Who "owns" the customer? - changing environment of the financial services industry - Panel Discussion

Chief Executive, The, Sept, 1999 by J.P. Donlon

Donlon: I think the operative word there is "skilled." We've all been contacted by people purporting to be friends of the customer who do not have the necessary skill.

Richard DeAgazio (Boston Capital Services): Doing the best job comes down to relationships. And there are various levels of relationships; there's a transactional relationship, the first time you get the customer to act, and then there are what I call the "moments of truth," when the client measures you and how well you followed up.

I've just recently done a lot of e-commerce personally. I bought all my furniture through the Internet, all name brands. And I tested a couple of retailers by saying, "I can buy it here, what can you do for me? I'll deal locally." They said, "You can't buy it for that price." But in fact, I now have a house full of it.

The reason I mention that is there are three or four furniture companies on the Internet and it was the one that responded to me after my first purchase and kept coming at me, because they had a way of measuring my searches, that I developed a relationship with. So they found the customer and then serviced me. And now they own me.

Devlin: I agree with what you're saying, but the product and service you're looking at is different. If you look at the spectrum of financial services and products, you have demand products like mutual funds or one-off stock transactions that Schwab is doing, and then you have non-demand products like life insurance. When was the last time any of you picked up the telephone or went on the Web to buy life insurance?

Financial services becomes very complex. There are 12,000 mutual funds out there. How does even an educated individual tap into the Internet and make an educated decision on what is the best mutual fund to buy, taking into consideration their needs over a long-term basis?

DeAgazio: You can, because the information is there, where it was available only to financial professionals five or six years ago.

Devlin: So far things are changing rapidly, but research suggests that once a person owns two or more financial products, they prefer doing business with some type of consultant. Also, as household income continues to go up, they also are looking for financial advice.

Hamilton: There are a lot of advisors out there. There's a whole generation of people who are quite comfortable dealing with people not face-to-face. You can get your advisor on a video, on the Internet, and you can get information and check all those things. So I think some products need research; they need somebody you trust. And the person who provides all of those things and lets you choose how you want to buy the product is going to be the winner.

Benmosche: I think this is all experimental. I could buy furniture from the back office, and then I get the furniture and it's broken. So now I need to go to somebody. Going to Joe Blow's Furniture Store and getting a cheap discount is different than going to GE or Met Life or the Bank of America, which says, "Not only do you come to me, not only do I get you a good deal, but I stand behind everything you buy." Once you talk about the power of a brand, of a great company with a great reputation, then I think the marketplace will change.