As traditional financial services companies try to transform themselves into a "one-stop shop" for all a customer's financial needs, one thing is clear-technology is the cornerstone of the process.
"If technology wasn't developed to lessen the burden" on financial advisors and insurance agents, "convergence may never have happened," says Michael Kellett, vice president and chief marketing officer for individual financial security at Minnesota Life (St. Paul, $20 billion in assets under management).
Indeed, in some instances, it can be said that technology is acting as a driver for financial services convergence. For example, converged enterprises are the best set-up to exploit the latest advances from wealth management software and systems.
But for the most part, technology remains an aid to, not catalyst of, convergence, as evidenced by Minnesota Life. The insurer and its subsidiaries, including Advantus Capital Management and Securian Financial Services, offer a range of financial options including life, business and group insurance products, annuities, 401(k) plans, mutual funds and investment services through Securian Financial Services, Minnesota Life's affiliated broker/dealer. Minnesota Life also sells auto and homeowners insurance from other insurance companies and distributes certain insurance products through partnerships with banks, including Bank of America, Wells Fargo, Homeside Lending, Principal Residential, Commercial Federal Mortgage Corp., Bank of Hawaii and First Nationwide Mortgage Corp.
Apples & Oranges
Minnesota Life's success in cross selling products is due mainly to similarities among the products. Almost all of the products are investment related, although the company does offer long-term care, disability, auto and homeowners insurance through partnerships with other insurance companies. "Consumers are not showing a strong demand for a one-stop shop when it comes to insurance, investment and banking products," says Brian O'Connell, partner in New York-based Accenture's insurance industry group.
"Cross-selling between property and casualty products and asset-based products is very hard, something that financial services companies recognize," O'Connell says, citing Citigroup's planned spin-off of the Travelers P & C business. "On the asset management side, there are great opportunities for cross-selling."
At Minnesota Life, effectively cross-selling means targeting customers through Minnesota Life's "needs-based" strategy, which requires that a complete database of customer information be maintained, Kellett says. "The ability to get the proper product in front of the customer at the right time is important for our advisors," he says. "We maintain a central client database that gives the advisors a complete picture of the customer so they know when a client is missing a certain coverage that they might need." Minnesota Life is currently making the database available to financial advisors over the Internet.
However, simply getting a centralized database up and running is quite a challenge for financial companies, according to Steven Meador, director of technology in Sapient Corp.'s insurance practice (Cambridge, MA). "Companies have grown up with separate systems for each product line and now they are struggling to get the necessary information into a central data warehouse," Meador says. "Companies need to use integration technologies and data translators to get data into a useful format."
According to Michael Schroeck, partner, global data warehousing and iAnalitics, PwC Consulting (New York), "insurance has invested more than other financial verticals in data warehousing in order to obtain the single customer view. EAI enterprise application integration and ETL extraction, transformation and loading-or the functions performed when pulling data out of one database and placing it into another are common tools used to form data warehouses," he adds.
Accenture's O'Connell says, "Creating a single view of the customer has been the Holy Grail in financial services for some time. That focus is making EAI very popular." Many of his clients are using Marketsoft (Lexington, MA) and E.piphany (San Mateo, CA) products for EAI. Other common applications include products from Tibco (Palo Alto, CA), Vitria (Sunnyvale, CA), WebMethods (Fairfax, VA) and SeeBeyond (Monrovia, CA).
Where's the Payback?
But simply having a central database is only half of the battle, Accenture's O'Connell stresses. Knowing what to do with the information once a company has it is the real challenge. "Historically, a lot of money has been spent on technology over the past few years, especially on the broad topic of CRM. Most of the improvements from the investments have been on the customer service side, but companies have not increased wallet share because of the investments," he says.
"Companies are now shifting spending from back-end servicing to front-end customer modeling and campaign management," O'Connell adds. "Now that the back-end is in order, financial services companies are focusing on trying to understand what products are suited for which customers," and have that information ready for the financial advisor at the point of sale.
PwC's Schroeck says that customer modeling and campaign management involves taking to a new level the existing investments that companies have made in customer relationship management technology. "iAnalytics," or analytical CRM, "is the ability to leverage the information that has been gathered from across the enterprise," Schroeck says. "Companies are looking to get more value out of their CRM investments. To date, CRM has helped automate processes, streamline call centers and integrate channels. With iAnalytics, companies can take the integrated customer information, analyze it with target marketing software and distribute it."
For now, distribution of target marketing information or consolidated views of customers will be delivered over Internet-based technology, whether it is over a source connection on the public Internet, a financial services company's extranet or through a VPN, says Sapient's Meador. "Getting the information to the people who need it is often the hardest part, especially if you are talking about a distributed sales force," he says. "For instance, many insurance companies are simply sending e-mails to agents to inform them of possible cross-sells within their client base."