Back to basics

Recently we have been doing some pretty extensive work on our “client journey”. This is an exercise in refreshing ourselves with our stated desire to put the client at the heart of our enterprise and to put ourselves in “their shoes” as they interact with us, making sure that what we say and what they get are aligned!

As a starting point for this work, we conducted a client survey to solicit some simple client feedback; and the results made for interesting reading. There were some clear signposts as to what business owners expect when doing business with a company such as ours:

[icon_list]
[icon_list_item type=”arrow-right”]They want the information to be simple, clear and accurate[/icon_list_item]
[icon_list_item type=”arrow-right”]They want us to do what we say we will do[/icon_list_item]
[icon_list_item type=”arrow-right”]They want to be kept in the loop and communicated with throughout[/icon_list_item]
[/icon_list]

Now, I suggest you might be thinking ‘I hope they didn’t pay too much for these fairly obvious results.’ But I would argue that there is a constant need – no, requirement, to obtain client feedback and, most importantly, act on it.

We can all do stuff better. Undoubtedly.

We live in an age where news, good or bad, travels fast. Peer review and client feedback are assuming a greater and more visible role in the success of an enterprise.

The financial industry in general has been badly bruised by scandal and mismanagement over the last few years.

It is up to the participants in this field to strive to improve and offer products and services that meet, or hopefully, exceed client expectations.

As the results of our customer survey suggest, satisfaction is about getting the basics right.

Sweating the small stuff.

Computer says no

Over the last decade or so it has been popular to describe the automation of credit scoring for both individuals and businesses as a “computer says no” or retrograde Modus Operandi.

Long gone are the chinwags on the golf course, ending at the 19th hole with a satisfactory increase in overdraft limits to boot.

But, the reality is that today’s credit scoring is a relatively blunt tool that relies on a series of metrics that can only ever paint a simplified picture of a business’ ability to repay borrowing.

Big data is about to radically change all this.

Businesses generate enormous amounts of information already, describing trading conditions, cash flow, inventory levels and more. This can be compared to historic data to give trend analysis across a wide range of metrics.

Add this data to macro data, including sector performance, client trading data and other widely-held information and one can see that it won’t take long to build a full and detailed picture of the business and to asses creditworthiness on a much broader basis.

Although lenders may say that they are taking much into consideration, our experience is that many borrowers have been rejected because of a single metric and not assessed across a wide variety of information points.

I understand that the process of complete due diligence is laborious and time consuming, however, technology now allows us to capitalise on the data available and lenders need to address this. It is important that a full “360-degree” view is available as there are a significant number of potential borrowers who have failed to secure lending through traditional sources and these businesses are not the basket cases that rejection by these lenders infers.

Far from it. Many are excellent businesses with exciting prospects and they are poorly served by the current system.

We, among many others I am sure, are working on this sophisticated automation and I am sure that this work will yield valuable results.

Unlimited partnerships

There is something intoxicating about what drives entrepreneurs to create their own successful business. This single-minded enthusiasm, coupled with a pugnacious, never-say-die attitude that helps turn a dream into reality, is rare and powerful.

We are immensely fortunate to work with many of these entrepreneurs on a day-to-day basis. Our clients are predominantly business owners and this gives us a privileged insight into the UK economy. Each business has its own profile, its own issues, challenges and triumphs. We get to see these first hand and with a deep understanding that the large High Street lenders can never replicate.

New orders, new hires, difficult trading, unexpected issues, each day we are helping clients respond to situations that mark the pulse of the nation’s business community.

And we listen.

There is no doubt that trading conditions have begun to improve – balance sheets are gradually being repaired. But it is not yet across the board. Indeed, the nature of this recovery is very different from recent ones. The rising tide is not lifting all boats, it is being very selective.

However, the general state of the economy is not dulling the merchant spirit and we are experiencing somewhat of a boom in those seeking to make their entrepreneurial debut. This can only be a positive trend and says much for the confidence of those who may be striking out on their own for the very first time.

But these businesses, small or larger, will need capital to grow and all the enthusiasm in the world will not compensate for the lack of a good business plan and a good execution strategy to back up a good idea.

I believe that it is in the best interests of all involved, lenders and borrowers alike, that as many of these businesses succeed as possible. Therefore it is in all our interests that lenders understand their role in nurturing these fledgling tycoons.

Sophisticated business lending is a partnership where both sides are actively engaged in the success of the enterprise.

It is something that I believe we need to see a lot more of.

All aboard

Our industry is facing sweeping and unprecedented change. Customers today demand personal service whenever and wherever they want, and our competition is just a mouse click or a street corner away.

Additionally, we face major challenges presented by decreasing margins, a stricter regulatory environment, and fierce competition (in some cases coming from non-traditional sources).

We need solutions to help us seize market opportunities, make smart decisions, and realise maximum value from our technology investments. Digital communication, especially mobile, is transforming every industry. We should heed the following:

[icon_list]
[icon_list_item type=”arrow-right”]Financial advice and financial product distribution is not immune from this transformation, indeed it is ripe for disturbance[/icon_list_item]
[icon_list_item type=”arrow-right”]The question is not if but when the “tipping point” moment for financial advice and information will arrive[/icon_list_item]
[icon_list_item type=”arrow-right”]The FCA now acknowledges that advice can be delivered without human intervention[/icon_list_item]
[icon_list_item type=”arrow-right”]The big question is how?[/icon_list_item]
[/icon_list]

The rise of online investment platforms and personal financial management software, coupled with the almost universal acceptance of online banking, suggests that this movement is well underway.

The addition of financial advice into the mix creates a unique opportunity to provide customers with a truly complete experience, using their income, expenditure, savings and investment information to help drive appropriate and highly personal, financial advice.

This is a train that is rapidly leaving the station.

Disruptive influence

As I travel around the country talking about alternative financing, and specifically pension-led funding, I am always surprised by the number of business owners, accountants, financial advisers and consultants who are simply unaware of some of the options and benefits in considering alternative, or non-bank, funding.

In our own specialist field, that of enabling business owners to invest a portion of their personal pension pots in their own business, the most common reaction is “this sounds too good to be true” followed by “and why haven’t I heard of it before?”

We’ve been in this business since the mid-1980s and have seen a decent rise in some areas of knowledge of alternative funding, however this rise still leaves general levels of understanding painfully low.

Why?

I wish I had a simple answer to this question. My guess is that we are really simple folk at heart and we like to keep things uncomplicated.

You get a pizza from a pizzeria, a house from an estate agent and money from a bank. And yet in each of these examples there have been significant disruptions to the traditional ways of doing business, brought about almost exclusively through the adoption of new technologies.

From centralised online ordering of delivery pizza, to websites that compare, contrast and value properties and the now increasingly popular banking from your smart phone. These innovations keep the businesses relevant and therefore visible.

Much the same needs to happen in the world of business funding. Disruption by using technology to improve choice, information and ultimately to lower costs. As those of us interested in the growth and success of alternative funding should realise, thoughts of business-as-usual should have been long banished.

The big operators, the banks and hedge funds are waking up to this in a big way. Now is the time for the more nimble of us to seize the opportunity to make providing finance to businesses quicker, easier and cheaper.

We just have to keep finding exciting and innovative ways to get in front of business owners at the point of maximum impact.

When they need us.