutual-funds/articles/2012/01/31/investors-increasingly-tap-social- media-for-stock-tips. • Making a case for socio-business network,
  6. 6. About Cognizant Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 162,700 employees as of March 31, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at for more information. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ 07666 USA Phone: +1 201 801 0233 Fax: +1 201 801 0243 Toll Free: +1 888 937 3277 Email: European Headquarters 1 Kingdom Street Paddington Central London W2 6BD Phone: +44 (0) 207 297 7600 Fax: +44 (0) 207 121 0102 Email: India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, 600 096 India Phone: +91 (0) 44 4209 6000 Fax: +91 (0) 44 4209 6060 Email: ­­© Copyright 2013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners. About the Authors Sathish Thiruvenkataswamy is a Senior Manager within the Cognizant Business Consulting (CBC) Practice. He has over 11 years of technology and consulting experience in the banking and financial sector. Sathish holds a post graduate diploma from IIM Calcutta and earned his bachelor’s degree from National Institute of Technology Silchar. He can be reached at K B Venkatasubramaniam is a Senior Consultant within the Cognizant Business Consulting (CBC) Practice. He has over nine years of technology and consulting experience in the banking and finan- cial sector. Venkat holds a post graduate diploma from T.A. Pai Management Institute and earned his bachelor’s degree from Sri Venkateswara College of Engineering (University of Madras). He can be reached at Sumit Srivastava is a Senior Consultant within the Cognizant Business Consulting (CBC) Practice. He has over six years of technology and consulting experience in the banking and financial sector. Sumit holds a post graduate diploma from IIM Lucknow and earned his bachelor’s degree from Delhi College of Engineering. He also cleared the financial risk management (FRM) examination in 2009. He can be reached at • Traditional Approach in the financial advisory business, art9351.asp,, cial-advisor-jlp.html, html and • Improving customer experience through social technologies, blog/posts/how-social-technologies-contribute-to-a-better-customer-experience/, http://www.mycu- and • Impact of socio-business model, social-business.html. • Financial planning process, • Business Benefits, business/1487.