Change ManagementExecution PlanningProgram Management

How to serve your clients lemonade when regulation serves you lemons

US Financial Services industry is highly regulated; that’s nothing new. Financial services (Finserv) incumbents – often offering bundled/ multiple financial products – feel that current regulations impact them far more than their single/ un-bundled product offering Fintech competitors. When Finserv incumbents are battling Fintech competitors on the customer experience dimension, increased regulations may seem like a double whammy.

But regulatory changes present wonderful opportunities for Finserv incumbents to deliver superior customer experience and retain clients.

Often, trying times test the strength of a relationship between a Financial Institution (FI) and its client. How the FI responds at it’s client’s hour of need can either strengthen or break the relationship. Think of a time when you had to contact your FI because you had to sort out a discrepancy like an authorized CC transaction. Did you feel the FI had your back or did you feel they were giving you a canned response looking out for themselves? How did that incident change your equation with your FI?

Finserv regulations can create trying times for clients – even they are intended to positively impact them. Regulations can cause confusion and short-term inconvenience. If the FI handholds its clients through such times, it will be rewarded with customer loyalty.

The proposed DOL regulation that impacts retirement account advice is one such instance. Here are three ways to deliver superior customer experience in the event it comes a reality.

Put the focus back on the clients

The proposed DOL regulation has been contentious, and for good reasons. While the intent of the regulation – eliminating conflicts of interest between the advisor and the advised – is supported across the industry, the mechanics of implementation are causing heartburn for many FI business leaders. Many FIs are expected to incur significant expenses to comply with the regulation as it stands now (esp BICE) and several will probably also see near-term revenue reduction till they make changes to their business model.

But here’s the point: it’s not about you – the FI; it’s about your clients! Once you make this paradigm shift, you’ll be able to develop and deliver processes that smoothen the transition for your clients (and their clients) – even if you are bleeding.

When you put yourselves in your clients’ and their clients’ shoes, your answers to common change management questions will be different:

  • When and how should you communicate about the regulation to your clients?
    • Communicate to them after the regulation; OR take a more personalized and proactive approach?
  • If their accounts need to be moved to a fee-based structure, how should that transition look?
    • Minimize client inconvenience; OR use this opportunity to improve your client engagement process?
  • If a Best Interest Contract Exemption (BICE) is the best way forward for the client, what would that look like?
    • A 20-page legal document; OR a more user-friendly format where clients actually understand the content and confidently consent to the contract?
  • If your advisors’ compensation on retirement accounts needs to be disclosed due to the regulation, how do you disclose it?
    • Display compensation on the website and meet compliance requirements; OR use an audience-friendly format that makes it easy for client understand advisor compensation on their retirement account?
  • If your FI or your advisor needs to ‘drop’ a client due to viability reasons, how do you see that separation happening?
    • A client letter, email and/or call that explains the reason; OR something more with recommended alternatives, even names of competitors if needed, to help the clients’ transition?

If you ever find yourself thinking “that is how we have always done it,” ask yourselves “how would my Fintech competitors do this?” You will incur compliance expenses anyway; this perspective will help use those dollars wisely.

Engage an unlikely source to ensure your compliance process is also client-centric

Even though compliance and ease-of-doing-business don’t usually go hand-in-hand, engage your legal counsel to develop a client-centric compliance process. If you are looking for degrees of freedom in implementing a regulation, who else than these SMEs to guide you.

I once had an opportunity with work closely with a group of 6-8 attorneys on a company ‘spin-off’ initiative. During that time, not only did I learn some “legal speak,” I also developed a deeper appreciation for the perspective they bring to the table. They were all sharp no-doubt; but some attorneys stood out by looking beyond the language and looking at the intent of a clause/ directive when providing guidance.

When you engage such “intent-based” attorneys, you create processes that increases the ease of doing business quotient while not compromising on the risk management aspect.

Be it disclosure of compensation, BICE contract language or any other compliance procedure related to the DOL regulation, such attorneys can advice on ways to be compliant while still keeping the process client-friendly.

On a side note, Finserv industry will continue to see more regulations as the disruption continues. Attorneys who can balance compliance with ease of doing business may very well be a FI’s ticket to staying competitive.

Allow the purpose and intended outcome of the regulation to percolate

It is not uncommon for client facing teams – like client service teams or support teams – to be familiar with the context of a regulation. But change management required to address comprehensive regulations, like the one being by DOL, will need involvement from several areas in the FI. Unless all the teams touching the change management process clearly understand the purpose and intended outcome of this regulation to the clients, designing a client-centric process will be difficult.

During a recent tech initiative, a key feature that would allow service reps to “see” advisors’ screen when they called the help desk was not ready even as the pilot date neared. There were some technical complexities. I realized as a Product Manager I had not communicated the context of this feature, even though it was prioritized high for the sprint. Instead of saying “it is a ‘must have’,” I explained to the IT development lead how the service reps intend to use the feasture and its importance. Lo and behold! we had the feature available in the next sprint. The dev team had come up with an innovative solution to work around the complexity.

Most people take pride in their work and want to make a difference, but lack the context.

Think about the IT team; will the developers know why they are developing a webpage to display compensation details or will they be delivering against a set of requirements? Will the communication teams truly understand the intent of the DOL regulation to the clients or will be the seeing deliverables against deadlines? When these teams truly understand the intent, the end result will show client-centricity.

Existing client base is one major advantage Finserv incumbents have over Fintech entrants. It is common business knowledge that acquiring a new client is far more expensive than retaining one. If and when the proposed DOL regulation comes law, take the opportunity to serve up refreshing lemonade to your clients even if you, as a FI, feel you have been handed lemons. You will gain your clients’ trust and increase loyalty.

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