Relationships are critical in achieving business growth particularly within the professional and financial services sector. There are four factors that are driving the importance of relationships for your business growth.
Business Growth factor #1: In a marketplace saturated with providers it is relationships that determine our competitive edge
The global financial crisis of 2008 was considered to be the worst since the Great Depression of the 1930s. One of the outcomes of the recession is an over supply of financial and professional services and an under demand from the market. This highly competitive environment means that clients have a much greater negotiating position.
You can no longer sit in your office and wait for the telephone to ring for the next piece of new business. If you do you could be waiting quite some time.
Your competition are trying to win new business around you, behind you and in front of you. They are eating away at the market share.
You may be one of the best lawyers, accountants or bankers in the city but it is the quality of your relationships that give you the competitive edge. Despite greater involvement of procurement in the buying process one of the most important buying decisions is trusting relationships. People buy people. It is relationships that determine your competitive edge.
Business Growth factor #2: In an increasingly demanding regulatory environment we need to remember we are in the business of relationships not administration
The global head of regulatory intelligence at Thomson Reuters said, “People used to talk about regulation in terms of a tsunami that would wreak havoc and then go. It is more like global warming, in that the tide just continues to rise.” Regulation and compliance requirements are only increasing. Governments who believe in reducing ‘red tape’ show no sign of decreasing compliance requirements in financial services.
A senior private banker was recently describing his concern to me about overbearing compliance requirements. He felt that his team of relationship managers had become the ‘front office’ of the banks ‘back office’ compliance department. What was one a relationship business was now being dominated by the business of compliance.
Changing regulation is increasing the administrative demands on lawyers, accountants and bankers. Institutions are increasingly concerned that this is driving ‘Tick Box’ behaviour. Trusted advisors are more concerned with their relationship with the compliance than they are with their relationships with clients.
Financial and professional services is a relationship business focused on building long-term mutually beneficial relationships with clients. Organisations that are being reduced to administrative hubs have forgotten the true nature of what they do. Business growth exists for those who are focus on being in the relationship business.
Business Growth factor #3: In a world dominated by disruptive technology relationships are the sought after added value
Harvard Business School Professor Clayton Christensen has said, “Once disruption takes hold, it typically enables a larger population of less-skilled or less affluent people to do things in a more convenient, lower-cost setting. Things that previously could only be accomplished by specialists in less convenient, centralized settings.”
There are very few aspects of life that technology is not disrupting and transforming. Uber is disrupting the black cab and mini-cab business with on-demand private car hire. AirBNB disrupting the bed & breakfast and hotel industry with a global rent-a-room or rent-a-home platform.
Financial services are far from exempt from technological disrupters. Metro and Atom amongst others have entered the market as challenger banks. MoneyFarm and Nutmeg asset management Apps are eating away at market share. Established financial institutions are developing high-tech interfaces in order to beat of the disrupters. Engaging existing clients and reaching new markets through technology is now essential.
The law is sometimes thought to be beyond technology disruption however Disruption Overruled argues otherwise. Cloud computing, block chain, big data, artificial intellegance and automation technology are having an increasing impact on the law.
In a world dominated by disruptive technology relationships are the sought after value add. Let’s continue to invest in high-tech but also in high-touch client relationships.
Business Growth factor #4: In a commoditised sector it is relationships that differentiate us and keep is front of mind
The financial services blogger Michael Kitces explains that, “Commoditisation occurs when a particular series of goods become indistinguishable and undifferentiated from one another, such that they are viewed as being perfectly interchangeable with one another.”
The financial and professional services sector has become profoundly commoditised. Clients look at the array of services from a multitude of providers and they all look pretty much the same. You may believe that your proposition has a Unique Selling Point however experience says that clients rarely feel the same way about you.
An international banker said, “Any effective financial services business has to crunch costs in the back office and/or add value in the front office”. That front office is all about the client relationship experience that we create.
In a sector that has become commoditised what differentiates one trusted advisor from another are trusting relationships.
Financial and professionals services is in the relationship business, it always has been and always will. The challenge of saturated markets, overbearing compliance, disruptive technology and product commoditisation make relationships mission critical. Building trusting relationships is more important than it has ever been.
Achieving business growth within financial and professional services requires investment in relationships like never before. As Relationology says relationships are the true currency of business.