Expert: Michael Feeley, COO, SEI Facilitator: Gilly Green, FoxRed Insight
Headlines:
- Firms must adopt consistent productivity metrics and leverage data-driven decision-making to foster trust and identify inefficiencies, enabling a culture of continuous improvement
- Developing a sophisticated understanding of the true cost to serve, including downstream impacts and client-specific variables, is critical for effective productivity measurement
- Leveraging AI and tools like CRM systems can enhance productivity tracking, improve compliance, and streamline client interactions while addressing privacy concerns
- Successful productivity improvement relies on creating a culture that supports change, from building data habits to addressing behavioural resistance, such as aversion to timesheets
- Firms must carefully measure the full impact of regulatory requirements, like Consumer Duty, on productivity and ensure alignment between compliance and operational efficiency
Discussion points:
Key areas of challenge
Firms are struggling to understand their current (base) position, with some admitting they are at the teenager stage in terms of development/sophistication of measuring anything effectively.
Data quality and availability (whether collected, ease of extraction) – errors in data are a major red flag.
Understanding of cost to serve is made even more difficult if advisers are self-employed (associates), there are different costs for different clients even when on the same services and timesheets are viscerally hated ( when people do have to record time, it often shows that they spend more time on administration than they thought.)
Income is a key factor, but often missing from metrics, which currently focus on ratios of advisers to admin, or number of clients per adviser
Data analysts are becoming difficult (impossible!) to find, everyone is scrambling for multiple resources and people with data skills combined with wealth knowledge are scarce – one CEO has even learned Python himself to mitigate the lack of support in this area.
Mergers impact the measurement of productivity (multiple sources) for a significant period until consolidation/integration is completed.
What firms need to measure
The data produced needs to tell the right story, which means that it needs to produced independently from the person/persons it measures, to ensure it is unbiased.
This needs to be appropriate for the audience/stakeholders (Board, COO, Head of FP, Head of investment, FCA etc) in both detail and the story it is telling.
They need to measure full impact – not just team for whom an improvement is made, but to include downstream teams also, which could be positive or negative!
The benefits of advisers that provide the data:
- What gets measured gets improved
- A business case with the right data (a big stick for department heads) drives priorities for investment
- A single measure should never be used in isolation as a drive to improve a specific activity – it needs to consider downstream teams and processes and the impact of change to avoid pushing inefficiencies elsewhere
- Measures are a point in time and need to be regular to demonstrate the effectiveness of any investment initiatives.
Solutions
None of the delegates have found sophisticated solutions to the problem, though better use of CRM and improved consumer duty tracking are a help.
The group discussed the potential of AI and technology in improving productivity and data analysis. They explored the use of tools like Salesforce for tracking client interactions and the possibility of recording client meetings for compliance and relationship management purposes.
There was a concern that customers will not like being recorded, especially videoed, and that could constrain the conversation. It would, however, be a powerful tool to combine this with AI to assess emotional response to the conversation. (POST MEETING NOTE: there is one firm doing this, and interestingly, only 3% of customers have objected to it).
Consumer Duty and compliance
There is no doubt that Consumer Duty is increasing the cost to Service for firms and adviser productivity.
A discussion was held on the “cost of compliance” and what was about the right proportion spent – 20% of costs was suggested, based upon the number of Compliance resources.
However, understanding true cost of compliance needs to consider it full impact – e.g. cost of regulation is not just an increase in Compliance resources, it will have an effect across BAU processes and additional training requirements. In the case of Consumer Duty, some firms said the advice process is taking much longer (twice in one case) with the increase level of documentation/evidence being requested by compliance.
FCA information demands are focused on baseline of service provision and are driving new measures to evidence this (specifically on annual reviews). The use of CRM tools and planning tools are becoming imperative to drive consistent recording and make data assessment easier.
Key takeaways:
- We need to do a lot more thinking about what productivity measures are relevant and appropriate
- Data accuracy is key – it needs to tell the right, true story – and the producer of the data needs to be unconflicted by the decisions that might be driven by it
- Income and profitability measures should be included – not just staff ratios
- There is a need to develop a more sophisticated understanding of cost to serve
- Centralising data analysis / having dedicated data resources (cross departments) will be valuable
- AI and technology could be leveraged to help this – whilst reliant on accurate data, it is also a good internal use-case for early adoption of AI
- Recording client meetings could improve compliance, relationship management and productivity if combined with AI – mindful of customers’ privacy concerns
- We need to find the balance of regulatory compliance with operational efficiency in light of consumer duty regulations
