As the cost of living continues to rise, the financial outlook of consumers is shifting rapidly. Kidbrooke has urged firms to move towards customer-centricity.
It stated that the rise in household outgoings is making living costs less manageable. On top of this, as central banks raise interest rates, it makes it harder for borrowers to service their mortgages. Another challenge in the market is the high uncertainty around inflation and interest rate outlooks.
Due to this, Kidbrooke highlights the importance of supplying end customers with a framework that helps them navigate uncertainty and make well-informed financial decisions.
Kidbrooke offered an example of how this could look. It stated that the financial industry has traditionally approached customer needs via a product-centric approach, focusing on products that meet the needs of target customer segments.
In this context, the company could offer an inflation-linked investment or a fixed-rate mortgage for a certain term.
However, it said, “While these are appropriate options to consider with the current macroeconomic situation, one could argue that the starting point should be the individual customer’s financial situation. Increased inflation could affect various customer groups and their financial goals differently.”
As an example, a HNWI customer might seek long-term wealth preservation, while a less affluent customer might want to ensure their short-term expenses are covered.
Kidbrooke added that a contributing factor pervasiveness of the product-centric approach is that current advisor tools do not support a personalised discussion of the inflation impact.
The market is moving towards customer-centricity, but this is going to need appropriate analytical framework driving the underlying customer journey.
It said, “If you use a goal-based model with a poorly designed decision-making element for personalisation, it will be challenging to provide your customers with an accurate picture of how economic phenomena such as inflation would impact their specific situation.”
To ensure firms can effectively implement customer-centric platforms, Kidbrooke has suggested using a utility-based approach, such as that employed by Kidbrooke’s OutRank, is the best route to take.
The OutRank solution puts customers at the centre of decision-making by evaluating clients’ utility across every scenario and available investment products. The utility-based approach enables customers to perform an individual assessment of customers’ financial situations by evaluating how high inflation and interest rates impact their finances.
Through OutRank, an advisor can estimate a customer’s personalised situation, create a favourable atmosphere for trusted conversations or improve digital tools.
It added, “Successful implementation of a customer-centric approach will improve your services by helping your customers tailor their financial decision-making to respond to economic phenomena, such as inflation.
“The transition from the product-based strategy is likely to enhance your focus on your customers and help you increase their expected future wealth. Therefore, it’s more likely to lead to higher satisfaction, loyalty and Customer Lifetime Value.”
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