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In the introduction and current situation of the series of reports of the White Paper on Investor Returns, we systematically sort out the factors that cause the gap between investor returns and product returns, and deeply analyze the origins of the difference between investor returns and product returns, as well as the current situation and problems in investor behavior that cause this difference. Starting from this plan, we will study from multiple angles and try to come up with a reasonable solution to the above problems. This is the first report of the solution chapter, and we will start with the question of customer profiling, because we believe that accurate customer profiling is the starting point and cornerstone of a truly integrated wealth management service. Thousands of high-rise buildings rise from the ground, and only by laying a solid foundation and mastering the fundamentals can we build a majestic wealth management building.
1. Accurate portrait is the starting point and cornerstone of wealth management
Fundamentally, the basic process of wealth management can be summarized as the process of matching the client's wealth needs with financial products.
Figure 1 Wealth management is the process of matching solutions based on customer needs and financial product profiles
Note: Examples are for reference only, and results may vary depending on the classification method. It does not constitute the promotion of any product or service, does not constitute specific investment advice, and does not represent the scope of our company's sales. The market is risky, and investors need to be cautious. There is no guarantee that investors will make a profit, nor does it guarantee that the minimum return or principal will not be lost.
As can be seen from Figure 1, one of the values of wealth management is to match the right financial products and services for the needs of customers. The basis of this process is the precise definition of the customer's needs. If the client's wealth needs are not clearly defined and matched with financial products that are not suitable for the client, the final investment effect will naturally be poor, and the client will not be satisfied with the return on investment.
Therefore, as the starting point of wealth management services, accurate portraits of customers have become an important cornerstone for achieving customer investment goals and achieving customer return expectations. Customer profiling usually starts with KYC. With the development of the digital economy such as the mobile Internet, continuous and comprehensive KYC work is possible. This creates conditions for improving the efficiency of customer demand matching, configuration scheme design, risk control and compliance, account management and other links. As business continues to become online and intelligent, wealth management institutions will accumulate a large amount of customer data, and the effective management and analysis of this information will help customers accurately profile, thereby promoting the development of the wealth management industry.
Second, the current situation of the customer portrait industry
The accurate portrait of customers plays a vital role in wealth management services, which is both the starting point and the cornerstone of wealth management services. In wealth management practice, there is still a lot of room for improvement in the necessary process of customer profiling. The phenomenon of simplification, formalization, and once and for all is very common in this organization, which reflects the lack of understanding of the meaning and value of customer portrait work, and insufficient attention.
1. The customer portrait is limited to this institution
In practice, there is a common phenomenon that the asset profile of customers is often limited to their own positions. As a result, when assessing customer risk appetite and account satisfaction, it is easy to discuss the institution's positions. In reality, a client's position in a particular institution may be a small portion of their family wealth.
This is one of the more common situations in the KYC process. On the one hand, investors have a certain psychology of protecting privacy and are reluctant to inform the overall situation of family wealth at the beginning, on the other hand, investors also have a risk-averse psychology and tend to believe that handing over funds to multiple institutions to take care of can prevent institutional risks. However, this situation will produce a series of biases, and then in the wealth management practice, the positioning of the customer's risk appetite, the portrayal of the customer's account satisfaction and the subsequent adjustment will cause some trouble.
For example, the client mainly buys stock assets in institution A, while in institution B, it mainly buys relatively stable fixed income or even cash management products. The stock market is generally volatile, and sometimes even bearish. Then it is difficult to avoid a large fluctuation in the customer's position in institution A, or even a large floating loss in stages. At this time, it is unknown whether we want to adjust the customer's account and whether the customer's evaluation of institution A is satisfactory. If there is a lack of good communication, the financial planner of institution A may advise the client to reduce the position of equity assets in order to improve the client's satisfaction with the institution. But in reality, from the perspective of the customer's overall account, such an adjustment may be wrong. From the perspective of the customer's overall account, considering that the customer has a large number of stable products in institution B, the proportion of equity assets is reasonable, or even less.
The opposite is true. If there is a bull market in the stock market, then the client may not be satisfied with the allocation of institution B. In order to improve customer satisfaction, the financial planner of institution B may advise customers to chase up and buy stock-like assets. Doing so may result in a significant overweight of equity-like assets in the client's overall account, bringing greater volatility risk to the client's account. This is obviously not necessarily true.
This is what we are talking about, if you can't paint a picture from the customer's large account as a whole, wealth management institutions are easy to fall into the dilemma of headaches.
2. The customer portrait is too "thick line"
In practice, it is often found that some risk questionnaires about customer portraits are too simplistic and "thick". The specific manifestations are that the number of questionnaire questions is small, the dimensions are relatively simple, the interview process is too simple and arbitrary, and there is a lack of dynamic tracking. Clients' wealth management needs are affected by their own risk appetite, capital attributes, investment experience and other factors, so the characterization of needs is a multi-dimensional process. At the same time, clients' wealth management needs are dynamic and variable. The customer portrait that is too "thick" cannot achieve the goal of comprehensively and dynamically understanding customers and accurately portraying customer needs, and it is even farther away from discovering the potential needs of customers. An overly "thick-lined" portrait may miss or even misjudge the needs of customers, and based on the results of a broad-line portrait, the results of wealth management can be imagined.
In addition to the relatively simple and rough design of the questions in the portrait process, there is also a hidden "simplification", that is, relying too much on the digital answers, and ignoring whether the real feelings of the customer and the digital representation are consistent. For example, although in the questionnaire, the customer answered "can withstand a maximum drawdown of 20%". However, investment advisors need to be wary that clients may not be familiar with the concept of "maximum drawdown", and may not have experienced such a drawdown, so they do not have a personal feel for the 20% figure. Therefore, a good investment advisor should be aware that 20% alone does not mean that the client can afford a drawdown of this magnitude, but needs to find other information to back it up. For example, you can ask customers whether they have invested in stocks and equity funds in the past, and whether the investment period covers 2018, 2016, 2015 and other time periods when the stock market has withdrawn significantly.
3. The process of questionnaire survey is too cumbersome
Customer personas should be neither too simple nor too cumbersome. If the customer risk questionnaire is too cumbersome, on the one hand, it may involve the customer's sensitive information earlier, such as the number of children, whether they are married, etc., on the other hand, because there are too many questions to be filled, the customer's enthusiasm for cooperation will be dampened, and finally the goal of a comprehensive customer portrait will not be achieved.
In general, customer personas are not a one-and-done job. Trying to solve the customer profiling problem once and for all with a questionnaire of more than 30 pages is unnecessary, unrealistic, and ultimately futile. A reasonable customer portrait questionnaire design needs to balance the amount of information and the willingness to fill in. The more questions there are, the more private the questions are, and the less willing the customer is to fill them out. In practice, questionnaires also need to be subtracted appropriately.
4. After the customer portrait process, it is placed in financial services
Understanding the customer and determining the customer's risk preference, capital attributes, and investment experience should be the premise of wealth management services, which is a must pre-project. However, in practice, financial planners sometimes start to recommend financial products to customers before they have a clear understanding of their needs in order to achieve their sales goals. When financial planners recommend equity funds, they often get more information (Figure 2) that puts the performance of the fund in the most prominent place, and the volatility of the fund is not even shown.
If the client does not have a deep understanding of the risks of equity funds, does not have rich investment experience in the past, and has not experienced bull and bear tests, he may not have enough understanding of the volatility risk of equity funds. Once there is a significant drawdown in the market, it is very likely to be redeemed at a loss. A very important reason why customers can't hold on to the final return on investment may be that they don't do a good job in the customer portrait of investors, and financial planners recommend to customers, or recommend too many financial products that don't match their current characteristics.
5. For special purposes, guide customers to modify the option of risk questionnaire multiple times
In practice, it is not uncommon for customers to be guided to revise their answers to the risk questionnaire several times in order to achieve their sales targets. For example, the risk level of a financial product is R4, but the risk level determined by the risk questionnaire previously filled out by the client is R3. In order to avoid investor suitability issues, clients are instructed to re-fill the risk questionnaire to raise the risk level to R4. In addition to the resulting risk of non-compliance, the potential risk of doing so is that customers may not really understand what this adjustment really means. As a result, customers with R3 risk levels are allocated to financial products with R4 risk levels. Once the risk of a financial product exceeds the customer's risk tolerance, the customer is likely to choose to redeem the financial product at an inappropriate time. This not only affects the customer's return on investment, but also the customer's happiness.
6. Customer portraits are considered to be a one-shot deal
After all, customer portraits take time and energy, and it is better to directly recommend products to customers and place orders. In the practice of wealth management, there are few financial planners who can continue to promote and gradually deepen customer portraits, while there are many financial planners who can make a hammer deal. This work mainly stops at the initial filling of the risk questionnaire when the customer opens an account and the programmatic reminder after the questionnaire expires. In the practice of wealth management, the attention to the collation and accumulation of customer portrait data is far from enough. A large amount of customer information is not systematically organized, archived and iteratively analyzed. Significant changes in customer needs are naturally difficult to detect in a timely manner.
In fact, every customer interaction is an opportunity to deepen the understanding of the customer and the potential wealth needs of the customer. Establishing awareness and methods for continuous follow-up and in-depth understanding of customers should be the proper meaning of wealth management customer portrait work.
3. The role of accurate customer portrait in wealth management services
Accurate customer portraits are essential to do a good job in wealth management services. The role of customer profiling is mainly focused on two aspects: (1) matching the right financial products, and (2) matching the right post-investment services and investor education.
1. Match suitable financial products for customers through "double portraits".
We suggest that the customer portrait can be based on two dimensions, not only the overall portrait of the customer, but also the portrait of the customer's entrusted funds. This is what we call a "double portrait". "Double portrait" can alleviate the trouble caused by the customer portrait being limited to the institution to a certain extent. On the one hand, the overall situation of the customer is profiled, and on the other hand, the psychology of the customer who is only willing to take out part of the funds, or even a small part of the funds, is considered to try in the institution, and this part of the funds is profiled separately.
First of all, the goal of the overall portrait of the customer is to understand the customer's risk appetite and financial needs pyramid and the current overall allocation.
Once we have gone through certain steps to understand the customer's financial needs pyramid and the current actual allocation, we can probably make reasonable suggestions based on the customer's overall allocation.
Figure 2 One of the goals of customer profiling is to understand the pyramid of customers' financial needs
Table 1 Customer's financial requirements and current configuration (example)
Note: The above examples of wealth planning for customer needs, such as value-added, interest-earning, and protection, are only conceptual classifications based on customer needs, and are not based on risk levels. Examples are for reference only and may vary between different classification methods. It does not constitute the promotion of any product or service, does not constitute specific investment advice, and does not represent the scope of our company's sales. The market is risky, and investors need to be cautious. There is no guarantee that investors will make a profit, nor does it guarantee that the minimum return or principal will not be lost.
For example, in the example of a customer in Table 1, based on customer information, we believe that the customer's financial needs should be allocated 10% protection products, 75% interest-bearing assets, and 15% value-added assets. In the current allocation of customers, only 5% of the assets are allocated to protection products, 45% of the assets are used to achieve value-added targets, and only 50% of the interest-bearing assets are allocated. Specifically, clients are currently allocating more value-added assets than they targeted.
However, based on the customer's risk appetite and the long-term judgment of the capital market, the customer should increase the allocation of interest-bearing assets and increase the allocation of protection assets. This is our recommendation for the customer's overall configuration.
However, clients do not place all their funds in a single wealth manager. When a customer has established trust in a wealth institution and decides to entrust 10 million yuan to the institution to take care of it, the wealth institution needs to make a special portrait of the customer's funds in order to better match the customer's financial needs.
Under the "double portrait", the customer's funds have been allocated more effectively, and it is also more in line with the customer's real financial needs.
2. Match more suitable services through more dimensional portraits of customers
In addition to helping to match customers with more suitable financial products, accurate customer portraits are also crucial in matching the right services. Adopting different post-investment services for different clients is a more efficient way for both clients and wealth institutions.
When it comes to post-investment services, in addition to the risk level, we also need to consider more dimensional information to do a better job of post-investment services. According to our observations, the client's professionalism in the financial market is a very important dimension. If we divide customers according to risk level and professionalism, investors with different specialties have different sensitivities to different investment education content. Clients can be divided into four quadrants based on their professionalism and risk level of financial investment.
Table 2 Clients are divided into four quadrants according to risk level and specialization
Because of the different professionalism of customers, the content and professional requirements of post-investment services will also be different. If you don't make any distinctions, it is easy to unreasonably occupy the customer's attention and time, causing the customer's disgust. For example, for customers who do not have any equity funds, send their views on the rise and fall of the stock market. For clients who do not have a bond fund allocation, send a comment on the bond market. For customers who are not interested in the macro point, send opinions on international relations, geopolitics and other topics. And so on, which not only consumes the limited energy and resources of wealth institutions, but also wastes the time of customers.
Taking investor education as an example, for investors with high risk appetite and high professionalism, they tend to pay more attention to where the future investment opportunities are and what the logic is. It is of little value to them to educate them only on general investor issues, such as long-term holding, what is value investing, and what is regular investing. However, for investors with a high risk appetite and low level of expertise, promoting the above can be very effective. Because for such investors, due to lack of experience, when the market fluctuates significantly, they are prone to panic and are easy to hold on. This is where simple investor education content may be more effective. For investors with low risk appetite and high professionalism, they may not like to overemphasize similar views on how high the expected returns are in the stock market. In short, for wealth management institutions, the formation of a three-dimensional investor education service system may be a multiplier with half the effort. It is a good companion to let customers with different risk appetites and professionalism find suitable companionship.
Generally speaking, in the process of wealth management, it is necessary not only to achieve "double portraits" but also to achieve "double matching". Match the right financial products with dual portraits, but also match the right services.
Table 3 Different types of clients need different types of education
3. Good KYC itself is an investor education
KYC is often an important tool and gripper for customer profiling. In fact, good KYC is also an investor education in itself. Good KYC is not only the process of understanding and familiarizing the wealth management department (institution) with the customer, but also the process of the customer understanding financial knowledge and risk cognition, and it is also the process of the customer understanding himself.
Fourth, how to do a good job of customer portrait
Next, we further delved into the detailed process of customer profiling and tried to explore a reasonable customer profiling process and specific methods.
1. The goal of customer portraits
Wealth management is customer-centric, people-oriented, considers the whole life cycle of people, and makes comprehensive arrangements around the core elements of people's asset evaluation, value-added ability, cash flow matching, wealth protection and so on. People's financial management is to achieve financial goals, and the essence behind it is the balance of assets, liabilities and cash flow. Therefore, a comprehensive and accurate customer portrait should be oriented towards understanding the customer's assets, liabilities, and cash flow.
In addition to focusing on the financial information of the customer, you should also pay attention to some non-financial information. Non-financial information includes the client's family structure and life stage. In addition, it is also necessary to know the customer's risk tolerance, financial goals, expected investment time horizon, and whether there is a need for repayment in the future. From the perspective of time, in addition to understanding the current information of the customer, it is also necessary to understand the future arrangements and changes. Therefore, in order to know the current situation, it is necessary to pay more attention to changes; for example, whether the customer has a plan for retirement, whether there is a retirement plan, whether there is a plan to send children to study abroad; if there is a company or enterprise under the customer's name, does there is a plan to go public for financing, and may there be major changes in the customer's family structure in the future? A professional customer portrait not only needs to understand the customer's wealth needs and dreams, but also understands their key concerns and potential concerns, so that the customer can solve problems.
The following is an example of a customer's KYC details.
Table 4 Direction of in-depth KYC (example)
The above is the goal of customer portrait, but it is not necessary to achieve this goal all at once. Because knowing your customers' information inevitably involves your privacy. Rushing too quickly can provoke a customer's defensiveness and ultimately backfire. Gathering misinformation is more harmful than missing information.
2. It's more important to understand how customers intend to spend their money
The ultimate goal of wealth is to express love and yearning for life. Therefore, the ultimate goal of wealth planning is really related to how you spend your money. For example, whether our wealth is used for old age, daily consumption, children's education, or passed on to future generations. Wealth planning is essentially planning for the needs of your clients. Through wealth sorting and demand planning, we reasonably plan the customer's wealth to meet the customer's demand planning, and achieve the customer's cross-life cycle demand goals in a more probable and more certain way.
Therefore, the ultimate goal of wealth management is to plan for cross-generational life needs and solve the problem of how to spend money. Where and when to spend it, how to spend it in this life, or how to spend it in the next life.
For wealth management institutions, it is necessary to understand the customer's consumption scenario, understand the customer's values, outlook on life and worldview, and understand the customer's yearning for a better life through customer KYC and customer companionship, so as to find the customer's consumption demand scenario planning, including education, health care, medical beauty, pension, inheritance, charity, etc. With the planning of consumer demand, the wealth plan is determined.
Constructing the client's wealth plan from a larger, broader and more real dimension will reconstruct the scene, content and way of accompanying the client. In the past, the main scenarios that often accompanied were investor education, product analysis, and market outlook. In the future, we should focus on the consumption scenarios of life, with consumption with investment, with capital planning with account planning, and the best way to lead customers to adjust the allocation ratio is not to talk about products and markets about the market, but to create consumption and capital use scenarios.
3. Step-by-step, understand the process of trust building
It is not difficult to see that customer portraits involve the private situation of the client and his family, and if there is not enough trust in the financial planner and wealth management institution, the client may be reluctant to tell the truth. Therefore, the first premise for a financial planner with sufficient professional knowledge to do a good job of customer portrait is to build a sense of trust, learn to ask the right questions, and communicate effectively. To build a sense of trust with customers who are not close to each other, we must first compare our hearts with our hearts, empathize, and show affinity and professionalism with the strength and professionalism of our platform. As a buyer with weak information, customers will hope that financial planners can think more about how to make financial decisions from their perspective; each customer's life growth experience, past investment experience, investment preferences, financial situation and risk tolerance are different, and cannot be generalized; so we can't talk aimlessly, which is not only inefficient but also wastes each other's time; let alone rush to "interrogate", this way will cause customers to resent it.
For financial planners who are just starting out in the industry, they may still have to accumulate professional knowledge and life experience, but they can filter the topics or specialties they are most familiar with within their ability, such as sports, real estate or stock market investment. The most important thing is to understand the customer's risk tolerance and risk appetite, communicate with aggressive investors about investment opportunities in high-growth sectors, and then give some investment advice, believing that customers are more acceptable, and communicate with conservative investors about family responsibilities, life and risk planning, and provide corresponding protection planning solutions. A professional customer profile is the result of a pleasant atmosphere and a relationship that enhances the interviews and communication. Therefore, it is essential for financial planners to prepare before the negotiation, including the highlights of the service platform and financial products, their own background and advantages, high-quality cases that can be borrowed, or high-quality products they want to recommend.
4. Continue to carry out customer KYC and do a good job in archiving customer information
Customer profiles, risk appetite and needs will change, so customer KYC should also run through the entire customer lifecycle. Financial planners should strive to continuously create touchpoints with their clients. Only by constantly colliding with customers can we dig out the pain points and needs of customers, and finally form a foundation for improving the level of wealth services.
Ongoing KYC is a process of getting to know your customers and gradually strengthening your connection with them. To do a good job of bigger and deeper customer portraits, continuous KYC is an inevitable requirement. In order to do a good job in continuous KYC, as a wealth management institution, it is necessary to establish a complete system of traceable customer information registration and strive to do a good job of analysis. In this way, you can quickly understand the needs of customers and improve the efficiency of customer service before reaching customers.
5. Summary: It is very important to understand the customer
Wealth management is essentially a matching process. Based on the understanding of the customer and the understanding of the product, select the appropriate financial products and services to meet the needs of the customer. Therefore, knowing the customer is the premise and foundation of wealth management. Only by understanding the customer can we better match the needs of the customer. Therefore, accurate customer portraits will inevitably improve the efficiency of matching, and in the long run, it will also be the cornerstone of improving customer return on investment.
Wealth management is not mysterious, it is nothing more than going from "double portrait" to "double match". We advocate the profiling of customers, and the need for a profiling of customers' funds. At the same time, on the basis of customer portraits, we match suitable financial products and services. In short, doing a good job of customer portrait is the starting point of serving customers, and the more detailed and accurate the understanding of customers, the more likely it is to win the trust and choice of customers.
In the process of doing a good job of customer portraits, we recommend that you start from the perspective of health, balance and sustainability of family wealth, gradually understand the real needs of customers, and gradually expand to the customer's non-financial information, and understand the customer's past, present and future, and grasp the customer's key concerns and concerns. At the same time, establish a good file and management of customer information, so as to lay the foundation for a better and more comprehensive understanding of customers and continuous improvement of service quality.
Disclaimer: The information or views expressed herein do not constitute investment advice to any person, nor do they take into account the particular investment objectives, financial situation or needs of the recipient, and should not be relied upon as the basis for investment decisions. The data and information contained herein are derived from publicly available market information or other sources that the Company believes to be reliable, but the Company makes no representations or warranties, express or implied, as to their accuracy or completeness. The content of the third-party reports, materials, information, etc. reproduced in this article only represents the views of the third party and does not represent the position of the Company. There can be no assurance that the views or statements contained herein will not change and the Company may issue reports at different times that are inconsistent with the information, opinions and projections contained herein. The examples of wealth planning mentioned in this article are only based on customer needs, and the value-added, interest-earning, and protection mentioned are only conceptual classifications based on customer needs, rather than classification of products/services according to risk levels. Examples are for reference only and may vary between different classification methods. It does not constitute the promotion of any product or service, does not constitute specific investment advice, and does not represent the scope of our company's sales. The market is risky, and investors need to be cautious. The Company does not guarantee that investors will make a profit, nor does it guarantee that the minimum return or principal will not be lost. Investors should fully consider their risk tolerance and risk identification ability, and invest prudently.