Personal Financial Services - Literature review 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 incorporates financial advising, planning, investment portfolio management and other financial services. It constitutes financial services 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 a registration platform. The banks are required to submit detailed description of the wealth management products. The new regulation measures will help in facilitating transparency regarding the new wealth management products for a better understanding of the markets. It has also been observed that wealth management products in China are the high yielding financial vehicles 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 of utmost importance because of the present challenging marketing environment. Presently, the companies differentiate themselves by delivering exquisite customer experience and offer products, which are unique and tailor-made for delivering customer satisfaction. By procuring highly innovative financial products for core banking, insurance and wealth management, the companies would be able to develop meaningful relationships with their 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 highlighting 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 customised customer requirements. Although CRM is relatively a new concept, it entails 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 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 a thorough understanding of the customers to influence their purchasing behaviour. The relationship banking has become largely open and centralised banking has been replaced by open and competitive market banking. The state owned commercial banks are more restructured and commercialised for market oriented profit entities. The Chinese local banks use domestic strategies, which pay particular attention to the customer purchasing behaviour. The emergence of financial products allows the complete use of transactions with full autonomy. The emergence of the Internet has allowed customers to use and access the financial products with ease and operate the foreign currencies without geographical distribution and operational purposes. In spite of various banking reforms, the local banks are lagging behind due to capitalisation, developing overseas networks and instigating modern banking experience (Hao, Kasper and Muehlbacher, 2012). The customer switching behaviour includes the service provider to incorporate various factors, which influence customer switching behaviour and are related to pricing, inconvenience, core service facilities, involuntary switching and response to switching failure. The banks of China have understood that price plays a meaningful role as an attribute that can identify 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 associated 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 one because it requires a 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 a 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 financial products and services. However, the normal consumer buying behaviour is followed in a series including 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 evolution of marketing or financial conceptual model. This has also led to a 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, such as 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 services (Rafiq Awan and Mahmood, 2010) Size and dependability of the financial institution Location of the financial institution Ease and convenience of financial transactions Professional nature of bank personnel Easy availability of loans The research study has been carried out from the individual buyer behaviour perspective and not from the corporate customer one, whose needs and motives are different entirely. It was observed that the individual customers had a more positive and favourable attitude towards a long term banking relationship. Popular banks such as Bank of China, Bank of East Asia, Citibank and China Construction Bank target for maintaining long term relationships with the customers and believe in being responsive to customer requests, initiation of customer interactions and also developing 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 production services. It was also observed that the Chinese customer preferences change considerably with 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 variables which affected the purchase behaviour of Chinese customers in financial services were competitive pricing, service quality, relationship networking across several organizations, cross-selling opportunities and the relationship between bankers and customers (Dastmalchian and Blyton, 2000). Based on these relationships it was observed that the Chinese customers prefer local banks to foreign ones (Erkutlu, 2008). The main reason of preferring local banks over foreign ones was due to the low pricing in the opening of a local saving account business, and the Chinese customers are very 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 found 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 local Chinese banks tend to be more at affordable and favourable rates. Thus, banking is regarded as one of the weak sectors of the 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 customer preferences. A major portion of the Chinese population is shifting towards foreign banks, which is because they have two major competitive advantages over the local ones: innovative capacities and a wide range of financial products. These foreign exchange network and financial product market depend upon the various financial tools, resources and capabilities as well as the ability to strive to be the first to release its own marketing exchange (Jogulu, 2010). Internet banking operations are very strong in the Chinese foreign banks, which makes it easy for the consumers to perform transactions. Apart from the staff service quality, a wide range of financial products, a large number of bank branches etc are some of the factors that make them preferable for the local Chinese customers. However, it has been observed that in spite of various innovative factors related to innovative service quality of the banks, the Chinese customers prefer traditional local banks over foreign ones. 2. Risk Management & Human Resource Selection in Banks Risk management is crucial in the financial institutions and includes credit, mortgage and business risks. The bank managers have to refer to the Basel Committee for managing the risk related to financial and non-financial transactions. Risk management also involves the management of treasury risk, and complex financial instruments include credit derivatives. Apart from fluctuations in currency dealings and the instable foreign exchange rate mechanism, they involve particular risks in data protection. Data protection includes protection of data related to the customers. This also includes monetary and non-monetary data related to the bank and customers. 3. Hiring and Selection in Financial Institutions The recruitment and selection process is very similar to every banking organization and requires different approaches as per the designation of an individual. Recruitment and selection in the banking industry are regarded as a systematic process for identification of various activities, tasks and responsibilities, which are associated with a particular job or a particular group of jobs. The main purpose of recruitment is to gather information systematically and focus on behaviour, tasks and outcomes. Although it is not the analysis of workflow that helps in defining the job related to the process, the work behaviour recruitment process in Chinese financial organizations is done much after scrutiny and severance. 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