To say that a one-size-fits-all approach doesn’t work in financial planning is taken as axiomatic among advisors. But if clients deserve nothing less than a well-tailored financial plan, why not also a personalized web portal where they can go to manage their portfolios?
Predictive analytics solutions that enable such customization have been in the marketplace for years, yet few advisors or insurance manufacturers use them, according to a January 2006 report from The Tower Group, Needham, Mass. As more boomers enter retirement, the need for such technology is becoming greater than ever–and not just for online self-service applications. The software’s powerful data mining capabilities can help advisors better target clients for up-selling and cross-selling opportunities.
“Predictive analytics allow advisors to more efficiently service and communicate with clients,” says Cynthia Saccocia, the report’s author and a research area director with The Tower Group. “Those [advisors] who don’t leverage these tools will find their practices more expensive to run, as they won’t be able to service a greater volume of clients as effectively.”
The report, titled “Courting the Retired: Predictive Analytics to Define Preferences in Products, Services and Delivery,” concludes that the ability to segment clients so as to learn individual preferences increasingly will be key to courting the retired and the soon-to-be retired. Financial institutions that make products and services available to their entire customer base and segment the base to target individuals based on their life stages, events and needs will offer the most successful programs.
To attract and retain retirees and pre-retirees, the report adds, financial institutions–not least life insurers and affiliated producers–will have to use predictive analytics tools to identify behavioral trends, segment the base and use the knowledge gained to better service clients.
Predictive analytics solutions are software applications that can anticipate outcomes or suggest actions based on historical data about clients. The software aggregates client profiles, then segments clients according to common attributes, such as previous products purchased, income level, age, ethnicity, etc.
The products typically are sold as modules to customer relationships management solutions. CRM vendors–PeopleSoft, Siebel, Microsoft, among others–generally also market the products as enterprise solutions to be installed on desktop PCs, or as hosted software that may be leased through an application service provider or ASP.
The technology might, for example, determine that particular owners of term life insurance would be ready to purchase a permanent life insurance product based on a triggering event, such as the birth of a child or increase in the client’s income. Similarly, the software might suggest shifting client assets from high-risk equities and mutual funds to lower risk bonds or fixed annuities when the client attains a certain age.
As more boomers reach retirement age, and as their financial needs shift from an asset accumulation to asset conservation phase, such protection-type products will be in greater demand. By identifying these clients quickly and efficiently, says Saccocia, a predictive analytics tool can help insurers retain “orphaned clients” who otherwise might be inclined to bolt to another carrier because the original agent who sold them a policy has left the firm.
She adds that the software tools also will help producers compensate for the lower commissions and fees associated with income protection products by enabling them to sell to boomers in higher volume.
“If you predominantly work with clients who once were invested in growth-oriented portfolios and now are moving toward fixed income vehicles, where will the revenue come from?” asks Saccocia. “The generation behind the boomers is not mature enough to offset this shift. Advisors really need to start thinking about this.”
They need to consider, too, which methods of communicating will best serve the boomer client. Most producers, Saccocia notes, rely on “high touch” face-to-face communications when alternative channels–call center agents for clients who require minimal assistance and websites for do-it-yourselfers–can service certain client needs just as effectively and at a lower cost.
Saccocia adds that boomers increasingly want access to online portals to be able to manage portfolios themselves. By personalizing their websites, insurers and financial planning firms can provide a value-added benefit that contributes to customer satisfaction and retention.
“Some boomers may want a view of the website that uses larger fonts,” says Saccocia. “Also, new techno-graphic data indicates that older web users read from left to right, whereas younger users scan the page, searching for what they need.”
She adds that companies now are experimenting with web portals that use a common home page then direct clients to links customized to their user profiles and preferences.