Tuesday, October 16, 2012

Retail Broking: Customer relationship that outlive market crashes


Stock market has its ups and downs, the cycles of boom and bust and times of high volatility. The mood of stock market investors also tend to go up or down with the market. This creates some unique challenges in customer relationship management for the stock brokers. We are trying to look at some of that and see if there are any best practices one could adopt to tackle these challenges.


None of us likes to loose money, it makes it even harder when you loose money on an investment that you thought was a good bet. So one can't blame the retail broking customer for being grumpy. Being unhappy with the market is not the same as being unhappy with the broker or investment adviser. This is something that most brokers do not realize.

Brokers themselves would be feeling gloomy in a bad market as they would be expecting lesser volumes and hence lesser income by way of commissions. The natural tendency would be to keep the expenses low and ride out the bad times. Spending money and effort to call the customers when they are not going to enter the market would look futile but no less painful. Brokers knows that good times are not far ahead, so all you need to do is to ride out the bad times by cutting down on expenses.

Now look at this from the investors/traders point of view. They came into the market hoping to make some money, even some quick money . May be they acted out on some of the investment/trading calls made by the broker. It looked good for a while when market was going well. Now the markets are going south and most of the investment are in red.  They don't know what to do and to make the matters worse the guy from  broking firm who used to call everyday is nowhere to be seen or heard. It feels as if all the broker wanted is that commission from the trade and doesn't care to help them make money. They feel abandoned and even cheated. Some of them will never come back to the market again.

The investor would have felt a lot better if the broker had called them to explain the situation. It is an opportunity to explain the market conditions and why things are looking bad. You can tell them that it is a cycle of boom and bust and that you have seen this played out several times. If you have made some wrong calls that contributed to the  loses of the customer, you can explain what went wrong. It shows to the customers that you care, that you are responsible and that you are dependable.

Some of the things to do to build customer relationship that outlive market crashes are:
  • Set the expectation right: Tell the customers before hand that markets will crash now and again. There are chances that they will lose money.
  • Guidance: Provide good investment/trading guidance.
  • Good customer service: Have a good customer service team in place to handle request and queries from the customers.
  • Do not auto pilot market crashes: When market crashes, people will lose money but it is  an opportunity for a healing touch too.  So actively manage customer interactions during a market crash.
  • Have a long term outlook: Find out the Life Time Value (LTV) of your customer. This would help in measuring real worth of the customer and importance long term customer relationships.
  • Make use of technology: Use technology to help you in interacting with your customer, gather more information about them and provide better service.
 Do you think there are more things that broker can do to improve his customer relationship?  Please share it with us.

Finahub Team