Strategy
Lessons From Luxury Sector For Wealth Firms

This article broaches a topic aired here before but always relevant: what the luxury goods and services sector can teach wealth management about client service, branding and business development.
The following article comes from Nitasha Dhiri, who is head
of strategic projects at Monica Vinader, the jewelry firm. The
insights here are useful for wealth industry practitioners around
the world so we are running this on all of our news services. We
hope readers find these ideas of value. The material is published
here with permission CREALOGIX, a
Switzerland-based financial technology firm operating in areas
such as digital banking.
The usual disclaimers apply and we urge readers who want to join
debate to email us at tom.burroughes@wealthbriefing.com
and jackie.bennion@clearviepublishing.com
There are some striking similarities between the worlds of luxury
fashion and wealth management when it comes to their efforts at
digital transformation. Our industries face many of the same
challenges – and there’s much we can learn from each other in the
search for solutions.
I recently had the pleasure of taking part in a CREALOGIX
discussion panel on digital transformation in private banking and
wealth management. It was fascinating to be surrounded by people
from a completely different industry, yet to see that many of the
high-level digital challenges they face are very similar to those
we have seen in luxury fashion and high-end retail.
Of course, this is partly because we are both targeting a similar
high net worth audience, and both business models have a
concierge-style service ethos – so it follows that we share some
of the same strengths and weaknesses. One of those shared
weaknesses has arguably been a resistance to adopt digital
channels.
Twenty years ago, the concept of e-commerce seemed completely
irrelevant to luxury fashion brands, and similarly, I imagine, to
many wealth managers and private banks. Like many established
wealth managers, some of the largest fashion players including
Cartier, Dior and Prada have been slow to adapt to e-commerce, in
part due to a reluctance to erode the exclusivity and service
associated with their brands. Initially, digital channels were
seen as a threat, as opposed to an opportunity – retailers feared
they would be unable to replicate the personalized, luxury
experience delivered offline to a mass-market of consumers
online.
But like it or not, we’re living in a digital world where
customers are driven by convenience. Brands like Amazon and
Netflix have set a precedent for on-demand products and services,
while smartphones and tablets have changed the way customers
work, shop and interact with brands. The high net worth customer
profile is changing too as purchasing power rapidly shifts from
the Baby Boomer generation to Millennials, who tend to be digital
natives and expect a different type of luxury experience to that
of their parents and grandparents.
Early entrants, such as Net-A-Porter, were quick to recognize the
opportunity digital channels were able to offer to customers,
both in terms of engagement and convenience. Today, digital
adoption in luxury retail is widespread and even the most
resistant players have started to develop their online offerings
to remain competitive.
In a similar vein, it’s becoming increasingly clear that wealth
management brands built on exclusivity could be under threat from
the new breed of digital-native investment platforms if they
don’t react to a changing market in good time.
But how can wealth management brands be successful in the online
space? Lessons from luxury retail suggest focusing on three
areas: building trust and credibility with your customers online,
identifying ways to replicate the offline experience online, and
leveraging your human capital.
Trust and credibility
Like wealth management, luxury retail is about far more than the
products themselves. It’s about a holistic customer experience –
the level of personal service, expertise and the overall quality
of the interaction are all important in these transactions.
Trust is also crucial and can determine a brand’s value in the
marketplace. The same idea of long-term brand value should apply
in how high net worth investors feel about their relationship
with a financial services firm.
How can you build trust online without interacting with your
customer face to face? High-quality customer service is the
foundation of any online offering – whether this is 24/7 online
and over-the-phone customer service, strict data security
policies, or simply the reassurance that your customers’ money is
protected, a clear customer service strategy should be the first
step to building credibility with your customers.
Trust and brand loyalty are also hugely influenced by
word-of-mouth discussions with friends and family. Nowadays much
of this takes place online, so the links, visuals, offers, and
online reviews used to discover and share are just as important
as in-store discovery and expert recommendations. Digital
channels offer new ways to get the in-person expertise of
designers and brand advocates out to customers. I can certainly
see this being the case in wealth management and private banking
too – why keep all your firm’s experts behind closed doors when
they could have a global audience, building trust and driving
sales?
Finally, information should be accessible and informative –
moving online may open up your customer base to investors with
varying levels of experience. You could choose to narrowly define
your customer base, or to capture as much of the market as you
can. The latter will require you to speak to and influence
different customer groups in different ways.
Building trust with new investors may require you to describe
your offer in simpler terms, outlining how your financial
instruments are a good ‘fit’ for that customer. However, you’ll
simultaneously need to build trust with more experienced
investors, requiring accurate and detailed information to give
these individuals confidence in your expertise and knowledge.
Striking the right balance is key.
Redefining the offline experience, online
It’s understandable that both brands and customers feel that it
is hard to replicate the traditional customer experience online.
From a customer’s point of view there may be a resistance to
buying online given the high price points involved, a lack of
physical interaction with products or a lack of trust. Brands
themselves often feel that going digital contradicts their brand
heritage and threatens their exclusivity.
However, my experience suggests that it is possible for brands to
recreate a luxury experience online. Success lies in taking the
key elements of your offline offering – strong customer service,
personalisation, expert guidance and quality – and finding ways
to re-create them online. Developing a strategy where your
digital channels complement your offline channels, rather than
replace them, is paramount.
How does this work in practice? Luxury retailers aim to plan
their in-store activity to match what’s happening online, which
gives customers much more transparency. They can use the digital
platform to learn about products and prices first before they
visit a store, or visit a store first and then learn more – and
make purchasing decisions – online at their leisure.
These types of businesses also rely on strong, individual
relationships with their customers, based on years of working
together and getting to know them and their preferences. Digital
services can be impersonal but equally, used well, data can be
the key to creating a personalised customer experience. This is
especially important where the customer is being dealt with by
multiple people within a business – whether through a customer
support team or an online portal.
But offering personalized services to your entire customer base
is most probably unsustainable, costly and would result in a low
return on investment. Instead, consider focusing on your top tier
of clients, offering a dedicated account manager with access to
their assigned customers’ data and knows their preferences inside
and out. Net-a-Porter’s team of 50+ personal shoppers have done
just this, which has been key to the company’s success and to
maintaining the ‘human’ element of the brand.
Leveraging your human capital
The decision to embrace digital is not without its technical
challenges of course – brands built on personal relationships and
human interactions don’t necessarily have all the necessary
resources, skillsets or capabilities in place when they set out
to adopt a digital strategy. Developing a strong online offering
will only work if your whole organisation is signed up to it –
starting with your leadership teams.
Digital transformation requires a complete business model shift,
and a completely new skill set. However, that’s not to say that
every business needs to invest in building up a team of their own
software developers in-house or re-inventing the wheel. While the
whole organization needs to own and embrace a digital strategy,
it’s possible to work with partners to create a digital
experience that matches your brand and your customers’
expectations. Some retailers choose to use external developers to
build their own in-house platforms, while others have invested in
customized off-the-shelf solutions to get off the ground quickly.
Both have their merits and flaws.
From what I can see, no matter whether you’re in high fashion,
luxury retail, wealth management or private banking, you’ll come
across many of the same barriers to digital – some cultural, and
some practical. There’s no single answer, and the most important
measure of success is finding ways of enhancing the customer’s
mobile and online experience, without losing the reputation for
quality and personal touch that our brands are built on.
For me the key to successfully embracing digital is to invest
time at the outset to think through your strategy, develop a
collective vision, and build relationships with partners you can
trust. And, of course, getting there before everyone else catches
up.