Understanding and Implementing Proactive Retention

Psychology 101: clients can learn that a call from their broker could benefit them and not only happens when they

Today I would like to discuss the concept of “Proactive Engagement”. Big word everyone uses that refers to initiating contact with your clients as opposed to engaging when it is too late (“Reactive”). I would like to dig into this concept because it could be a crucial success factor for every single Account Manager and every brokerage owner.

True Story

Few years back, a large broker (very clever guy who is no longer in business – don’t even think we had anything to do with it), asked us to provide a signal to his CRM whenever clients reach a margin call. I told him that he doesn’t need CPattern for that as it is not a rocket science. But I got curious why he needs this if he could have it in any trivial report. He said that he wants his Account Managers to follow up on these clients immediately. This is where it got me thinking: wouldn’t it be too late to call a client when he has a margin call? Think about yourself – if you were a trader losing all your money and getting a phone call from your broker – would you be inclined to make another deposit? Sounds tough to me!

I asked him if it would not make more sense to call traders before the margin call ever took place, when things are still in control (let’s say when a client still has some reserves). He was not even aware of this possibility… I just realized that his entire operation was working on “emergencies”. Meaning – calling clients when things are not working well for them. Sadly enough, it was too late to help this broker as he was on a slippery slope and ended up shutting down within 3 months. My guess was that employing poor retention policies was probably linked to poor management in other fields, which resulted in a meltdown of a very large and profitable business.

My point here is that you need to be a professional in many fields in order to succeed and my focus is only on the retention aspect of it.

From this point on we started developing this concept of helping our clients (brokers) reaching out to their clients (traders) based on various ongoing indications before emergencies take place. This way traders could get used to associate a call from the broker with “care” (e.g., “let’s evaluate your trading strategy”) and not with “bad news” (e.g., “You are running out of funds”). Here is a very simple and easy-to-use psychology 101 lesson: your clients can learn that a call from their broker could benefit them and not only when they need to fund their account.

TLC (Tender Love & Care) Vitamin

Ideally, if brokers would analyze their traders’ course of action and become knowledgeable about traders’ strategy, they could see one step ahead and make a preventative intervention. I can only see a way brokers and traders benefit from it: Proactive engagement with clients should make clients feel secure and protected and as a result increase positive perception of their broker. This positive loop brings more stability to the broker-trader relationship and in the long run makes traders come back to trade.

Now let’s take a trivial example. Let’s say I am a trader with $2,000 in my account and I just lost a big chunk in one single trade. There is no way the broker will be able to predict this and call me before it ever happened. I might be feeling frustrated or even angry at myself/the world. Some traders may feel ashamed and would keep it to themselves (any volunteers telling your wives you lost $1,000 in 5 minutes?). These negative thoughts and emotions could discourage traders from trading and lead them to withdraw their funds to increase their sense of security and control. Brokers who understand this mechanism, are dealing with prevention of premature termination of trading by initiating engagement with the client on the spot. They know that when the call arrives 10 hours after I felt so bad, it is “water under the bridge” and they have small chances to make a change. This is being proactive!

Imagine my Account Manager is so busy with other things he did not even bother to call me. My frustration could be directed to the broker blaming him for all the bad things in this world.

If my Account Manager would call me 1 minute after I lost and said: “Hey, I noticed you had a bad trade. Let’s talk…” and then we would have a professional discussion about my strategy and the current market conditions – I would imagine it could help me overcome this event and feel more in control. Perhaps challenged to try again and learn from my own experience. Deep inside I may even feel grateful that someone noticed and cared about my poor soul.

Here is the opposite example: I won $1,000 and my Account Manager calls me up on the spot saying “well done”. I would probably feel so great that I would want to share this with the entire world. I might also be more attentive and open to suggestions from my Account Manager!

There are so many opportunities to engage traders – the sky is the limit (e.g., sequence of winning trades, observable reduction in activity, fast burnout and so on).

Our reports support the assumption that engagement closer to an event has much better chances to produce trading volume comparing to late engagement or no engagement at all. Basic human psychology across cultures and across brokers.

Proactive Engagement in Practice

Now we need to turn theory to practice. If you run a brokerage and you acknowledge that retaining clients should be proactive and immediate then go at it:

  1. Design internal processes that enable Account Managers to respond in real time
  2. Make sure engagement with clients is made around positive events (e.g. significant account gain)
  3. Come up with a compensation plan for Account Managers who comply
  4. Provide proper education and training to your Account Managers
  5. Enforce proactive retention with consistent management control
  6. Employ testing to make sure the effect has been observed

For some brokers it is a step further. For others it could be a big shift in perception. But if you ask me – it is a small investment with immense ROI. We see brokers who adopt these perceptions and brokers who don’t. Like I said at the beginning – there are many factors for success so you won’t hear from me that if you do X you will have Y” because life is not like that. However, among the factors for success, I believe proactivity is very strongly correlated to a successful brokerage. It is a long run but there are no free meals anywhere, right?

Good luck!

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