Sunday, July 27, 2014

And if compliance were Finance 2.0’s best friend…and the other way around?

When talking to (Swiss) bankers, compliance is often seen as one of the biggest showstoppers for business development and innovation. This goes especially for Finance 2.0.  On the other hand Finance 2.0 often gives compliance officers nightmares but….actually they could be best friends!


Certainly the Swiss banking secrecy is a bid of challenge for social media activities. Because of the fear of violation and of reputational risk, banking employees are hardly allowed to interact in the Finance 2.0 world with clients or potential clients. To convince compliance that the advantages of Finance 2.0 would exceed the disadvantages and that the risk might be bigger not to be a player in the Finance 2.0 world is hard and will take time, but if there were an area where business and compliance could be friends……

What is the current situation, what do clients have to do in order to be compliant? 20 years ago a new private banking clients had to read and sign a few documents and then were ready to act. In our days they have to read and sign a “book” and then for additional more sophisticated products have to read and sign some more stuff. So is anybody happy? No! The client advisor isn’t. The client isn’t because he has to read tons of documents he doesn’t understand and he has no interest in at this particular moment and compliance won’t as soon they find out after the next big bang, that clients once more are upset, once more have bought something they don’t understand and that all the signed papers haven’t changed a thing. It’s not about save your ass politics but about financial literacy and that’s where Finance 2.0 jumps in.

At the Finance 2.0 in Zurich Crealogix showed a good example how this challenge could be handled differently. They presented a Finance 2.0 CRM to be used by client advisors and clients. This CRM consists of a traditional part but with the possibility for the client to add components from social media. On one hand clients have all they need for communication and information purpose in one tool on the other hand the CRM is enriched by additional information from Social Media. This helps to advise and support the client in a better way, in particularly in the compliance area. A key is big data and the access to all CRM data including data from the CRM Finance 2.0 components. Based on analysis of data the system can provide customized compliance information exactly when needed   

A good example is the purchase of an option. In order to get to a decision a client will conduct a number of analyses over a certain period. He will look at charts of the underlying; will evaluate which strike and which maturity suits him etc. Either way he will leave a trace. Within this process, based on analysis of activities and data including Social Media, information can be provided in user-friendly way. Exactly what the client wants and when he wants it. A well timed popup giving him exactly this would sharply increase client’s willingness to consume the provided information and to confirm that he understood everything. This willingness is usually not there, when the client is just about to open a portfolio. By the way the second worst point in time to provide information and force him to click a box is right before he wants to press the purchase button. The popups providing information should be short, accurate and interactive. A good way how to communicate important information could be as Fintool does. In addition such a Finance 2.0 CRM could send important information to the client adviser, e.g. that portfolio analysis and analysis of client’s social media data show that risk tolerance and risk ability is not optimal for this product and that some action is required.

My conclusion: The above mentioned area is exactly the one where compliance and Finance 2.0 really can be best friends! From there it will be much easier to convince compliance of additional Finance 2.0 activities in other areas

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