The general setup of the second and third prototype is similar to the first iteration – client and advisor seat themselves at the tabletop system, whereas in general the client will sit at the long side of the tabletop such that all information elements are oriented to the client by default. The second and third prototype share the same front end design and differ mainly regarding their interaction primitives. While the second prototype implements several interaction gestures (double tap, two finger zoom, two finger rotation), the third prototype shifts these hidden gestures to a radial menu that can be accessed by placing a physical token onto the screen.
In the first few minutes of the encounter, however, the tabletop system will only be used as a table – client and advisor will engage in small talk, and the advisor will write down important information on his notepad. After this initial phase, the advisor will activate the tabletop system and present the general process overview to the client (Figure 7-7.1) to prepare the client in what to expect from the encounter and role of the IT artifact. Having discussed the general frame of the advisory session, the advisor may switch to the main overview (Figure 7-7.2) via a “hidden” menu that will appear whenever the advisor puts one finger anywhere on the screen for at least three seconds. In this overview, the advisor will briefly explain the visualized information, starting with client information (personal information, cash flow, assets), progressing with risk profile and investment strategy as well as explaining the role of the needs visualization and the projection of growth (central graph visualization).
The advisor will then start to enter the information gathered in and noted on his notepad in the first few minutes of the session, verifying the entered data with the client and showing effects on either other information blocks or the central visualization. When accessing the detail view of some information blocks, relevant information from other blocks will be visualized (e.g., when accessing the cash flow detail view, cash flow-relevant expenditure or income from existing assets and important tax-relevant information will be displayed, Figure 7-7.3). Using such information, advisor and client may verify whether all relevant data has been entered and which effects additional data might have.
After having discussed the client’s risk profile (Figure 7-7.4) and client goals, the actors will define an appropriate investment strategy (Figure 7-7.5). As all relevant information is visible at any time, changes and their effects can be immediately assessed (e.g., effects of investment strategy on projected growth; effects of needs and goals on projected growth; effects of changes of client cash flow and assets). All information blocks may be accessed and adapted at any time – the application does not enforce any course of action.
The advisor and client may access additional tools using two identical menus available on the upper left and lower right corner. In addition to a simple calculator, the actors may also retrieve explanatory information through a help browser and information prepared by the advisor in a digital briefcase, also providing a summary of all accomplished activities and gathered information that may be compiled at any time. The latter visualization will be used by the advisor at least once in the encounter, namely to recapitulate the advisory session and provide the client with a printout or digital representation of the summary.
Figure 7-7: Screens of second design iteration; (1) General process overview, (2) Overview of relevant information blocks, (3) Detailed gathering of financial situation
(here: cash flow), (4) Risk profiling, (5) Definition of investment strategy, (5) Supportive tools (calculator, information browser, session summary)
8 Essay III: Designing for Cost Transparency in Investment Advisory Service Encounters
Abstract
Investment advisory services of financial service providers (FSPs) exhibit several characteristics that are detrimental to advisory quality. The interaction of advisor and client is strained by a lack of transparency regarding the advisory process (what activities are performed and why) and the information used therein (what information is used for what purpose and with what effect), as well as regarding the precise costs of the service and the recommended products. In prior research, we suggested that process and information transparency issues may be appropriately addressed with collaborative information technology (IT) artifacts. In this paper, we argue that collaborative, transparent artifacts may also be a premise of enabling cost transparency. To this end, we describe a complete research cycle of designing, implementing and evaluating a shared cost-transparent IT artifact to support client-advisor interaction in investment advisory encounters.
Evaluation results suggest the efficacy of our design in improving the clients’ perceived cost transparency as well as increase their satisfaction and their willingness to pay for the received investment advice. These findings may also challenge the common belief of FSPs that transparent, fee-based advisory services would neither be accepted by clients nor be economically viable. Practical implications of these findings for designing advisory encounters with supportive IT are discussed.
8.1 Introduction
Investors are dissatisfied with their financial service providers’ (FSPs) investment advisory services [Mogicato et al. 2009]. Indeed, to counteract cost pressures resulting from fierce competition, FSPs have been optimizing their advisory activities towards product sale rather than provision of advice, leading to a poor quality of advice [Jungermann and Belting 2004]. For investment advisory services, research suggests several characteristics that are detrimental to advisory quality, including information asymmetry, interest asymmetry and ignorance of the client’s information needs [Oehler and Kohlert 2009]. Due to these asymmetries, the advisor might exploit the client’s less knowledge and experience to opportunistically pursue his own goals (e.g., by only superficially gathering relevant information or deliberately presenting information in a way that is incomprehensible for the
client). From a client’s perspective, such (possible) behavior is fostered by the lack of information disclosure, especially regarding the exact costs of both the investment advisory service and the products offered therein – thus, the client cannot be sure whether the advisor is optimizing the solution for the client’s best interest or, on the contrary, towards higher fees and provisions.
Considering the clients’ general preference and demand for transparency [Lechner et al. 2009], especially regarding the cost of advisory services [Mogicato et al. 2009], the revenue models of FSPs lead to a paradoxical situation; while FSPs are trying to confront competition by designing cost structures to be highly non-transparent and difficult to compare [Carlin 2009], they are at the same time impairing the resulting service quality as perceived by their clients – potentially also affecting their satisfaction.
Indeed, looking at the prevailing business models of Swiss FSPs and the resulting incentive systems of advisors, we argue that the lack of cost transparency may be a major source of client dissatisfaction.
As legislative regulations trying to establish transparency “top down” do not hold up to their promises [Oehler and Kohlert 2009], in this essay we suggest a “bottom up” approach of introducing transparency at the locus of investment advisory services – the client-advisor encounter. We start our investigations by posing the question of why FSPs are still refraining from establishing cost transparency. Based on a comprehensive study of the status quo of investment advisory services in Swiss FSPs [Mogicato et al. 2009], we find two major reasons:
(1) Given that information technology (IT) is hardly used in advisory encounters [Schwabe and Nussbaumer 2009], cost transparency of advisory results (i.e., product portfolios configured by the advisor and adapted to the client’s preferences) is very difficult to maintain – while it is complex enough to allow for ad-hoc changes of product allocation (e.g., replacing one product with another), it is virtually impossible to adapt and configure such portfolios while dynamically adjusting or accounting for changes in the cost structure, as the calculation of actual costs in such scenarios is too complex. Thus, the client is confronted with the actual costs of her decisions typically only after they have been made.
(2) FSPs consider cost transparency being detrimental to existing business models, supposing – and thus following neoclassical theory’s intuition – that clients would always opt for the least expensive product from a