High-Touch Personalized Service With RIAs
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Back in the late 1980s when I entered the stock market, there was no chance of getting personal attention from brokers who dealt only with high networth individuals. Even one of my schoolmates who turned a sub-broker politely told me that, while he wouldn’t refuse my custom out of friendship, his typical customer was someone with a portfolio of at least 10 lakh rupees (which was equivalent to around 50K USD at the then prevailing exchange rate). So, when online brokerages like ICICIdirect opened up in mid-1990s with the onset of Internet, that was a boon for people like me with smaller portfolios.
Having enjoyed some of the advantages of an online brokerage (e.g. total pricing transparency), I’ve stayed with one of them to this day.
Against the backdrop of my personal experience and in the light of the fabled growth of FII-fueled stock trading volumes in the Indian bourses since the late eighties, it would appear that personalized service would be an even rarer commodity now and that new entrants today would have to content themselves with self-service through online brokerages. Turns out that that’s not at all the case.
Apparently, online brokerage companies are employing a lot of people at very low fixed salaries to sign up new customers. These people are expected to supplement their income through incentives that they earn when their customers trade greater volumes and cough up more brokerage fees to the online brokerages. This has created self-styled relationship managers out of these salespersons who offer personalized service even to new market entrants with tiny portfolios.
With uncertain job prospects in India amid the current depressed economic conditions, it’s easy to understand how this model works since it provides these salespersons an opportunity to earn a decent living albeit by stretching themselves to do a relationship manager’s job in addition to their own. However, with the inevitable upturn in the economy, this model is unlikely to be sustainable since fixed salaries are bound to go up and it wouldn’t be necessary for these salespersons to provide personalized service as the only way to earn a living wage. When that happens, online brokerages face the risk of estrangement from a large swathe of their customers who suddenly have to fend for themselves. To hold on to such customers acquired during the downturn and pampered by personalized service, online brokerages might want to consider deploying Rich Internet Applications. With their ability to create rich and responsive web applications, RIAs deliver great user experience and could prove to be a close substitute to humans providing high touch personalized service.
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