In customer experience management (CEM), one fundamental truth is that the customer experience is made up of two halves: rational and emotional. In financial services, one fundamental reality is that people want the greatest return but within their acceptable risk horizon. An individual’s acceptable risk horizon is determined by personal disposition and external factors like interest rates, economic stability and so forth. All of us in financial services clearly understand the importance and impact of the external factors. Whole fields of study (e.g., economics, finance, and accounting) are devoted to better understanding these external factors. The personal disposition side of the equation is less well understood although many social scientists are devoted to understanding it. The goal of studying personal risk disposition tends to focus on identifying what a person’s true risk disposition is – characterising it as high, medium or low tolerance to risk. As an example, two of the 20 straightforward questions asked on the MSN Money website to assess your own financial risk tolerance are:
• “How do you feel when you suffer a financial loss”?
• “How far away are your major financial goals”?
Thus, a reasonable conclusion is that a customer with a high tolerance to risk (the gambler) will have a distant acceptable risk horizon. Many more financial waves may occur before the gambler becomes significantly worried. Likewise, a customer with a low tolerance to risk will have a risk horizon closer to shore. The non-gambler would essentially prefer to stay on shore rather than get wet in the waves. Thus, their maximum risk horizon is near.
The standard view is that external factors along with a customers’ personal disposition determines the risk horizon they are comfortable with. Thus, the classic way of accounting for a customer’s personal risk disposition is to simply assess in a straightforward manner how much risk they are comfortable with in order to create a risk tolerance profile.
If CEM is added to the equation we get a very different and insightful perspective. CEM, properly applied presents an interesting opportunity to financial service providers. Rather than just identifying a person’s risk disposition as in the standard equation, CEM can potentially be used to help adjust a customer’s personal disposition towards a more distant acceptable risk horizon than would be the case if the financial service provider did not employ CEM. Click here for the full paper.
| Qaalfa Dibeehi is Chief Operating and Consulting Officer at of Beyond Philosophy one of the world’s first organizations devoted to customer experience. Qaalfa is an international co-author of Customer Experience: Future Trends and Insights. Beyond Philosophy provide consulting, specialised research & training from offices in Atlanta, Georgia and London, England. |