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The Customer is Still King

In a down market, it's easy to put something like CRM on the back burner, but that strategy may get you the cold shoulder.

In a down market, it's easy to put something like CRM on the back burner, but that strategy may get you the cold shoulder.

When it comes to customer-relationship management, 2003 will be a year of retrenching for some firms and of fine-tuning technology investments for others, say experts.

"I think that a lot of companies are still in the rollout mode," says Dave Erickson, a risk management partner at PricewaterhouseCoopers, who tracks CRM developments from his Chicago base.

People have been in the pilot stage for the past couple of years, "Now we're getting into much bigger implementations," he says.

That's the case with Tamarah Daniel, vice president of operations at Intrepid Capital Management Inc., which employs 30 people and manages $460 million.

The Jacksonville, Fla.-based firm has grown quickly through acquisitions in the past couple of years, leaving it juggling a variety of different contact-management systems, which weren't always capable of integrating with the firm's other systems.

That made managing contact with clients difficult, as some of the systems didn't allow advisers to see the client's positions or statements.

To rectify that, Daniel's firm opted, last September, to deploy a new integrated portfolio-management and contact system, Qube from Advent Software, Inc. Daniel says there are "so many third parties involved" in the investment process, and it's "so much more complex, this system allows us to handle that." Not only can users access contact information, but they can also access portfolio information.

Under the old system, brokers couldn't "personalize anything, because it meant additional work." Now, she says, employees can do quarterly and monthly reporting and send additional personalized letters. "It's definitely an improvement. You're not taking additional time away from human capital."

It's a matter of understanding the opportunities that the new technology brings and taking advantage of the tools to better manage client relations, she says.

For others, though, 2003 won't be as pleasant when it comes to CRM technology, says Kevin Kraft, the vice president of the consulting practice for Cap Gemini Ernst & Young in New York.

Rather, he says, 2003 will be a year of "retrenchment" for many firms that are "licking their wounds" after rolling out expensive enterprise-wide systems only to find that brokers rejected them.

The problem wasn't the technology, Kraft explains, it was the way firm's rolled out the technology that was the impediment.

Many didn't take the time to understand how their best performers operated. "Sophisticated brokers already know their clients' spouses' name or their kids' birthdays and they know who the lawyer or accountant is," because of the referral nature of the business, he says. Firms had no idea of the kinds of stuff their top producers tracked so "when the firm's best brokers were asked to use the technology, they rejected it."

PwC's Erickson adds that a lot of firms believed that "CRM would solve their organizational issues." But it's "not a silver bullet," he says, noting that "to make CRM come to life, you need quite a few changes on how you provide services to customers."

He says that CRM in 2003 is similar to large-scale enterprise-software applications five years ago - many implementations are struggling. The problem, he says, is that you can't "boil the ocean," so firms can't expect a CRM solution to do everything at once.

Moreover, Kraft adds, your CRM system has to "reflect the best practices of your top brokers. You have to prove to those guys it's not a hindrance and not going to tie their hands behind their backs." That means firms need to understand how staff works and how their processes can be maximized, using everything from alerts to time and contact management and tapping all aspects of the corporation's knowledge and products.

Kraft says firms need to spend more time in 2003 understanding their workflow processes and customizing a "dashboard"of services, tools and products and layering best practices into the CRM systems.

One trend Kraft sees shaping up this year is a move to more self-service sales, taking a trick from the world of online bookseller Amazon.com.

A person who buys a specific book is provided with a list of other titles that customers who purchased the same tome also bought. Applied to the investment world, the idea is that a firm segments its clients and provides them with other possible investments purchased by like-minded investors. Kraft says it's a strategy that is "working very well" for one client.

As well, CRM will take on a broader view in 2003 than simple contact management. It will start to reach deeper into places like the call center and firm databases through analytics, so that advisers can get a better overall picture of their clients' assets, purchasing habits and stage of investing life cycle.

The ability to aggregate accounts and get a full picture of a client's holding will be critical to better customer service moving forward, says Brent Owens, president of CFD Investments Inc., a registered broker/dealer in Kokomo, Ind.

With more than 100 advisers, his firm recently added aggregation technology from ByAllAccounts, a Woburn, Mass. company that allows CFD representatives to see a full picture of their clients' holdings, both captive and non-captive accounts.

That allows the firm to provide better advice on portfolio diversification, which should help improve returns. "It's hard to put together a portfolio for clients if you don't know all the pieces," Owens says.

Pat Gardner, president and chief executive officer of ByAllAccounts, says you'll see "much more collaborative relationships" between advisers and clients as they use Web technology to keep in touch.

Erickson predicts that in 2003, the industry will see a "proliferation of wireless and the ability to be remote and still be able to get information."

Once the market turns around, he says, people will be buying and selling more stocks and traveling again, so the appetite for instant information, while on the move, will return.

One of the big challenges for CRM in 2003 will be integration, Erickson says - making sure that systems can speak to each other. "Integration will become more stable and robust," he predicts.

Nick Ward, Siebel Systems general manager, finance, which includes the brokerage and investment-banking space, says 2003 will be the year of "broader-based implementations,"especially on the institutional side of the business. "Most CRM implementations in institutional finance have been very narrowly focused." That's because firms are "extremely silo based."

Moving forward, he says, firms need to be thinking about "chunked, phased in implementations that address the entire firm, as opposed to simply automating across a single line of business."

CRM, says Ward, "has shifted dramatically from where it was as little as nine months ago. It's a new game for us," he says, made possible by technical innovations that will make it easier to integrate CRM into firm-wide systems and workflow. That capability didn't exist nine months ago, he says, agreeing that early CRM technology was "clunky" and "cumbersome to use." The focus, he says, will shift to building CRM practices around workflow.

Fritz McCormick, an analyst at Boston-based Celent Communications says that while the collapse of investment volume has hurt tech spending, firms will still cough up money in 2003 for CRM. In fact, he says, the slump has created a "lot more interest in being able to develop your relationship with customers and being able to internally analyze and develop more targeted offerings. The markets are so bad, that firms have to find a way to leverage more out of their clients."

According to a recent Celent study, the penetration rate for CRM in the top 100 North American banks and security firms will jump from about 12 percent in 2002 to 18 percent in 2003 and rise to more than 35 percent in 2005.

However, not every vendor will reap rewards. In fact, Erickson says, "I think we are definitely going to see consolidation (among vendors) and we'll come out with a few strong players."

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