Insurers and pension firms are traditionally good at managing risk and available capital over longer time horizons. But the nature of today’s markets and investment strategies also require them to operate in faster and more complex trading environments than they have in the past.  Events through the pandemic and more recently in UK markets have underlined the need to tighten markets operations and be better able to manage collateral and liquidity in periods of volatility. Other market developments such as the compression of the settlement cycle (e.g. T+2, T+1) will only amplify this need.

This article at a glance

• A look back
• Why now is the time to invest in more robust operations
• The benefits of getting it right

A look back

Historically the requirements for treasury and trading were reasonably straight forward. Investment strategies focused on a combination of domestic debt, conservative equities, and cash/cash equivalents. Firms had minimal hedging requirements and only a modest use of derivatives. Liquidity was relatively unconstrained with the operational focus on cash management and simple (reasonably low velocity) trade processing and investment accounting.

But, driven by a variety of market forces, firms needed to look further afield to seek the returns required to support their members and policy holders. There was an increased focus on illiquid assets and foreign exposures, bringing with it more complex hedging and valuations requirements. This also included an increase in the complexity and velocity of trading operations and a much heavier usage of derivatives. Liquidity has also become more constrained and uncertain with the focus on illiquid investments and the impact of derivative collateral requirements.

The operational requirement has evolved from that of a traditional corporate treasury operation to that of a complex fund manager. In many cases while the investment strategies have evolved, the operations have not kept pace.

In commenting on mini budget crisis, the FCA said – “In general firms’ systems were not set up to allow them to react with the speed that was needed.”[1]

Why is now the time to invest in more robust operations?

Increasing portfolio complexity – Investment strategies are requiring higher international exposures, a heavier use of derivatives, and significant exposures to illiquid or less liquid investments. With this comes the management of a more complex portfolio with more complex correlations, valuations and required hedging.

Operational requirements – This has come with a need to process higher complexity and velocity trading activities at a time of an increased focus on market rigour; shorter settlement cycles, enhanced derivatives reporting, moves to central clearing, higher collateral demand and complex collateral processes.

More constrained liquidity – Issues during the pandemic and more recently in the UK illustrated that liquidity risk in pensions and insurance is far from theoretical. While liquidity often plays second fiddle to solvency in the competition for executive attention, the changing dynamics brought on by the evolution of investment strategies (illiquid investments and greater use of derivatives) and persistent levels of higher volatility mean it deserves more attention.

Regulatory requirements – As referenced earlier, the amount and complexity of financial markets focused regulation applicable to insurers and pensions firms hasn’t decreased. In addition, there is a growing focus from pensions and insurance regulators on the robustness of treasury and trading operations, overall operational resilience, and liquidity risk.

Reputation – While insurers and pensions firms are arguably low true credit risks, a lack of discipline in confirmation, settlements, margin valuation and payments can undermine one of their most important assets – The trust of policyholders, market counterparties and regulators.  As requirements increase, it is that much more important that firms have the rigour in operations expected of such an important market participant.

But I outsource my asset management and /or operations …

Regardless of whether some or all of the asset management value chain is outsourced, firms are still subject to the fundamental regulatory rules and other requirements and “expectations on business continuity, governance, operational resilience, and risk management[2]”.  This isn’t limited to setting and monitoring mandates, but also includes ensuring MI is in place and operational processes are “fit for purpose” and appropriate business recovery/resilience plans are in place and periodically tested. This is particularly important in a multi-manager environment.

The benefits of getting it right

Growth facilitation, and operational risk and cost avoidance:  A robust operating model that enables safe and efficient operational scalability has significant impact on the safety and efficiency of your operation. On the topic of required resources, one respondent in our 2023 Treasury and Trading operational survey described it – “In a well-controlled and highly automated environment, volume increases have a fractional impact. But, with low levels of automation and poor controls, volumes could quickly have an exponential impact”.

Asset optimisation: A robust treasury and trading infrastructure ensures the most efficient use of fund assets across all collateral obligations and helps to optimise liquidity buffers (and reduce the resulting drag on returns). Understanding an up-to-date view of cash and securities positions and being able to accurately forecast requirements over a variety of time horizons is essential in avoiding the need to hold excess buffers to deal with “frictional” requirements. This connects to the ability to effectively manage collateral obligations. Rapidly understanding applicable collateral, available inventory and applying “cheapest to deliver” rules.

Problem solving and agility: Rather than taking days to understand positions, a robust infrastructure will give firms the data and analytical tools to rapidly understand and adapt to changing market conditions and the external connections to provide liquidity if required. It will also enable firms to adapt more efficiently to changing regulatory requirements, whether this is the range of markets-oriented regulation already in the pipeline or new requirements as they come up.

Conclusions

Now is the time to ensure treasury and trading operations are “fit-for-purpose” and sufficiently robust to address the requirements of the investment strategies and operations they support. Not only should this more robust operating model be a prerequisite for safely operating in this faster and more complex environment, it also presents significant competitive advantage to those that can embed these systems and practices across their business.

A note on our 2023 Treasury and Trading operational survey

For the purposes of this review, we focused on the following broad functions:

• Trade operations and control
• Cash management
• Liquidity risk management
• Market risk management and hedging
• Collateral management

It also became clear that while there were some high performers in the industry, we needed to look to adjacent industries to find true examples of leading practice across this range of activities. With this in mind, we expanded the interviews to include a range of Global & Regional banks, Asset Managers, Sovereign Wealth and Hedge Funds.

Summary conclusions

Whilst we will expand more on the results of this research in future blogs, in summary, insurance and pensions firms had significant opportunities for improvement across each of the broad functions we reviewed as compared to leaders in the sector and the adjacent industries. The key themes observed were broadly aligned to the following categories:

• Capabilities and organisation
• Process management and control
• Management information, reporting and analytics
• Systems and automation
• Data management

If you would like to hear more about our findings, or how you can enhance your Treasury and Trading operations, please contact us.

Contact us

Call: +442045742661

email: info@hesmur.com

[1] Further guidance on enhancing resilience in Liability Driven Investment | FCA

[2] Example from the UK – Source SS2/21 ‘Outsourcing and third party risk management’ (bankofengland.co.uk)

Our point of view

Problem Statement:

As the complexity of investments in life and pensions has increased, so too has the operational complexity. Whether this is due to an increased focus on illiquid investments, increased derivative usage or overall trading volumes, L&P treasury and trading functions were not historically built to address this complexity. With this increased risk and renewed regulatory attention it is time for firms to take stock and upgrade capabilities and system to meet this new demand.

POV:

The investment profile of many life and pensions firms is now closer to a large hedge fund rather than traditional long-dated pension funds. The related operations need to reflect that. In building this new operation there is a lot to learn from adjacent sectors such as hedge funds and capital markets in building a robust and cost-effective operation.

Case study

Problem:

The firm was an L&P provider with a significant bulk annuities portfolio. While investment volumes and complexity had increased significantly, the firm was concerned their treasury and trading operations weren’t keeping pace.

Solution:

Reviewed the current operations against market practice in L&P and adjunct sectors such as asset management and capital markets. Based on this review identified a number of areas for improvement and recommended a series of practical steps to improve the robustness of the operation.

Result:

Immediate steps were taken to shore up key areas and a longer-term operational transformation programme was initiated. This included core trading systems, control and reconciliation processes, collateral management, liquidity risk measurement and management and operational MI.

Contact us

Call: +442045742661

email: info@hesmur.com

Our point of view

Problem Statement:

With a focus on the immediate burning platform firms often miss the longer-term implications of early design decisions. Coupled with break downs in communication and other project management processes, confidence in delivery can rapidly breakdown.

POV:

Rather than seeing the programme as “simply a replacement call centre package” it should be seen as in integral part of your overall customer management infrastructure. It is a key enabler for your customer service colleagues and often the key factor behind your customers having a great experience versus getting stuck on call queue and having a horrible experience.

Case study

Problem:

The firm was a pensions and investments distributor that was in the midst of replacing its contact centre systems with a more holistic omnichannel package. The programme had run into issues and was failing to deliver against milestones or expected benefits.

Solution:

Rapidly reviewed the programme using our programme assurance approach, which focuses on solution design and strategic alignment, governance and management, execution capabilities and track record and financial, commercial and contractual elements.

Result:

Identified a series of “no-regret” immediate actions as well as longer-term remediation options. As part this re-set the existing programme and initiated actions in the wider contact systems infrastructure to ensure the programme delivered to plan but also realised the benefits of the integrated customer.

Contact us

Call: +442045742661

email: info@hesmur.com

Delivering better customer experiences requires a comprehensive approach to data and knowledge management. And adopting a single source of truth approach as part of a wider digital strategy can help financial firms better meet rising customer expectations by being able to access up-to-date and accurate information quickly.

This article at a glance:

• A single source of truth (SSOT) explained and why it matters in financial services.
• The benefits of adopting a single source of truth philosophy with your data.
• Possible outcomes for firms failing to adopt this philosophy.
• Indicator of the need for change
• Challenges in adoption

In a digitised world where customer expectations are rising, omnichannel experiences are expected, and personalisation is standard practice, data is the key to satisfying customers. Yet, to be able to delight the customer at every touch point, an integrated and robust approach to data management is needed. And this is why a single source of truth (SSOFT) matters to data managers and leaders in financial services.

What is a single source of truth (SSOT)?

A single source of truth (SSOT) collates and manages data in one central location so that information can be shared appropriately to drive their business strategy. In doing so, everyone within the organisation can access the relevant information and trust that it is accurate, up-to-date and, therefore, reliable.

For this to manifest, organisations must implement good data and knowledge governance and ensure that the data is updated timely and accurately. And this hinges on adopting the right technology and implementing the right processes through a well-designed and executed digital strategy, combined with good knowledge management.

Why a single source of truth matters in financial services

Meeting rising customer expectations

There is a real sense of urgency in raising the bar in customer experience across financial services, not least because of the weight of regulatory changes, but the momentum and standards set in pure B2C industries are raising customer expectations.

Retail brands are investing in technology to deliver hyper-personalised experiences from the earliest touchpoints and through the whole customer life cycle to meet consumer expectations.

The result is that consumers expect a fast and friendly service across all organisations they interact with; they expect relevant experiences and expect brands to know where they are and what they want. Therefore, those who fail to adopt will fail to delight the customer. And from the customer’s perspective, why should their experience with their wealth management provider, retail bank, or pensions firm differ from their internet provider, fashion retailer or supermarket?

The ability to deliver this level of customer service hinges on the ability of the financial service provider to gather and manage customer data accurately.

The regulatory environment

In an environment where complex regulation plays significant roles, adopting a single source of truth can address many challenges that financial service providers face in shifting to a consumer-centric way.

The FCA’s Consumer Duty will demand to see evidence of good outcomes for consumers, meaning firms will need to adopt the right technology and procedures to not only facilitate this but to record and evidence it.

From tracking and recording the entire customer lifecycle and using that information to deliver better customer outcomes at every stage. To utilising customer insight to design better products for customers that result in better customer outcomes. Data is the key.

Benefits of a single source of truth to financial service providers

We have talked at length in previous articles about data as the key to transforming sales and distribution in FS. In our article How can financial service intermediaries build digital EQ and why does it matter? we highlighted the relevance of digital EQ for providers and why it’s needed to deliver meaningful experiences to customers^1. and in Steps to digitising sales and distribution in pensions, investments, and wealth², we outlined the role of technology in delivering a customer-focused system infrastructure that delivers better customer experiences.

And whilst both articles focused on systems, processes, and strategy, neither addresses in any depth the importance of a single source of truth and its role in delivering better customer experiences.

The benefits can be summarised as follows:

• Removed siloed working, which can facilitate a culture of collaboration and transparency.
• Removal of duplicate and inaccurate information and data.
• Offer agency to employees who can trust the information they are accessing.
• Enable front-line staff to access information quickly to deliver better customer service.
• Enable all teams to be ‘singing off the same hymn sheet’.
• Better decision-making from being able to access more accurate information.
• Leaders can build a complete and accurate view of business performance, therefore, make better decisions.
• Build a comprehensive view of business performance.
• Facilitate regulatory compliance concerning data management.

What is evident is that, beyond the sales and distribution function, operating a single source of truth is imperative for a customer-focused and efficient operation across all business functions.

Ignoring the need for change is not an option

In every industry, there are the early adaptors, the innovators and those hungry to grow or maintain market share. And with increasing competition in the sector, those hungry to grow will already reap the rewards of digitising their operations.

Adopting this digital-first mindset must be addressed, as without it, a firm cannot remain as competitive. What is more, failure to adopt a single source of truth would result in several unpleasant scenarios:

• Early adopters and smart followers will maintain market share by delivering superior customer experience.
• You will fail to keep pace with the market due to a lack of agility and efficiency.
• Without a SSOT, time is wasted, and poor decision-making will continue without access to accurate data.
• You will fail to operate a customer-focused sales and distribution function.

Signs your organisation needs to adopt a single source of truth

These signs indicate that your financial services organisation should adopt a single source of truth philosophy with your data:

1. Different versions of the same information exist on various systems and data centres.
2. It is difficult for employees to access the most accurate and up-to-date information.
3. Even where knowledge and data are centrally managed, it is complicated and clunky to access and involves navigating away from your central work system and workflow – this can be time-consuming and frustrating for employees.
4. Customers have been impacted by inaccurate information – often due to disjointed internal communication between departments.

Making change happen

Whilst the benefits are clear, there are other considerations and challenges that financial service organisations may need to navigate along the journey:

Digital maturity

Achieving a single source of truth must be part of a broader digital strategy that drives digital adoption organisation wide. The degree of digital maturity of financial service firms varies from industry to industry. For those later to the party, there will be more to do to ensure digital is at the core of the business strategy.

Senior buy-in

Senior management needs to believe in the transformation and help facilitate the change by providing enough of the right resources to enable the change to occur in an agile and efficient way. A single source of truth cannot be applied by purchasing a single tech solution. It will be part of a sizable shift in how the financial firm manages its data and knowledge.

Knowledge Management

Knowledge management is also a key component, and achieving it demands good governance, yet it is one of the top three issues influencing company success, with only a small portion of businesses feeling ready to address it3. Technology is only one piece of the puzzle, too, as what is truly required is strong governance and a culture of knowledge sharing.

To conclude

Those financial service providers who can successfully achieve digital maturity and acquire good acknowledgement management will see how it could help them fundamentally transform their business. And for some, help them embrace innovative and better ways of doing things⁴.
The challenge will lie in implementing the wider digital strategy and moving to a digital-first mindset which supports knowledge sharing.

Contact us

Call: +442045742661

email: info@hesmur.com

Written by Hesmur partner and Director Christopher Hess CA, CPA, CFA. Chris specialises in intelligence, strategy, market intelligence, performance improvement, digital transformation and fintech partnerships within the financial services sector. Christopher has 20 years of international experience as an advisor and executive in wealth management and insurance, and has held senior tenures at Scottish Widows and NED at Origo, amongst others. Aswell as several senior roles with major consultancies, including Deloitte and EY.

References

1. Hesmur, How can intermediaries build digital EQ and why does it matter?
2. Hesmur, Steps to digitising sales and distribution in pensions investments and wealth.
3. Erica Volini et al., 2021 Deloitte Global Human Capital Trends: The social enterprise in a world disrupted, Deloitte Insights, 2020.
4. G. C. Kane, D. Palmer, A. N. Phillips, D. Kiron, and N. Buckley, “Achieving Digital Maturity” MIT Sloan Management Review and Deloitte University Press, July 2017

This 2nd article in the CRM series looks at Microsoft Dynamics 365 as a CRM solution within the financial services sector.

Despite challenging economic conditions and slow sector growth projected by some[1], the industry is still a hive of activity, presenting significant opportunities to those equipped to capitalise upon it. For those able to successfully deliver a digitally enabled customer experience and capable of leveraging their data smartly, there is an abundance of opportunities. A key tool in achieving this is investing in core technologies that facilitate better customer data management.

This article at a glance:

• What’s happening in wealth and pensions, and why.
• 5 reasons why Microsoft Dynamics 365 is a highly effective CRM solution for wealth and pension management firms;
  • Its ability to solve complex problems now and, in the future;
  • It can improve the way sales and distribution teams work individually and together;
  • It makes attracting and retaining more clients easier work;
  • How it enables firms to better “know your customer”;
  • How it facilitates a hybrid approach to customer service.

A changing landscape

The financial services sector is a hive of activity and transformational change. Massive regulatory change, changing consumer attitudes to long-term financial planning, and consolidation within the sector are keeping firms on their toes.

We recently spoke about these changes on a tech podcast we were invited speak on. In this conversation we discussed the importance of crm software for wealth and pensions firms to keep up with this fast rate of change remain competitive and compliant amidst the FCA Duty of Care regulatory changes. (Read “Practical questions for board and senior management about your infrastructure, in addressing the new Consumer Durty Regulations“.

This second article in the crm series summarises, some of the points raised on this podcast and examines why Microsoft Dynamics 365 is a highly effective CRM platform for wealth and pension management firms. Many of these features admittedly can be found in other reputable and modern CRM platforms. Yet, we believe that seamless integration with the whole Microsoft ecosystem places it heads and shoulders above its competitors.

5 reasons Microsoft Dynamics 365 is a highly effective CRM solution for wealth and pension firms:

1. It solves complex problems now and, in the future

From the basic to the highly complex, Dynamics 365 can handle high volumes of customer data from across your organisation in a secure and intuitive manner. The ability to take either the ‘out-of-the-box’ solution and configure and fine tune, or ‘build from scratch’ to solve whatever problems offers organisations the best of both worlds. As a low-code platform, it is quick and cost-effective to build, maintain and update. From client acquisition and client management to process improvement and risk management, the customisable and flexible nature of Microsoft Dynamics 365 means it can be built to address the issues affecting financial service providers right now.

The complexity of interacting with brokers, partners, and regulatory agencies is easily managed with Dynamics 365, which removes disjointed data management and time laborious data input from one system to another. And when it comes to stringent compliance rules that financial services must abide by, the security features and centralised nature of Dynamics 365 means compliance processes can be built into the system, offering safe data storage and evidence of your Duty of Care activity to regulators.

We often see with legacy systems that the system built ten years ago or more may have been perfect for the organisation back then, it is now not fit-for-purpose, and these legacy systems are often highly inflexible. So when faced with newer challenges and problems to solve, the solution is often a workaround and more of a square peg in a round hole. Clunky navigation makes what should be a simple administrative process laborious and painful for users.

With Dynamics 365, as you will go on to discover, completely eliminates this issue for good. With no compromises and no fear that the system will age poorly either, as features and tools can be adapted as your firm grows and changes.

2. It improves the way your teams work individually and together

Getting individuals to work more productively and work together effectively is an instant way to boost the growth of any firm. Microsoft Dynamics 365 offers a huge selection of tools and features that enable individuals to work smarter and reduce administrative workload.

The integrated nature of the system means that it is easier than ever for teams to collaborate, thanks to the seamless integration with the Microsoft ecosystem. For example, users can jump from outlook or teams to sharepoint or dynamics 365 and see whatever data they need in that application, making accessing and updating data super-efficient.

Even where a provider’s existing tech stack utilises various 3rd party platforms and systems, integration into the microsoft ecosystem using API technology will effectively pool this information into one central area, again eliminating the dreaded data silo and offering better data insight and the coveted single source of truth. (We’ll be discussing this in more detail in our next CRM article).

And when it comes to the management of data and document generation, of which there can be vast volumes, automation tools can again help reduce the dreaded administrative burden, allowing advisors and administrators to focus more time on activity that counts working with clients, attracting new clients and thanks to document automation and workflows, the client experiences a smoother more efficient interaction with your brand.

This focus on making lives easier makes the buy-in from users far more successful from the get-go even if those same users were originally resistant to change. This cynical view of new CRM technology is understandable, when users have felt the pain of ineffective systems of the past, or worse, previous crm investments have not lived up to their hype. Yet, Microsoft Dynamics 365, when planned and implemented correctly will quickly be viewed as an asset not a hindrance by the work force.

For senior levels and management again, Dynamics 365 makes easy work of augmenting and presenting data to offer the ‘bird’s eye view’ that management need to be able to make smart, informed decisions. Thanks to the multilevel reporting capabilities of Microsoft Dynamics 365, users are afforded boundless insights.

With many CRMs, the report dashboards are often pre-baked or, at best, limited to specific data fields, but the customisation and centralised nature of dynamics means all levels of management across all business functions can gain sight of the overall picture or even drill down into the detail. And as the reports are in real-time and use the data sitting there within the CRM, not a user’s outdated spreadsheet sat on a desktop, decision-makers and team leaders have confidence that the data is telling the right story.

3. It will make attracting and retaining clients easier work

As we have already outlined, Dynamics 365 is designed to make people’s lives easier, reduce admin, increase productivity and encourage collaboration across the organisation. This reduction in administration frees up advisors’ time, allowing them to focus more on client activity. This can only benefit the client and the company as a whole. Satisfied clients are loyal clients and the power of word of mouth cant be overlooked either.

And whilst the advisor can deliver a more personalised service, centralised marketing communications can be automated and integrated into the wider customer comms strategy. This results in sales and distribution working closer. And with cutting-edge marketing tools, customer acquisition and sales pipeline visibility take the guess work out of sales and marketing effectiveness.

This better visibility and control over sales and distribution activity will grow in importance as Consumer Duty regulation begins to kick in, and providers and advisors are pressured to place even greater emphasis on ensuring better consumer outcomes.

4. It enables you to truly “know your customer”

The tightening regulation set by the FCA’s Consumer Duty demands that firms ensure that customers are treated fairly and experience good outcomes. For this to become a reality, truly knowing the customer is at the heart of this transformation.

To enable this transformation, firms can utilise modern crm technology to gain better customer insight, segment more accurately and understand their customer needs and wants in greater detail. As we have highlighted earlier, the centralised nature of Dynamics 365 will make delving into customer data and gaining accurate insights possible.

This customer insight will help firms mitigate risk better, and the flexibility and custom-built nature of Dynamics 365 means that new processes and procedures introduced as part of this legislation, can be built into the CRM.

And with a wide range of tools that enable greater personalisation of communications, control of sales channel communications, monitoring and assessment of sales and marketing communications becomes much simpler. Furthermore, digital logging of all communication, whether directly from the advisor or the central team, is logged, making auditing simpler.

Other features in the Dynamics 365 marketing suite, such as questionnaires, can be used to be more proactive on customer feedback. For example, automated emails may be sent as part of the onboarding process. This information is then readily and easily available to appropriate staff members.

5. It enables a hybrid approach to customer service

The dawn of the digital age is here and accelerating quickly. The use of “robo-advisors” is nothing new, and customers’ expectations regarding communications and customer experience are rising.

Firms can raise the bar with the right tools and deliver the digital experience customers expect and want with the right tools. And Microsoft Dynamics packs a punch when it comes to delivering the tools needed to deliver a digital experience, complemented with the human touch.

The broad range of communications tools in the Dynamics 365 suite can not only improve direct communications in ways we have previously outlined, but customer service tools can elevate the customer journey and deliver that coveted ‘hybrid’ experience, across the entire customer journey. From online self-service portals to ai customer rooting, to automated emails and customer feedback tools.

As all customer data is stored securely in one central database, so whoever happens to be dealing with a customer has full sight of the client’s communication history and touchpoints. Combining this digital-first approach with the personal touch of an advisor, the customer experience is raised to meet the expectations of today’s consumers.

Summary

When it comes to CRM solutions that are truly fit-for-purpose and suited to the complex needs of financial services, Dynamics 365 offers countless benefits. We have listed just a handful of reasons why we believe it is a compelling solution to a very pressing problem of effective digitisation.

To listen to our conversation on CRM software in financial service listen to the CRM podcast RocketPod.

Hesmur offers CRM products built specifically for the financial services sector and also offers strategic guidance on digital transformation to leaders, to help them address the most pressing matters and accelerate change.

CRM Series

Part 1

CRM is a central component to successful digitisation in financial services | Hesmur

Part 3

Why a single source of truth matters to financial service providers | Hesmur

Contact us

Call: +442045742661

email: info@hesmur.com

Written by Hesmur partner and Director Christopher Hess CA, CPA, CFA. Chris specialises in intelligence, strategy, market intelligence, performance improvement, digital transformation and fintech partnerships within the financial services sector. Christopher has 20 years of international experience as an advisor and executive in wealth management and insurance, and has held senior tenures at Scottish Widows and NED at Origo, amongst others. Aswell as several senior roles with major consultancies, including Deloitte and EY.

References

[1] Global Data, United Kingdom (UK) Pensions Market Size, Trends, Competitive Landscape and Forecasts, 2022-2026

During times of economic downturn and uncertainty, it can be tempting for wealth and pension firms to trim the fat and rationalise, but we argue a frugal and cautious approach could harm your sales effectiveness; it will be sales that get you through the challenging times and so it is vital to ensure you sales function is robust, motivated and resilient.

This article offers advice on how to build sales resilience in the face of challenging conditions, so that you’re prepared for when the tide goes out.

This article, at a glance

• The continuing theme of resilience
• What not to do during economic downturn
• How to build a more resilient sales and distribution function
• Building a digitally enabled sales function by focusing investment in core technologies.

If we were to pick a theme for 2023, it would be resilience, as leaving yourself open to vulnerability in uncertain market conditions is not an option when conditions are as unpredictable and challenging as today.

To quote the successful American investor Warren Buffett, “it’s only when the tide goes out that you know who’s been swimming naked. ” in other words, don’t expect the wave to come in, but prepare for the tide to go out. And that’s precisely what wealth and pensions providers should do as we brace ourselves for further challenges.

With forecasts of a “sharp and prolonged” economic downturn[1] and rocky market conditions expected to reduce business flows in wealth and pensions, it is more important than ever to ensure your sales and distribution team is up to the challenge and isn’t left naked when the tide turns.

As the market constricts, distributors and manufacturers will be chasing a shrinking pool of clients and client money. And to compound this issue, many sales and distribution professionals in today’s market have never experienced this sort of downturn, so they may be ill-equipped to deal with the challenges ahead.

The months and years ahead will show us who has been “swimming naked” and not investing in their core sales and distribution capabilities.

Underpinned by in-depth interviews[2] with industry leaders and academics in the UK, Europe, Canada and further afield, we look at how pensions and wealth firms can build a more resilient sales organisation, keep sales teams focused and motivated, and prepare for the ever-changing sales landscape.

What not to do during economic downturn

Rationalise your sales teams

A typical response to reducing business volumes is to reduce sales teams accordingly. But, this false logic fails to consider that opportunities are much harder to close in these periods. A reduction in sales teams will likely accelerate this fall in volumes.

“Just work harder.”

Another common response by sales managers and professionals alike is to “just work harder”. This could be increasing contact targets, booking more client meetings per day, or promoting a wider set of products and services. If your teams are already working at their optimum levels, this will likely decrease their focus and even reduce the number of opportunities that close. The phrase busy fools springs to mind, and this mindset only serves to demotivate and reduce output quality.

Stop investing in your infrastructure

With the market and customer preferences continuing to evolve, ensuring your infrastructure is evolving with it is more important than ever. Aside from the efficiency improvement opportunity, there is also a tangible revenue driver. End clients and distribution partners will have that much more choice in choosing partners; an ageing infrastructure that is difficult to work with could be the factor that makes them look elsewhere.

How to build a more resilient sales and distribution function

Listen to the market!

It is a truism to say that the first step in selling is having a product people want. Staying abreast of changing customer dynamics is the first step in building a resilient sales organisation. In our planning and executing in uncertainty series, we outlined questions firms can ask when faced with uncertainty. Regularly asking these fundamental questions will go a long way to building your ability to serve customers and drive sales activities.

Is my proposition still relevant? Does it need to be adjusted to meet changes in customer behaviour or other environmental factors? [3]

In some cases, the answers to these questions will be obvious, but where the answer is more subtle, the feedback loop from the sales teams and other customer intelligence is essential.

We are all on the same team!

An organisation’s culture goes a long way to building resilience in times of unexpected shocks or changes in customer dynamics. While a customer focus will help ensure you are on top of any changes in market dynamics, a true focus on employees will help ensure everyone is focused on solving the problem rather than looking over their shoulders.

As a key driver of organisational agility, this employee empowerment focus helps build a more agile culture, better able to react (and willing to respond) to situations that arise.

In sales organisations, employee support and investment are essential under challenging times. The sales organisation is the closest point of contact with your customers but is also the most severely impacted during difficult times due to high commission levels and variable compensation.

Taking a long-term view and bolstering the sales organisation in times of difficulty helps make the best of the hard times and helps maintain customer relationships and prepare for the future.

“The best sales leaders focus on communicating a clear vision of where the organisation needs to go and demonstrating a commitment to their people.” [4]

Build a robust sales infrastructure – even if you don’t think you need it now

In good times, few pay attention to how sales are happening and if targets are being met. The pandemic brought several existing issues in many sales infrastructures into sharp focus and gave us several new ones for good measure.

Considerations for building a robust sales infrastructure

People and capabilities

At its core, sales are about people: the customers you are selling to and the sales teams that connect with those customers. Ensuring your sales teams have the required skills, capabilities, and appropriate tools to deal with changing environments is critical. Where any of these things need to be improved, training and/or augmented tools and technology can help maintain resilience. Assessing your sales force capabilities:

• Do they understand the changing sales drivers for their customers?
• Do they aware of and understand all the products/suite of products they sell?
• Can they work across all channels customers require (Remote, face-to-face and digital if needed)?
• Are they able to build relationships with customers and stay engaged through long sales cycles and over the life of the customer relationship (even when it is difficult, in the example of Covid-19! )?
• And most importantly, are they able to maintain customer understanding, core sales capability and eq, even in times when it is difficult to maintain a relationship?

If the answer to any of the above is no, bolstering your training and supporting infrastructure could pay dividends.

Digital EQ

 Understanding your customers’ needs and motivations is a critical part of effective selling. When traditional ways of interacting are interrupted, it is easy for sales teams to lose touch with customers and the drivers to their purchasing decisions.

Regardless of the industry, using digital tools to augment this core sales capability and “EQ” (emotional intelligence quotient) is critical to building a resilient sales organisation capable of weathering the storm of changing customer dynamics. Available tools include everything from the better use of remote engagement tools, crm and customer data management, through to dynamic “voice of the customer” monitoring and natural language processing sales enablement.

Read more about Digital EQ: How can fincancial service intermedaries build digital EQ and why does it matter?

Process management

While many view sales as a “dark art”, the crisis has underlined the importance of rigorous process management that keeps people focused on:

• The customer
• Opportunities that will bring the greatest value, and
• Executing flawlessly when a sales opportunity does arise.

Technology has gone a long way in enabling and streamlining these processes, the focus on these core processes has enabled firms to continue to serve customers and drive sales activities even in crisis situations.

Performance management

Many traditional sales performance management frameworks often only focus on tracking “wins on the board”. This binary and rather blunt approach fails to capture the richness of intelligence through the sales cycle that enables a more finely tuned and resilient sales organisation. Understanding the drivers of success (and failure! ), whether it’s in identification, qualification, the ultimate sale or post-sales support and service, will add to the overall corporate intelligence and drive better sales decisions; in good times and bad.

Tools and technology

While most firms have evolved beyond when a sales infrastructure meant a rolodex and a company card, few outside of digital businesses fully take advantage of the available tools to streamline and enhance their sales organisations and build greater resilience. Our research has identified the following components of a robust sales technology infrastructure[5].

Hesmur research: Building a digitally enabled sales function

Experience and engagement – Building an ongoing and interactive relationship with customers.

Augmented consultative selling – Automating and enabling more traditional sales journeys.

Seamless omnichannel sales and service – Serving the customer how they want to be served: D2C when it suits them, with the option for assistance and advice when needed.

Streamlined administration – Reducing administrative overheads while also providing a “straight through” experience for customers.

Effective sales operations – Building a focused, informative feedback system enabling more efficient allocation of resources, evaluation and improvement of performance, and ease of operations.

Focused investment in core enterprise technologies – Ensuring the core investments in data and enterprise technologies are focused on driving greater customer understanding, experience and interactions. For more on this, see Steps to digitising sales and distribution in pensions investments and wealth.

Next steps

Nothing is more fundamental to business than being able to sell and deliver products and services to your clients and customers. While no one can truly predict the shocks the industry will face, we can prepare to meet them. Building greater resilience iner your sales organisation is the first step. As we face unknowns of the year to come, areas to focus on are:

1. Focus on the fundamentals and continuously reassess your ability to deliver products and services that meet customers’ needs.
2. Build towards a nimble and focused sales culture and give them the support and tools when they need it.
3. Begin to build your resilient sales infrastructure with the rigour and flexibility to address any future change to come.

References

[1] WBG GEP january 2023 [2] Hesmur Research: market practices in driving greater sales resilience [3] Hesmur Research: strategic and business planning: insights on process and practices in prolonged uncertainty [4] Mckinsey & Company: Five actions to boost your sales organisations resilience, july 1, 2020 [5] Hesmur Research: building a digitally enabled sales function

Contact us

Call: +442045742661

email: info@hesmur.com

Hesmur is a digital transformation consultancy helping financial service organizations navigate and adapt to a rapidly changing data-driven world. Through rapid diagnostic and leading-edge digital delivery, we implement measurable change swiftly and effectively, and through our network of highly experienced professionals and data specialists, we use data-driven insights to help financial service organizations maintain that competitive edge with tailored and transformational consultancy services.

The first in a 3-part CRM series summarises a podcast interview on the topic of CRM in financial services.

Hesmur Director and Partner Chris Hess, was invited to speak on RocketPod, a CRM podcast, to share his thoughts on the radical changes happening in financial services. In this interview, he sheds light on the role of CRM in successful digitisation.  

Chris explains why wealth management must make this digital shift sooner rather than later and why CRM should be considered a critical component of digital transformation amidst rising consumer demands and changing industry regulation. 

This article at a glance

• The digital transformation happening in financial services
• The drivers of change: digital shift, rising customer expectations, changing regulation
• The existing issue with CRM in financial services and how it’s occured.
• Why organisations have to address these issues now.
• How to get started with this change – start with your people

Overview of CRM in financial services

The use of customer relationship systems or CRM in financial services is nothing new, and beyond this sector CRM software has been around for decades, evolving from a simple contact management system to today’s highly developed data management tools that can store, manage and leverage data in a fashion that helps businesses drive efficiency and connect better with customers and leads. 

CRM technology has become an essential component of a business’s IT infrastructure in this increasingly digitally enabled world, regardless of sector. And whilst some industries have embraced the recent digital shift with ease and are reaping the benefits of modern CRM technology, others are still playing catch up two decades on. One such industry is financial services, a broad sector which, in some areas, is still very much a laggard in digital adoption and the use of modern CRM technology.  

Hesmur Director and Partner Chris Hess, a financial services strategist and digital transformation expert was invited onto a CRM podcast RocketPod to share his thoughts on the radical changes in financial services. In this interview, he sheds light on the role of CRM in successful digitisation.  

Chris explains why wealth management must make this digital shift sooner rather than later and why CRM should be considered a critical component of digital transformation amidst rising consumer demands and changing industry regulation. 

RocketPod interview with Chris Hess of Hesmur

The digital transformation of financial services

“The financial services (FS) sector is undergoing radical changes and is under significant pressure to digitise its sales and distribution operations to deliver the experiences customers expect, with the standard set by other sectors. It could be said that broadly FS is somewhat of a laggard in digital adoption and how it uses CRM to enhance the customer experience, especially within wealth management. Yet, as we uncover, change is definitely underway. 

The sector is very broad, and the way providers interact with customers varies. Whilst some have excelled – especially where they have direct relationships with customers, such as retail banking and Direct to Consumer (D2C) trading platforms other sectors are struggling and still trying to transform to a more customer-centric way. This is particularly difficult in intermediated markets with multiple levels of the customer relationship. 

CRM in FS has always played a role but doesn’t have the best reputation for several reasons. The first is that many FS customer data systems don’t offer a holistic view of customers (sometimes even within one provider). In the intermediatory space specifically, there’s a real gap between the provider, intermediatory and customer. 

Drivers of change in financial services

This sector is seen as a laggard, but in recent years there’s been a move to drive things forward, partly due to the impact of the pandemic, which has forced FS organisations to think of new ways of interacting better with customers via digital channels. Change is also driven by the customers’ expectations of how they want to interact; When they want, wherever they want, in the way they want. 

People are time-poor, and face-to-face conversation is less desired. They want the ability to simplify and speed up their personal finances and administration, and the industry needs to cater to these changing customer needs in a much more flexible and responsive way. Hesmur’s syndicated research has demonstrated a general desire for greater flexibility in engaging with advisers, from video chats to digital tools and a range of self-service options. Other market research has indicated the vast majority of customers view digital as a key component of any proposition. 

There are also a whole series of regulatory drivers, specifically in the UK, introduced to ensure that the right things are done for customers – these customer care improvements are coming as part of the Consumer Duty Regulation changes delivered by the FCA, due to come into force in 2023. 

Advisors and providers will need to have a more holistic overview of customer requirements and also be able to ensure products and services are suitable to their needs by carefully managing risk. 

Looking at the wealth management sector specifically, this sub-sector highlights many issues concerning knowing and supporting the customer. It highlights the product silo challenge, the need to provide a 360 up to, date view of the customer, and the need to help the customer navigate channels seamlessly between provider and intermediary.  

Whilst navigating and addressing these issues may seem challenging to providers and intermediaries, CRM offers many opportunities to address this product silo challenge and improve the customer journey. Replacing long, drawn-out processes with more pleasant speedier experiences. 

Whilst the buyer journey can be viewed as complex, the approach to improving the customer journey is quite simple. CRM is about enhancing the customer journey and tracking and managing that whole process to deliver a better experience for advisors and clients. However, the implementation of change isn’t as simplistic. 

The CRM problem in financial services

CRM in financial services has historically been viewed as a negative experience, as it has not always lived up to its promise, or it has simply been a basic contact manager or MI tracker rather than helping deliver value to the customer. Too often, a solution has been shoehorned into a remaining infrastructure like a square peg in a round hole. And it simply doesn’t work, partly because it hasn’t been built for the customer or the user, which causes frustration and more admin for operations staff and advisors. But it is possible to have a system that adds value and works for advisors and customers with intelligent planning. 

Another historical issue is that many CRMs were built with rigid processes. While that may have suited the business culture and rigid processes of the past, this approach doesn’t work anymore. Flexibility has to be a key feature of the next generation of CRM systems in order to deliver true agility to business operations. It’s not simply about talking lean; it’s about being lean in practice. 

The cost and complexity of historic CRM implementation projects are additional problems, particularly with larger firms. In many cases, a CRM implementation has been a waste of time and money, as the end result simply isn’t fit for purpose. For this reason, simplicity and lower cost of ownership are other priorities. 

Historically, many CRMs were also very much standalone systems, with little integration, which caused real problems such as siloed activity and siloed data sharing. We can now see how powerful combined sales and marketing CRM can be, as they are transforming communications through personalisation to improve the customer journey and adhere to the tightening regulations previously mentioned. 

Why have these CRM issues arisen?

Many of these problems are often down to the fact the executives don’t know what good looks like and don’t necessarily know the complexity of their own operational processes or what needs to be done to improve matters. In addition, not fully understanding the true cost of failing to get the CRM platform right is another major barrier to progress. If the true business cost had been realised, action would have been taken to remedy these problems far sooner. 

The cost is easy to see if you’re there in the day-to-day and can see the real negative business impact of unnecessary administration, inefficiencies, lost opportunities, poor compliance and poor customer satisfaction. Moreover, not having a good information base means not being able to evidence duty of care to clients when the regulators come calling. And this last point is especially relevant, as we approach some key milestones in terms of the consumer duty regulation changes. 

How can leaders address the pain points

The solution is simple, but the more pertinent question we should be asking is, ‘why now?’. 

Digital adoption is accelerating, and the industry needs to provide advisors with better tools to reduce administration, spend more time helping customers and build rich customer insights.  

The crux of the issue is that the building blocks of core customer data and customer management simply aren’t in place. And without the core backbone, i.e. a good CRM, you can’t do all the other smart things that will address the issues and help operators operate in a more agile, customer-focused way. Therefore, it’s important to do it now.  

What’s more, the regulatory changes coming into force in 2023 demand that financial service providers not only ensure good outcomes for customers by understanding and serving them better, but regulators will want to see evidence of such. 

Where do you start to begin positive change?

It is just as much about the people in the organisation as it is about the system.  

The best place is your people; understand how they work, the day-to-operations, the customers and how your employees interact with them, rather than looking at simply the MI you want to see and the database design. Place the people at the centre of your project, and you will have a greater chance of success. 

You need to engage people in the process, demonstrate how the system will make their lives easier, and then deliver a system that serves your people rather than the other way around. Approach it simply and ensure it is supported by strong leadership right from the top. 

Who is this relevant to?

The consideration of CRM as part of a digital transformation is just as relevant to smaller distributors as it is to big providers. A simple and intuitive CRM can support the goals of smaller organisations as much as it can the larger ones, but obviously, the cost-benefit is somewhat different. 

For operators or distributors considering their tech investment and wanting to drive their CRM improvements forward, they can start by thinking about what good could look like. Sit with teams, get familiar with the pain points and focus on the fact that things can be simplified, as there are solutions that can deliver what you need, if you what it is you need.” 

Takeaway message

The old way of doing things and old systems don’t need to keep harming FS organisations. Modern CRM tech can be a true facilitator of change that will help financial service providers and operators meet rising customer expectations, adapt to digital adoption and adhere to tightening regulatory change. 

The full ‘CRM in financial services’ conversation can be listened to on RocketPod, Rocket CRM’s podcast. 

Listen / subscribe to Rocketpod Podcast:

Anchor 

Spotify 

Apple 

Google 

Amazon 

Stitcher 

RocketPod is delivered by the CRM experts at Rocket CRM, famed for going the extra mile and making CRM simple. 

CRM series

CRM Series article 2: 5 reasons Dynamics 365 is a good CRM solution for wealth and pension providers and distributors in 2023

CRM Series article 3: Why a single source of truth matters to financial service providers

About Hesmur

Hesmur is a digital transformation and strategic management consultancy firm helping financial service organisations navigate and adapt to a rapidly changing data-driven world. 

Hesmur and Rocket CRM have recently launched a joint venture focused on developing Microsoft Dynamics based customer relationship management and marketing automation solutions for the wealth and pensions sector. Together we bring practical industry experience together with deep technical expertise across the Microsoft ecosystem. 

Chris is contactable on LinkedIn, or you can contact Hesmur at hesmur.com or email info@hesmur.com 

Follow Hesmur on LinkedIn 

Follow Christopher Hess on LinkedIn 

The third and final part of the planning and executing in uncertainty series aims to help firms understand the uncertainty they face and uncover the options offered to them by asking a series of critical questions.

Part 1: Understanding uncertainty and the planning approaches available
Part 2: Delivering change in periods of uncertainty

What should firms do now?

As firms continue to navigate in periods of heightened uncertainty, using a methodical approach is helpful in focusing attention on the critical issues. And rather than jumping to the answers, firms must ask critical questions to define and understand the uncertainty they are facing and then uncover the options they have to navigate it.

Questions to ask during periods of uncertainty

We advise starting with the fundamentals and asking the following series of questions:

Start with the fundamentals

What are the key drivers to my business? How am I positioned to compete and adapt to changing conditions?

• Who are my key customers and how can I ensure that I can still service them or deliver my product to them?
• Have customer needs or requirements changed?
• Who are my critical suppliers?
• Are they still able to provide me with the services i need?
• Are my operations and manufacturing facilities still able to function?
• Has my competitive landscape changed?
• How are my competitors reacting to the change?
• Have any substitutes emerged that fill the same need as my products or services?
• Which parts of my business can adapt quickly, and which parts will take more work?

What can I ground myself on?

What fundamentals have not changed in my market?

• Do my customers still need my products and services?
• Are supplies still readily available?
• Can I still manufacture/deliver my product or service?

What kind of uncertainty am I facing?

• Are there only a few possible outcomes I need to analyse, and can I use traditional decision analysis tools to review them?
• Are there a range of outcomes I need to prepare for, and can I use scenario planning to identify the critical points?
• Is the situation truly ambiguous?
• Are there any discovery[1] activities I can initiate to reduce that uncertainty?

What options do I have to address these issues?

• Am I able to develop the relevant scenarios?
• Have they addressed the fundamental business issues?
• Are there common elements across each of my scenarios?

How can i prepare for future uncertainty?

• Am I thinking about the possible horizon risks to my business?
• Have I thought through how probable or severe they might be?
• Do I have up to date information to monitor my environment and how it is changing
• Are there actions I can take now to mitigate these potential risks?

How do i move forward?

• Are there any no regret[2] actions I can take?
• Are there any common elements across my scenarios I can start to move forward?
• Do I need to make any big bets[3]?
• Can I reduce scope through identifying any interim implementation scenarios?

Regardless of your sector, existing market dynamics, or actions to date, actively understanding and engaging with uncertainty as part of standard practice will build resilience and robustness into your operation and allow you to capitalize on opportunities as they appear.

If you’d like to hear more about these concepts or how to put them into action, please contact us at info@hesmur.com.

References

[1] Activities aimed at discovering the path forward rather than executing along a defined path.
[2] “No regrets actions” – Those actions that will either have a positive payoff in themselves or are required regardless of the “options” or “big bets” taken forward.
[3] “Big bets” – Fundamental strategic or implementation options that are difficult to test and refine through the change process [Note: in reality, few decisions truly need to be big bets].

Contact us

Call: +442045742661

email: info@hesmur.com

Written by Hesmur partner and Director Christopher Hess CA, CPA, CFA. Chris specialises in intelligence, strategy, market intelligence, performance improvement, digital transformation and fintech partnerships within the financial services sector. He has 20 years of international experience as an advisor and executive in wealth management and insurance, and has held senior tenures at Scottish Widows and NED at Origo, amongst others. Aswell as several senior roles with major consultancies, including Deloitte and EY.

Part 2 of the planning and executing in uncertainty series provides an overview of the tools and techniques for delivering change during periods of uncertainty and incorporating lessons learnt from the Covid-19 pandemic.

Part 1: Understanding uncertainty and the planning approaches available

In traditional strategy and execution cycles, a periodic strategy development effort is usually followed by a longer period of execution. While execution plans are often tuned and realigned, the core strategy and objectives are rarely revisited. During times of uncertainty, this linear approach risks being out of step with changes in the market when much greater levels of feedback are required to test and guide decision-making.

To mitigate this risk, many firms have adopted agile or discovery-based approaches to better align decision-making and investment horizons with different levels of uncertainty and adjust to the unknown pace. Agile or discovery-based approaches can be used both in the context of wider strategic options as well as in the delivery of specific change programmes.

“No regrets” actions

While agile or discovery-driven approaches are clearly more aligned to greater levels of uncertainty (and the related commitment to a particular course of action or investment requirement), regardless of the approach taken, it is important for firms to identify the no regrets actions they can take. These are actions that will either have a positive payoff in themselves or are required regardless of the strategic options taken forward. By identifying these actions, firms can maintain forward momentum while minimising the risk of wasted effort or investment.

Change methodologies

Planning and execution cycle [1]

The virtuous circle of understanding, strategy development, execution, and frontline feedback is important in normal times and critical in times of uncertainty. Not only does this include a robust market intelligence approach but also a strong internal feedback mechanism that actively tracks the impact of the firm’s actions and activities. Given their focus on active market testing, agile and discovery-based implementation approaches can be useful in providing elements of this feedback loop, but firms should also look to formalise this feedback more broadly to ensure actions are aligned with changing conditions.

Lessons from the crisis

The initial shock of lockdown proved to be a galvanizing force for many firms as they focused on getting remote operations up and running. But, for many organisations that momentum slowed as the path ahead became less clear[2]. It was those firms that were able to quickly assess the fundamentals of their markets, fill gaps in their business model and maintain strategic direction that were better able to weather the storm and, in many cases, thrive. This even included businesses in the hardest hit segments, with restaurants that pivoted to offer takeaway, health clubs switching to online offerings and in-person sales forces moving to virtual meetings and digitally enabled sales.

In doing this, these firms demonstrated three characteristics critical to succeeding in periods of uncertainty:

1. The ability of leaders to ask the right questions about the fundamentals of their business, even when they do not have all the answers.

2. Real organisational agility and the ability to rapidly adapt the organisation as situations changed.

3. A realisation that financial resilience was more than cost cutting, but instead a focus on maintaining the firm as a going concern.

What is clear is that succeeding in times of uncertainty is equally dependent on strong leadership as it is applying effective methodologies and being truly agile. In the final article in the planning and executing in uncertainty series, we delve into the questions leaders of financial service providers must ask during times of uncertainty.

References

[1] Hesmur Strategy Navigator
[2] Hesmur Research Strategic and Business Planning: insights on process and practices in prolonged uncertainty

Contact us

Call: +442045742661

email: info@hesmur.com

Written by Hesmur partner Christopher Hess CA, CPA, CFA. Chris specialises in intelligence, strategy, market intelligence, performance improvement, digital transformation and fintech partnerships within the financial services sector. He has 20 years of international experience as an advisor and executive in wealth management and insurance, and has held senior tenures at Scottish Widows and NED at Origo, amongst others. Aswell as several senior roles with major consultancies, including Deloitte and EY.