The Future Of Financial Advice
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Good morning. Twice a year, I fly over to the US to attend conferences on emerging financial technology. At these conferences, I get to talk to a lot of firms who really are at the cutting edge of online finance. They provide me with insights into their current propositions, and tell me what they think the future holds. Many of them view Canada, Australia and the UK as their secondary markets, so if we want to get a view of the future of financial advice & technology in the UK, we should look over the pond into our very own continent-sized crystal ball. Let’s start by looking at the future of financial technology for advisers…
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Back in April last year, I wrote a post on the Fincision blog about the back office market in the UK; it wasn’t too positive, and I got involved in a couple of interesting exchanges of view as a result! Since then, in the UK we’ve seen Salesforce Wealth Management Edition go AWOL, Capita’s Enabler project permanently disabled, and 1st Software passed from pillar to post before being bought by the dark side. Whilst some of the emerging adviser networks have made new systems their USP, our established technology providers don’t seem to have moved on much over the last year, which I find very disappointing. Contrast this with the situation in the US.
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In response to companies like Salesforce & Sungard upping their game, Pershing set itself the task of leap-frogging the opposition and building the next generation of adviser technology: NetX360. Pershing interviewed more than 700 investment professionals, and more than 1,500 suggestions were considered.
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Many firms told Pershing that they want integration and they want the ability to pick and choose their software providers, but they do not have the scale or the infrastructure to achieve their goals. So Pershing is stepping in as a conduit. With NetX360, clients will be able to have third-party integration on demand, and the products will often be available at a better price than small firms can negotiate on their own. There are also no long-term contracts to sign. Furthermore, advisors can control access to third-party software through the platform; so if a firm has 10 employees, but only two planners, the planning software can be enabled for the planners alone. If a firm wants to use a basic, inexpensive portfolio-reporting package for small accounts and a more sophisticated one for large accounts, NetX360 will run both. Pershing MD Suresh Kumar thinks the concept can be taken further still. Kumar has talked about opening his platform to other developers, drawing the analogy with Apple’s iPhone App Store. In essence, he believes that Pershing can and will offer advisers an App Store for NetX360 soon. It could be revolutionary.
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Like many applications, NetX360 will allow advisors to create their own home pages or dashboards- but it goes much further, allowing users to create and name multiple customized pages, each made up of discrete views or elements, including data from third-party providers that integrate with the system (such as CRM software & investment research tools). So, for example, first thing in the morning, an advisor might create a page that contains today's appointments from his preferred CRM application, his alerts, a list of top clients and a list of unrealized gains and losses across the practice. Once the morning review is completed, the advisor can choose to use a second page for the rest of the day. He could create several pages around common tasks, so there might be one for equity trading and another for research.
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Pershing wants to help advisors grow their businesses and reduce expenses. A single integrated set of workflows helps with the latter and Pershing will allow firms to combine their consolidated data with external information for prospecting and wealth scoring. Pershing is also considering anonymously tracking usage to identify how topperforming firms differ from the rest. Are successful firms consistently viewing particular screens that others ignore? Are they using a specific set of programs that differs from those used by the majority? By distributing this information to all users, Pershing could help raise the bar across its whole user base.
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Pershing is even planning to release new NetX360 apps for the iPhone and the BlackBerry shortly, and soon, American advisers might even see that NetX360 App Store. So where is the UK equivalent of Pershing? For the technologists in the house, that’s your challenge.
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And if that isn’t enough of a challenge, we should also consider the impact that the rising tide of consumer-facing financial technology is starting to have…
Copyright Fincision 2009
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Some pioneering american financial advisers are partnering with cutting edge technology firms to embrace the internet’s challenge to their traditional business models. Together, they are designing and building online solutions across the whole spectrum of financial education and advice. Even given the turbulent economy of the past year, there have been a number of significant angel & VC funding rounds for these fledgling collaborations, and as you’ll hear a little later, a highly successful and very profitable exit for one of the betterknown players. Before, we have a look at some of the leading firms in each of these areas, let’s just recap where we stand in the UK market…
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If anyone doubts the scale of the consumer interest in using the internet for financial research, consider this: Martin Lewis’s moneysavingexpert.com website was visited by 7,920,000 different people in July, and they looked at over 68 million pages. In one day, 710,000 people decided Martin Lewis had something interesting to say about their finances. We don’t have a true internet-based full advice service here yet, but I’m aware of a number of well-funded ongoing projects with that will deliver such a service within the next few months.
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In the US, not only have they gone further up the triangle into providing full advice online, use of services in all of these segments is sky-rocketing as people’s financial habits change in the wake of the credit crunch. A whole new area of macro financial planning is emerging, focusing on short-term goals and savings in such areas as credit card accounts, mobile phone plans, utility tariffs, reverse auctions for high interest savings, and peer-to-peer short-term lending. And people are accessing these services not just from their computers, but on their mobile phones too. As Steve Jobs likes to tell us, there’s an app for that – in fact there are currently 1160 finance apps available for iPhone alone! Let’s start at the leading websites operating in some of these areas
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The next generation of comparison shopping site is already delivering a much richer user experience. Billshrink is the leader of the pack, and is probably the most advanced comparison site I have ever seen... ... and its free...
Copyright Fincision 2009
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In the UK, we’ve already seen GoCompare spend a fortune on TV advertising to promote their new user experience, which is still way behind what you’ve just seen from BillShrink. But for us here in the UK, the real fun will start when Google enters the fray. Here’s a screenshot of what Google has been trialling on a very stealthy basis, but is rumoured to be launching soon! This is going to force the other comparison sites to really up their game and, who knows, maybe we won’t have to wait much longer to see that much richer BillShrink experience in British colours. I think I prefer it to dragons & meerkats.
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Last year, I talked a little about how consumer versions of tools that have traditionally been the domain of professional advisers were appearing. The trend is continuing, and this year I’m going to show you another planning tool which is blurring the lines between amateur and professional. Green Sherpa is a new web-based cash flow and budgeting solution that allows users to go beyond reports of actual spending, or static budgets based on historical averages, and instead create a plan much like a professional would produce.
Copyright Fincision 2009
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The tools and services we’ve looked at so far stop short of providing what we view as financial advice, although you could argue that billshrink is muddying the water somewhat. So lets have a look at two of the web-based services that are attempting to deliver financial advice…
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Mint was built the Silicon Valley Way. It started in CEO Aaran Patzer’s apartment, where, with two other partners, he built the software on a shoestring budget using mostly free open source technology. Mint’s founders interviewed their first real professional, a VP of engineering, in Aaron’s kitchen.
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From those humble beginnings, Mint has grown to be one of the most popular financial websites on the web... ..and yet again, it’s free...
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Mint automatically pulls together bank, credit card , savings and investment data, much like Green Sherpa...
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But it also provides personalized money–saving and money–making suggestions. Users identify an average of $1,000 in savings opportunities during their first session.
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Just a few months ago, Mint extended its macro financial planning focus and launched a limited financial advice service, that it developed in consultation with a number of CFPs, called Financial Fitness to it’s 1 million plus users.
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Yesterday, exactly two years after launch, Mint was acquired by NASDAQ-listed firm Intuit – the company behind Quicken and TurboTax . The deal is worth around $170 million. In all, Mint raised $32 million over three venture rounds, so that’s not a bad profit for all those who invested – about a 5x return.
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I would imagine that Simplifi’s founders would settle for a similar exit, and who knows, it might just happen… Simplifi is leading the way in delivering full independent financial planning advice over the internet. They even have a virtual financial adviser called Sophie, who guides users through the advice process. Here’s CEO Bryan Link demoing Simplifi at Finovate Startup…
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Last week, I talked to Bryan, who used to be one of you - a financial planner - and asked him to comment on how you should be thinking about the threat of automated advice…
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“As an adviser, I would think about this concept of online advice as another dimension to the types of services a face-to-face adviser could bring. The way we look at it, with the organisations we work with is, we want to be part of their segmentation plan. We want to provide advice for that group of customers who either don’t qualify for face-to-face service because they don’t have the assets or the income, or they want to opt out of that process. There are a number of folks out there who are just uncomfortable with sitting face-to-face with a professional at this point in their life. They feel like for whatever reasons, a combination of psychological factors, and maybe embarrassment about their own situation, they’re just not ready to take that step. So we feel that the online advice approach is a great first step into building an advice-based relationship, and then having an adviser come into that role as the relationship develops over time”
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Food for thought. I admit that I’ve painted a positive picture of online financial services so far, but there is a down side. The internet’s various privacy and security issues are well documented, but in a financial context, these are even more serious. Identity fraud and account hijacking are very real threats, and users should be continuously on their guard when using these services. For financial professionals, a thorough due diligence exercise against any online service that a firm is considering using is critical, because when things go wrong, they go very wrong indeed, as we are about to find out…
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Back in May, a financial website called Rudder suffered an embarrassing email glitch that affected a large number of it’s customers. In the pre-Internet days, no one other than those few hundred customers, and some of their friends, would have heard about it. Even last year, the story might have died without ever crossing over to the mass media. But when it comes to breaking news and company gaffes, 2009 is a whole new ball game. Everyone wants 15 minutes of fame as an investigative reporter, even me...
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…and this is the dream platform: Twitter! I'm going to recap how the news broke, because it illustrates the power of social media services such as twitter, facebook & blogs As the story unfolds, it’s worth taking time to think about how you would respond should something similar happen to you – remember you’ve got just 6 hours to survive!
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So, what triggered this incident? According to Rudder, a pre-planned system upgrade on the18th of May caused over 700 users to receive email containing balance and transaction information for other users. Rudder pulled the plug on the upgrade after realising it had all gone terribly wrong. Besides seeing private data in the email, unauthorized users were also able to click through links to access the full website account at Rudder.com.
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How did the news break? At just after 2:30 PM our time on 19th May, Adam Briggs of Beech Grove, Indiana, used twitter to alert his 600 or so followers to problems at Rudder. He didn't stop at that. He also took the time to search and warn several Twitter users who'd recently mentioned "Rudder.com“. Briggs went on to tweet 21 times that day about the Rudder problem.
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I was one of the people who heard from Briggs - having just tweeted about several companies, including Rudder, that I'd seen in San Francisco. I spent some time background checking the story to make sure that it wasn’t a hoax, and also tried to contact Rudder’s CEO Nikhil Roy via twitter and telephone, but without any success.
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Briggs then sent me screenshots of his Gmail inbox, full of email meant for other Rudder users...
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…plus a screenshot clearly showing this Rudder user’s paycheck details, mobile phone bills, bank account and credit card balances.
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Based on this evidence, at 5pm I decided to run the story on the Fincision blog .
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Within minutes, the story was being retweeted around the internet, and the blog had over 500 visitors within an hour.
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At just after seven pm, I got in touch with my friend Pete Cashmore who runs a blog called Mashable. A half-hour later, Mashable, which is the fifth largest blog in the USA, published a post on the Rudder problem. From Mashable, the problem was retweeted 120 times within 20 minutes.
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Then at 9 o’clock, the second largest blog in the USA, TechCrunch, which has more than 2 million subscribers, posted the story. And because of high comment activity, it stayed on the top of TechCrunch most of the next 12 hours.
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Finally, just over 10 hours after the error was first reported on Twitter, Nikhil Roy, Rudder's CEO, broke cover to post a detailed reply on TechCrunch and Mashable. Roy apologised for the error and explained what had happened.
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Rudder also created a special blog which listed the steps they were taking to fix the problem, and offered users a complimentary subscription to an identity fraud protection service. Not a bad response, but Rudder could have used social media much better. The company's Twitter page and that of its CEO were silent all day. A short Twitter posting, even "we've stopped all emails and are working on it" would have reassured users and potentially made the story less alarming. Also, Rudder didn't have a blog, so there was no place where they could post updates during the day. It was complete silence for 10 hours, other than the interview with TechCrunch. The big lesson here is the need for damage-control procedures that take into account the power and speed of new media. The entire episode could have, prior to Twitter and the blogs, been known to just a few customers of a very small company, but instead traveled from a lone tweet to a large splash across the homepage of a major publication, all within a few hours.
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The wounds inflicted on Rudder within that 6 hour period have been significant; in the following month they lost over three-quarters of their customers, and to date they have not recovered from that position. The internet can make you, and it can break you. Be prepared for both…
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Last year, I talked about the threat from the net. This year, I hope you will take away the message that there are many opportunities to be explored, not just threats to be avoided, and perhaps seeing how the american market is developing will inspire you to think about how your business might gain from the digital revolution we are experiencing. I want to talk about new opportunities right now. Our industry is no stranger to change, but there is one particular aspect of change that is regularly promoted to advisers that troubles me, and that is the assertion that, in order for financial advice firms to survive, they must first segment their clients, which is OK, but then get rid of the unprofitable majority. I’ve read stories of up to 60 or 70% of existing customers receiving a polite letter from their newly-converted new model adviser telling them that, in the nicest possible way, they can’t afford him or her any longer and should look elsewhere. Years of time & effort in marketing, networking & relationship-building are being sacrificed in the name of progress. But why are these customers now unprofitable? Why do you have to show them the door? It’s that last bit I have a problem with, and I know some of you do to. Well, this is my message for you…
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I can’t think of any other profession that believes it can have too many customers right now. Too many customers isn’t the problem. This is the problem:
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Yes, you don’t have enough time in the day to physically see all of your customers, but that’s a distribution problem. If you could deliver your service without having to see your customers, they would become profitable, and the problem would go away. And really, it’s not a problem. Certainly, as we’ve seen & heard in the past 20 minutes or so, our American friends don’t view it as a problem. They see the opportunity, and they are acting on it… So, imagine this…
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What if there was a way to distribute your firm’s financial advice via the internet? What if there was an advice distribution platform that you could rent, brand, customise, load up your own advice processes and decision trees, choose the products and providers that you want to recommend, and then introduce the platform to those customers that you can’t afford to see? People still want a trusted adviser, ideally someone who is qualified and experienced, who is regulated & insured, who can help them with their financial problems, but they want that on their terms, and when it suits them. They also want validation; they want someone to tell them they are making the right decision – in much the same way that Amazon’s people like you bought this...” works. This platform would show who else has acted on your recommendation & whether they thought it was a good suggestion, but Financial Advisers are still the people best placed to provide the initial guidance, but there are challenges to be overcome. The skills to build such a platform lie outside our industry, which means we need technology partners. The costs of building such a solution, plus the challenge of scaling it across the number of supporting firms it would need to make it a viable ongoing service, is not something that one individual firm could take on; it requires collaboration.
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There are regulatory and process challenges that would require an imaginative and engaging user experience to overcome them and compel your customers to use the service. The opportunities would be vast, though. Products, investment portfolios, advice, books, seminars, videos, premium advice via skype & webcam, could all be sold via such a platform, and could revolutionise our industry in much the same way that Pershing’s new platform will in the USA. We are at a time where there is a perfect financial storm underway. The events of the last 12 months have changed the way the masses view financial services. More people are saving, it’s harder to get credit, people are far more realistic about there financial situations, and they are coming to the conclusion that they need expert help. We should be engaging them, not turning them away, and distributing your advice via internet is the way forward. It’s a wonderful dream, and if you like the sound of it, come and talk to me later. The advice distribution platform may just be a little closer to reality than you might think…
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Contact Mike Linskey: [email protected]
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Copyright Fincision 2009
1
Back in April last year, I wrote a post on the Fincision blog about the back office market in the UK; it wasn’t too positive, and I got involved in a couple of interesting exchanges of view as a result! Since then, in the UK we’ve seen Salesforce Wealth Management Edition go AWOL, Capita’s Enabler project permanently disabled, and 1st Software passed from pillar to post before being bought by the dark side. Whilst some of the emerging adviser networks have made new systems their USP, our established technology providers don’t seem to have moved on much over the last year, which I find very disappointing. Contrast this with the situation in the US.
Copyright Fincision 2009
2
In response to companies like Salesforce & Sungard upping their game, Pershing set itself the task of leap-frogging the opposition and building the next generation of adviser technology: NetX360. Pershing interviewed more than 700 investment professionals, and more than 1,500 suggestions were considered.
Copyright Fincision 2009
3
Many firms told Pershing that they want integration and they want the ability to pick and choose their software providers, but they do not have the scale or the infrastructure to achieve their goals. So Pershing is stepping in as a conduit. With NetX360, clients will be able to have third-party integration on demand, and the products will often be available at a better price than small firms can negotiate on their own. There are also no long-term contracts to sign. Furthermore, advisors can control access to third-party software through the platform; so if a firm has 10 employees, but only two planners, the planning software can be enabled for the planners alone. If a firm wants to use a basic, inexpensive portfolio-reporting package for small accounts and a more sophisticated one for large accounts, NetX360 will run both. Pershing MD Suresh Kumar thinks the concept can be taken further still. Kumar has talked about opening his platform to other developers, drawing the analogy with Apple’s iPhone App Store. In essence, he believes that Pershing can and will offer advisers an App Store for NetX360 soon. It could be revolutionary.
Copyright Fincision 2009
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Like many applications, NetX360 will allow advisors to create their own home pages or dashboards- but it goes much further, allowing users to create and name multiple customized pages, each made up of discrete views or elements, including data from third-party providers that integrate with the system (such as CRM software & investment research tools). So, for example, first thing in the morning, an advisor might create a page that contains today's appointments from his preferred CRM application, his alerts, a list of top clients and a list of unrealized gains and losses across the practice. Once the morning review is completed, the advisor can choose to use a second page for the rest of the day. He could create several pages around common tasks, so there might be one for equity trading and another for research.
Copyright Fincision 2009
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Pershing wants to help advisors grow their businesses and reduce expenses. A single integrated set of workflows helps with the latter and Pershing will allow firms to combine their consolidated data with external information for prospecting and wealth scoring. Pershing is also considering anonymously tracking usage to identify how topperforming firms differ from the rest. Are successful firms consistently viewing particular screens that others ignore? Are they using a specific set of programs that differs from those used by the majority? By distributing this information to all users, Pershing could help raise the bar across its whole user base.
Copyright Fincision 2009
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Pershing is even planning to release new NetX360 apps for the iPhone and the BlackBerry shortly, and soon, American advisers might even see that NetX360 App Store. So where is the UK equivalent of Pershing? For the technologists in the house, that’s your challenge.
Copyright Fincision 2009
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And if that isn’t enough of a challenge, we should also consider the impact that the rising tide of consumer-facing financial technology is starting to have…
Copyright Fincision 2009
8
Some pioneering american financial advisers are partnering with cutting edge technology firms to embrace the internet’s challenge to their traditional business models. Together, they are designing and building online solutions across the whole spectrum of financial education and advice. Even given the turbulent economy of the past year, there have been a number of significant angel & VC funding rounds for these fledgling collaborations, and as you’ll hear a little later, a highly successful and very profitable exit for one of the betterknown players. Before, we have a look at some of the leading firms in each of these areas, let’s just recap where we stand in the UK market…
Copyright Fincision 2009
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If anyone doubts the scale of the consumer interest in using the internet for financial research, consider this: Martin Lewis’s moneysavingexpert.com website was visited by 7,920,000 different people in July, and they looked at over 68 million pages. In one day, 710,000 people decided Martin Lewis had something interesting to say about their finances. We don’t have a true internet-based full advice service here yet, but I’m aware of a number of well-funded ongoing projects with that will deliver such a service within the next few months.
Copyright Fincision 2009
10
In the US, not only have they gone further up the triangle into providing full advice online, use of services in all of these segments is sky-rocketing as people’s financial habits change in the wake of the credit crunch. A whole new area of macro financial planning is emerging, focusing on short-term goals and savings in such areas as credit card accounts, mobile phone plans, utility tariffs, reverse auctions for high interest savings, and peer-to-peer short-term lending. And people are accessing these services not just from their computers, but on their mobile phones too. As Steve Jobs likes to tell us, there’s an app for that – in fact there are currently 1160 finance apps available for iPhone alone! Let’s start at the leading websites operating in some of these areas
Copyright Fincision 2009
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The next generation of comparison shopping site is already delivering a much richer user experience. Billshrink is the leader of the pack, and is probably the most advanced comparison site I have ever seen... ... and its free...
Copyright Fincision 2009
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In the UK, we’ve already seen GoCompare spend a fortune on TV advertising to promote their new user experience, which is still way behind what you’ve just seen from BillShrink. But for us here in the UK, the real fun will start when Google enters the fray. Here’s a screenshot of what Google has been trialling on a very stealthy basis, but is rumoured to be launching soon! This is going to force the other comparison sites to really up their game and, who knows, maybe we won’t have to wait much longer to see that much richer BillShrink experience in British colours. I think I prefer it to dragons & meerkats.
Copyright Fincision 2009
14
Last year, I talked a little about how consumer versions of tools that have traditionally been the domain of professional advisers were appearing. The trend is continuing, and this year I’m going to show you another planning tool which is blurring the lines between amateur and professional. Green Sherpa is a new web-based cash flow and budgeting solution that allows users to go beyond reports of actual spending, or static budgets based on historical averages, and instead create a plan much like a professional would produce.
Copyright Fincision 2009
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Copyright Fincision 2009
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The tools and services we’ve looked at so far stop short of providing what we view as financial advice, although you could argue that billshrink is muddying the water somewhat. So lets have a look at two of the web-based services that are attempting to deliver financial advice…
Copyright Fincision 2009
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Mint was built the Silicon Valley Way. It started in CEO Aaran Patzer’s apartment, where, with two other partners, he built the software on a shoestring budget using mostly free open source technology. Mint’s founders interviewed their first real professional, a VP of engineering, in Aaron’s kitchen.
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From those humble beginnings, Mint has grown to be one of the most popular financial websites on the web... ..and yet again, it’s free...
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Mint automatically pulls together bank, credit card , savings and investment data, much like Green Sherpa...
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But it also provides personalized money–saving and money–making suggestions. Users identify an average of $1,000 in savings opportunities during their first session.
Copyright Fincision 2009
21
Just a few months ago, Mint extended its macro financial planning focus and launched a limited financial advice service, that it developed in consultation with a number of CFPs, called Financial Fitness to it’s 1 million plus users.
Copyright Fincision 2009
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Yesterday, exactly two years after launch, Mint was acquired by NASDAQ-listed firm Intuit – the company behind Quicken and TurboTax . The deal is worth around $170 million. In all, Mint raised $32 million over three venture rounds, so that’s not a bad profit for all those who invested – about a 5x return.
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I would imagine that Simplifi’s founders would settle for a similar exit, and who knows, it might just happen… Simplifi is leading the way in delivering full independent financial planning advice over the internet. They even have a virtual financial adviser called Sophie, who guides users through the advice process. Here’s CEO Bryan Link demoing Simplifi at Finovate Startup…
Copyright Fincision 2009
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Last week, I talked to Bryan, who used to be one of you - a financial planner - and asked him to comment on how you should be thinking about the threat of automated advice…
Copyright Fincision 2009
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“As an adviser, I would think about this concept of online advice as another dimension to the types of services a face-to-face adviser could bring. The way we look at it, with the organisations we work with is, we want to be part of their segmentation plan. We want to provide advice for that group of customers who either don’t qualify for face-to-face service because they don’t have the assets or the income, or they want to opt out of that process. There are a number of folks out there who are just uncomfortable with sitting face-to-face with a professional at this point in their life. They feel like for whatever reasons, a combination of psychological factors, and maybe embarrassment about their own situation, they’re just not ready to take that step. So we feel that the online advice approach is a great first step into building an advice-based relationship, and then having an adviser come into that role as the relationship develops over time”
Copyright Fincision 2009
26
Food for thought. I admit that I’ve painted a positive picture of online financial services so far, but there is a down side. The internet’s various privacy and security issues are well documented, but in a financial context, these are even more serious. Identity fraud and account hijacking are very real threats, and users should be continuously on their guard when using these services. For financial professionals, a thorough due diligence exercise against any online service that a firm is considering using is critical, because when things go wrong, they go very wrong indeed, as we are about to find out…
Copyright Fincision 2009
27
Back in May, a financial website called Rudder suffered an embarrassing email glitch that affected a large number of it’s customers. In the pre-Internet days, no one other than those few hundred customers, and some of their friends, would have heard about it. Even last year, the story might have died without ever crossing over to the mass media. But when it comes to breaking news and company gaffes, 2009 is a whole new ball game. Everyone wants 15 minutes of fame as an investigative reporter, even me...
Copyright Fincision 2009
28
…and this is the dream platform: Twitter! I'm going to recap how the news broke, because it illustrates the power of social media services such as twitter, facebook & blogs As the story unfolds, it’s worth taking time to think about how you would respond should something similar happen to you – remember you’ve got just 6 hours to survive!
Copyright Fincision 2009
29
So, what triggered this incident? According to Rudder, a pre-planned system upgrade on the18th of May caused over 700 users to receive email containing balance and transaction information for other users. Rudder pulled the plug on the upgrade after realising it had all gone terribly wrong. Besides seeing private data in the email, unauthorized users were also able to click through links to access the full website account at Rudder.com.
Copyright Fincision 2009
30
How did the news break? At just after 2:30 PM our time on 19th May, Adam Briggs of Beech Grove, Indiana, used twitter to alert his 600 or so followers to problems at Rudder. He didn't stop at that. He also took the time to search and warn several Twitter users who'd recently mentioned "Rudder.com“. Briggs went on to tweet 21 times that day about the Rudder problem.
Copyright Fincision 2009
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I was one of the people who heard from Briggs - having just tweeted about several companies, including Rudder, that I'd seen in San Francisco. I spent some time background checking the story to make sure that it wasn’t a hoax, and also tried to contact Rudder’s CEO Nikhil Roy via twitter and telephone, but without any success.
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Briggs then sent me screenshots of his Gmail inbox, full of email meant for other Rudder users...
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…plus a screenshot clearly showing this Rudder user’s paycheck details, mobile phone bills, bank account and credit card balances.
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Based on this evidence, at 5pm I decided to run the story on the Fincision blog .
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Within minutes, the story was being retweeted around the internet, and the blog had over 500 visitors within an hour.
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At just after seven pm, I got in touch with my friend Pete Cashmore who runs a blog called Mashable. A half-hour later, Mashable, which is the fifth largest blog in the USA, published a post on the Rudder problem. From Mashable, the problem was retweeted 120 times within 20 minutes.
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Then at 9 o’clock, the second largest blog in the USA, TechCrunch, which has more than 2 million subscribers, posted the story. And because of high comment activity, it stayed on the top of TechCrunch most of the next 12 hours.
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Finally, just over 10 hours after the error was first reported on Twitter, Nikhil Roy, Rudder's CEO, broke cover to post a detailed reply on TechCrunch and Mashable. Roy apologised for the error and explained what had happened.
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Rudder also created a special blog which listed the steps they were taking to fix the problem, and offered users a complimentary subscription to an identity fraud protection service. Not a bad response, but Rudder could have used social media much better. The company's Twitter page and that of its CEO were silent all day. A short Twitter posting, even "we've stopped all emails and are working on it" would have reassured users and potentially made the story less alarming. Also, Rudder didn't have a blog, so there was no place where they could post updates during the day. It was complete silence for 10 hours, other than the interview with TechCrunch. The big lesson here is the need for damage-control procedures that take into account the power and speed of new media. The entire episode could have, prior to Twitter and the blogs, been known to just a few customers of a very small company, but instead traveled from a lone tweet to a large splash across the homepage of a major publication, all within a few hours.
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The wounds inflicted on Rudder within that 6 hour period have been significant; in the following month they lost over three-quarters of their customers, and to date they have not recovered from that position. The internet can make you, and it can break you. Be prepared for both…
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Last year, I talked about the threat from the net. This year, I hope you will take away the message that there are many opportunities to be explored, not just threats to be avoided, and perhaps seeing how the american market is developing will inspire you to think about how your business might gain from the digital revolution we are experiencing. I want to talk about new opportunities right now. Our industry is no stranger to change, but there is one particular aspect of change that is regularly promoted to advisers that troubles me, and that is the assertion that, in order for financial advice firms to survive, they must first segment their clients, which is OK, but then get rid of the unprofitable majority. I’ve read stories of up to 60 or 70% of existing customers receiving a polite letter from their newly-converted new model adviser telling them that, in the nicest possible way, they can’t afford him or her any longer and should look elsewhere. Years of time & effort in marketing, networking & relationship-building are being sacrificed in the name of progress. But why are these customers now unprofitable? Why do you have to show them the door? It’s that last bit I have a problem with, and I know some of you do to. Well, this is my message for you…
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I can’t think of any other profession that believes it can have too many customers right now. Too many customers isn’t the problem. This is the problem:
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Yes, you don’t have enough time in the day to physically see all of your customers, but that’s a distribution problem. If you could deliver your service without having to see your customers, they would become profitable, and the problem would go away. And really, it’s not a problem. Certainly, as we’ve seen & heard in the past 20 minutes or so, our American friends don’t view it as a problem. They see the opportunity, and they are acting on it… So, imagine this…
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What if there was a way to distribute your firm’s financial advice via the internet? What if there was an advice distribution platform that you could rent, brand, customise, load up your own advice processes and decision trees, choose the products and providers that you want to recommend, and then introduce the platform to those customers that you can’t afford to see? People still want a trusted adviser, ideally someone who is qualified and experienced, who is regulated & insured, who can help them with their financial problems, but they want that on their terms, and when it suits them. They also want validation; they want someone to tell them they are making the right decision – in much the same way that Amazon’s people like you bought this...” works. This platform would show who else has acted on your recommendation & whether they thought it was a good suggestion, but Financial Advisers are still the people best placed to provide the initial guidance, but there are challenges to be overcome. The skills to build such a platform lie outside our industry, which means we need technology partners. The costs of building such a solution, plus the challenge of scaling it across the number of supporting firms it would need to make it a viable ongoing service, is not something that one individual firm could take on; it requires collaboration.
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There are regulatory and process challenges that would require an imaginative and engaging user experience to overcome them and compel your customers to use the service. The opportunities would be vast, though. Products, investment portfolios, advice, books, seminars, videos, premium advice via skype & webcam, could all be sold via such a platform, and could revolutionise our industry in much the same way that Pershing’s new platform will in the USA. We are at a time where there is a perfect financial storm underway. The events of the last 12 months have changed the way the masses view financial services. More people are saving, it’s harder to get credit, people are far more realistic about there financial situations, and they are coming to the conclusion that they need expert help. We should be engaging them, not turning them away, and distributing your advice via internet is the way forward. It’s a wonderful dream, and if you like the sound of it, come and talk to me later. The advice distribution platform may just be a little closer to reality than you might think…
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Contact Mike Linskey: [email protected]
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