Outside The Box: Brokerages Rush To Personalize Content For Millennials Amid $30 Trillion Wealth Transfer

Ever since online brokerages added customers’ names and balances to their landing pages, financial firms have struggled to meaningfully personalize content to better engage customers. Today, most firms still get it wrong and, as a result, their customers are bored and at risk of taking their money elsewhere.

Yet, steps have been taken in the right direction. Some noteworthy efforts include TD Ameritrade’s AMTD, -1.48%  Facebook Bot, E*Trade’s ETFC, -1.54%  weekly dynamic video recap of market performance on Twitter, Morgan Stanley’s MS, -1.49%  efforts to create digital, personal tools to aid their advisors and Bank of America Merrill Lynch’s BAC, -1.46%  new approach to research with their “stock story” feature. Truly personalizing those experiences is the next evolution.

Connecting with investors is crucial for online brokerages now because the biggest wealth transfer in U.S. history will take place in the coming decades. Generation X and millennials are about to inherit about $30 trillion, and many of them will fire their parents’ advisers.

The reality is that millennials don’t trust financial institutions to give them advice: A Facebook study finds only 8% trust financial institutions, 45% would switch financial firms for any better option, and millennials are two-and-a-half times likelier than Gen Xers or baby boomers to use robo-advisers to manage their wealth.

Personalization might well be the key in their decisions.

Know what you want to accomplish

This is what brokerages and advisers are working on: It’s about moving from pushing information to having a dialog. It should be a two-way conversation; the adviser pushes compelling data to the client, understands how the end user reacts and responds accordingly. And that personalized content must be consumable in a way that’s accessible on whatever device the customer uses and over whatever channel they prefer.

Sending someone personalized content via PDF on a mobile device won’t improve loyalty if the client has to pinch and pull at the document and then squint to read the tiny text.

Most marketing executives only pay lip-service to personalization — only 11.6% of firms have budgets for personalizing content. And, four of 10 of all but the very largest financial institutions have “static” sites, offering no personalization, even though 70% of consumers say personalized content influences their loyalty.

Personalizing content is not just about checking a box or being part of the latest hip marketing trend. After Apple AAPL, -0.96%  opened its App Store in 2008, countless companies rushed to have a mobile app, but many were failures if the app served no specific business rationale.

Three basics of personalization

The three principal approaches to personalization are behavioral, segmentation and actual personalization. Deciding how to approach those three areas is informed by what goal the firm is trying to achieve. Is the objective having users spend more time engaged online? Is the goal boosting assets under management? The desired outcome helps set the direction of what combination of the three methods of personalization will get you there.

Behavioral personalization responds to the user taking certain actions by offering differing experiences. We see this in our everyday lives with apps like Facebook FB, -1.56%  that know what articles we click on, how long we dwell on each and whether we comment, like or share. That informs an algorithm that picks what articles surface next for you. Similarly, if a customer goes to a wealth-management app and reads news stories about commodities every day, the app could prioritize more of those stories and push analyst research on commodities.

Segmentation personalization places types of people into subsets of the entire audience, offering each a modified experience. In financial services, that’s often done by self-identification. Are you a novice or experienced investor? Do you prefer active or passive portfolio management? What is your risk profile and your investment horizon?

Actual personalization drills deeper than your current balance, drawing on what the firm knows about you, the client. For example, a client who bought a South African ETF in 2016 that he felt was undervalued as a result of the Ebola scare could be served up content about the investment outlook in southern Africa.

As personalization matures, it has shifted from simple behavioral and segmentation techniques and transformed into more actual personalization. The best way to build a trusted relationship with the user is to offer a different navigation or workflow based on the client’s segment, populated with content based on data-driven personalization, and optimized based on the client’s actual behavior.

Don’t make clients ask for data

Financial-services clients have grown tired of having to log on to a web site to find a subscription center to set their triggers, specify delivery preferences and their desired frequency of alerts. They want content without asking for it. For example, Fitbit FIT, +1.51%  buzzes on your wrist when you hit 10,000 steps for the day, not because they picked some magic number, but because the American Heart Association has set that as a heart-healthy goal.

The challenge for financial firms is figuring out what personalized information clients might similarly want pushed to them. Should they be alerted if their portfolio is overweighted in one particular stock or sector?

The specific business goals of personalization will change from firm to firm, but all companies should aim to achieve three things: inspiration, validation of the client’s views and facilitating easier transactions.

Personalization does not require a massive platform overhaul, but should start with one small change at a time. That can mean giving clients a new dynamic module with links to what the firm believes are the most relevant tools for that client. Measuring the results of that experiment will suggest what steps to take next, quickly and easily moving change in the right direction.

As the Chinese proverb says, “A journey of a thousand miles begins with a single step.”

Bethany Baer is chief technology officer of IHS Markit Digital.


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