Management of Personal financial services. China case study - Essay Example

? Literature Review of Personal Financial Services Table of Contents 0 Literature Review 3 1 Wealth Management 3 2 Relationship Management in Personal Financial Services 3 1.2.1 Customer Relationship Management in Chinese Financial Institutions 4 1.3 Customer Behaviour in Personal Financial Services 5 2. Risk Management & Human Resource Selection in Banks 8 3. Hiring and Selection in Financial Institutions 9 1.0 Literature Review 1.1 Wealth Management Wealth management incorporate financial advisory, planning, investment portfolio management and other financial services. It constitutes of financial services, which are managed by certified planners and money managers and their main task is to focus on the enhancement of the investor’s money and income. The accumulated wealth of the investor would be managed efficiently with the help of portfolio analysis and effective advisory services. Wealth management in China is highly regulated and monitored by the Chinese government by evaluating each and every product. It is necessary for the investment banks to disclose the necessary and additional information related to the high yield and average returns. The regulators try to control and monitor the wealth management products to tighten the supervision and control activities. The banking regulators along with Chinese Government Securities Depositary Trust & Clearing Co Ltd help in establishing the registration platform. The banks are required to submit detailed production of the wealth management products. The new regulation measures will help in facilitating transparency regarding the new wealth management products for better understanding of the markets. It has also been observed that wealth management products in China are the high yielding financial vehicles, which is basically targeted to a larger audience; to prevent liquidity, risk and problems. 1.2 Customer Relationship Management in Personal Financial Services Customer Relationship Management (CRM) in financial services has become utmost important because of the present challenging marketing environment. Presently, the company differentiate themselves by delivering exquisite customer experience and offer product, which are unique, tailor-made for delivering customer satisfaction. By delivering highly innovative financial products for core banking, insurance and wealth management, the company would be able to develop meaningful relationship with its customers. Often termed as relationship marketing in China, it is also focuses on customer retention. CRM also helps in laying emphasis on the product features, which highlights the product benefits that are meaningful and necessary for the customers. The Chinese investment banking companies rely on the strength of the financial services that help the banks to make tailor-made financial products for customized customer requirements. Although, CRM is relatively a new concept, it entails the different marketing approaches involved in obtaining the refined customer information search, which helps the management to attract potential customers (Besson, 2000). The CRM activities in the financial institutions involve the incorporation of electronic business activities, relationship and customer management activities, and integration of customer centric strategy with the back office or front office executives (Carson, 2005). The main crux of CRM activities involves building of long term and healthy relationships to retain customers in the competitive financial environment. 1.2.1 Customer Relationship Management in Chinese Financial Institutions The long term relationship building process with the Chinese customers has not only become an enduring strategy for relationship building, but it has also augmented for customer loyalty and retention. It was observed in Chinese banking that due to the financial implications there was a strong correlation between customer loyalty and profitability of the bank. The deregulation and emergence of new banking technology in the financial services industry have also impacted the purchase behaviour of the customers (Forza, 2000). This allows the bank management to develop new strategies which require switching of customer to different banks. The bank management must develop thorough understanding of the customers to influence their purchasing behaviour. The relationship banking has become very open and centralized banking has been replaced by open and competitive market banking. The state owned commercial banks are more restructured and commercialized for market oriented profit entities. The Chinese local banks use domestic strategies, which pay particular attention to the customer purchasing behaviour. The emergence of the financial products allows the complete use of transaction with full autonomy. The emergence of internet has allowed customers to use and access the financial products with ease and operate the foreign currencies without the geographical distribution and operational purposes. In spite of various banking reforms, the local banks are lagging behind due to capitalization; develop overseas network and instigating modern banking experience (Hao, Kasper and Muehlbacher, 2012). The customer switching behaviour includes the service provider to include varied factors, which influences customer switching behaviour that are related to pricing, inconvenience, core service facilities, involuntary switching, response to switching failure. The banks of China have understood one factor that price plays meaningful role as an attribute, which can identify the customer satisfaction and behavioural intentions (Harley, n.d.). Customer tends to lay emphasis on the fairness of the price. Reputation also plays a pivotal role because the customers want to associate themselves with a bank which contributes to the social environment significantly. 1.3 Customer Behaviour in Personal Financial Services Customer Perspective of Financial Services The customer behaviour changes with the nature of the financial services and products. The financial services have intangibility and inseparability association with them, which makes the entire marketing process very interactive and interesting (Hax and Majluf, 2007). The professionals will also engage in the high quality credence specialist services, which can be assessed even after the purchase and consumption of financial services (Global Business Delight, 2013). The buying and consumption of financial services is regarded as a fiduciary responsibility, which is an implicit responsibility because it requires the systematic and effective use of customer funds (Matheson, 2006). It also requires giving proper financial advice to the customers, which also forms a basis for two way interaction (Peppard, 2000). From the customer perspective it is a process of acquiring and disseminating knowledge. From the banker and customer perspective it is a lot more than buying and selling of financial goods and services. Although, the normal consumer buying behaviour is followed in a series, which includes; problem recognition, information search, evaluation of alternatives, purchased decision and post purchase decision (Nurmi, 2000). The buying motive and the needs are totally different and there has been no evolving of marketing or financial conceptual model. This has also led to difficulty in understanding the consumer purchase behaviour in financial services (Ogbonna and Harris, 2003). Empirical work by certain authors has laid emphasis on certain issues on the purchase behaviour of the consumers like the choice of the bank, usage of financial services, bank loyalty and service quality (Rabey, 2003). Although, the banking products tend to be similar in every bank there is no clear association of the brand concept and a transparent association needs to exist between the demographic difference and consumer choices. Purchase Behaviour of Financial Services in China The consumer behaviour for purchasing financial services does not differ in terms of location. The below mentioned points were the main highlights of the Chinese consumer behaviour in financial service (Rafiq Awan and Mahmood, 2010) Size and dependability of the financial institution Location of the financial institution Ease and convenience of financial transactions Professionalism nature of the bank personnel Availability of the loans easily The research study has been studied from the individual buyer behaviour perspective and not from the corporate customer perspective, whose needs and motives are different entirely. It was observed that the individual customers had more positive and favourable attitude towards the long term banking relationship. Popular banks like Banks of China, Bank of East Asia, Citibank and China Construction Bank target for maintaining long term relationship with the customers and believe in being responsive to customer requests, initiation of customer interactions and also develop close yet formal relationships with customers (Heijes, 2004). The Chinese consumer is more actively involved in shaping of banks service offerings due to the inseparability of the consumption and the production services. It was also observed that the Chinese customer preferences changes considerably with the local and foreign banks (Carneiro, 2008).The difference was highly noticeable in the saving business, credit business, home banking, credit card, investment, and electronic bank business and information consultant services. The various variables which affected the purchase behaviour of Chinese customers in financial services were competitive pricing, service quality, relationship network across several organizations, cross selling opportunities and the relationship between bankers and the customers (Dastmalchian and Blyton, 2000).Based on these relationships it was observed that the Chinese customers prefer local banks than the foreign banks (Erkutlu, 2008). The main reason of preferring local banks over foreign banks was due to the low pricing in the opening of a local saving account business and the Chinese customers are highly sensitive to the price factor. The Chinese customers are highly particular about service quality and believe that the local banks provide more reliability and responsiveness to the customers (Evans, 2003). It was also observed that Chinese banks are more attractive and the reliability factor is very strong because they have been able to maintain the traditional Chinese culture. The loans offered by the local Chinese banks tend to be more at affordable and favourable rates. Since, banking is regarded as one of the weak sectors of Chinese economy (Groves, 2006). The local banks obtain their dealing licenses easily, which makes them more reliable and assuring from the customer perspective. The local banks are also more responsive to the needs and requirements of the customer preferences. A major portion of Chinese population are shifting towards foreign banks, which is because they have two major competitive advantages over the local banks; innovative capacities and wide range of financial products. These foreign exchanges network and financial product market depend upon the various financial tools, resources and capabilities and also the ability to strive to be the first to release its own marketing exchange (Jogulu, 2010). The internet banking operations is very strong in the Chinese foreign banks, which make it easy for the consumers to perform the transactions. Apart from the staff service quality, wide range of financial products, large number of bank branches etc are some of the factors, which make it preferable for the local Chinese customers. However, it has been therefore observed that in spite of various innovative factors related to innovative service quality of the banks, the Chinese customers prefer traditional local banks over the foreign banks. 2. Risk Management & Human Resource Selection in Banks Risk management in banks has been an important subject of discussion for many researchers and scholars around the world. It is often dubbed as a crucial factor for financial institutions and encompasses credit, mortgage and business risks. Usually, the bank managers have to refer to the Basel committee for managing the risk related to the financial transactions and non financial transactions. However, according to Crouhy, Gala and Marick (2000), an organization should develop a risk management culture and it must percolate from the executive level to the lowest in the hierarchy. The author also articulates that firms are required to make significant amount of investments and adapt to contemporary methods of risk management. Echoing the same, author such as Felsenfeld and Rechtschaffen (2000) states that financial institutions should develop integrated risk management infrastructure and pursue it. An integrated risk management tool would cover areas such as corporate governance, corporate compliance, capital management, reputation risk, business risk as well as strategic risk. In the similar way, consumers also need to face various kinds of risks when dealing with personal financial services. In this context, scholars mainly deal with how people manage the risk of financial transaction. According to Singh (1999) in order to manage such risks people generally rely on the secured transactions. Moreover, the author also emphasized that customers chooses those transaction modes that offer detailed information thereby minimizing the risk of theft. 3. Hiring and Selection in Financial Institutions The recruitment and selection process is very similar in every banking organization but banks generally alter the recruitment process depending upon the hierarchical position offered. Costello (2006) states recruitment as a set of process and activities used for legally obtaining qualified people required for carrying out the operations of the firm. However, banking is a specialized activity and requires people with specialized training on banking operations and sales. According to Mullins (1999), banks mostly recruits people with prior experience of banking or those who have specialized training. The author also emphasized that people once a person is recruited, training and develops plays crucial roles in equipping the candidate to perform banking operations effectively. Dessler (2000) states that a bank usually five steps in recruitment namely applicant pool, profile scrutiny, candidate short listing, screening (tests) and final interview. Thus, rrecruitment and selection in the banking industry is regarded as the systematic process for identification of various activities, tasks and responsibilities, which are associated with a particular job or a particular group of jobs. Although, it is not the analysis of work process that helps in defining the job related to the process, the work behaviour recruitment process in Chinese financial organization is done much after scrutiny and severance. 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