The article was first published on In The Black here.
When Bell Financial Group decided to take on the well established players in online stockbroking with the launch of Bell Direct 10 years ago, it found itself in a unique position.
Investors had lost money – and faith – dealing with their online brokers, and Bell Direct had acquired a CEO who was perfectly equipped to seize the moment.
That CEO was former accountant Arnie Selvarajah.
Selvarajah started his career as an accountant with EY, and spent time at National Foods and Bankers Trust before establishing his own business – providing tech solutions to improve the sales process in the food services industry. He sold his business in 2005 and moved back into financial services, becoming executive manager of broking at CommSec.
Central to Selvarajah’s strategy for Bell Direct was what he calls “the fundamental client truth” – a key learning from his time at rival online broker CommSec.
“Regardless of the industry or the organisation, there are some common truths,” he explains.
“There is always a client with a need and an objective, and the role of the organisation is to understand that need and how to solve it in the most efficient, effective way for the client.”
In the early days at Bell Direct, he says, a lot of time was devoted to talking with clients, understanding what they wanted and how they wanted it – an approach that provided a real alternative for online traders.
“When we entered the market, [the] market sentiment was that people had lost money dealing with existing providers,” says Selvarajah.
“That became an opportunity for us because we were able to present a fresh new face and differentiate ourselves from the current marketplace.”
The company studied findings from research group Investment Trends, identifying the most important attributes for clients when it came to choosing a broker.
“We started by looking at the attributes where our competitors weren’t doing well, then we focused our energy on providing those services better than anyone else,” he says.
“Once we’d done that, we shifted back to improving our ranking on the other attributes as well.”
Understanding client behaviour
Selvarajah says an important step in meeting client needs was to challenge assumptions about who the clients were and what motivated them most.
“When we started, everybody segmented clients based on how frequently they traded. In fact, most of them still do that today,” he says.
By looking at the reasons behind particular client behaviours, Bell Direct found there were often segments within segments.
“For example, we discovered there were two clear types of frequent traders: those who are trading to make money on every trade and those in the process of building a portfolio,” he explains. “While the resultant behaviour is the same volume of trades, their motivations and needs are different.”
Once the company understood that, it was able to create two separate sets of tools within its site to service both of them.
“For the profit traders, we were providing daily trading ideas,” he says. “At the same time, we were creating research reports, portfolio creation tools and strategy tools for people who wanted to create long-term portfolios.”
Another important insight came from watching clients work around the limitations of their existing broking systems.
“We would watch customers create workarounds and hacks to get them to do what they wanted,” says Selvarajah. "This would often cause them pain – but they kept doing it because there was no alternative, and no opportunity to provide that feedback to their provider in a credible way.”
Bell Direct addressed some of those immediate issues by incorporating them into its functions and services – “meeting that underlying need”.
“We also added a little ‘ideas’ button to our website, that clients can use to send us suggestions for improvements,” he says. “We collect all those ideas and the ones that get mentioned the most find their way to the top, and then we add them into the mix.”
Using technology to drive business
Selvarajah has also used technology to transform the customer experience and, in turn, the broking industry.
“Our platform was the first to deliver dynamic live pricing in online broking in Australia – so our clients don’t need to manually refresh to see when prices change,” he says.
“We were also the first to offer integration between the different types of technology our clients use – for example, when you make a trade on the platform the data can automatically feed through to your SMSF administrator. While that isn’t very sexy at the front end, it is very powerful at the back end.”
Selvarajah says Bell Direct has used big data to provide market insights to clients, including showing what company directors are trading, highlighting stocks with unusual trading volumes, and sharing information on the most popular trades.
“This type of analysis can help our customers to see what’s going on in the market, so they can make informed decisions around how they invest.”
The next wave in tech solutions
Selvarajah sees great potential in tech solutions that help clients make better decisions to manage their wealth, and says the company is well placed on the development of what he calls the next phase of robo-advice.
“While the initial launch of robo-advice was effective in providing a low-cost, low-engagement decision process, I think the expectation from clients will be underdelivered in terms of investment outcomes,” he says.
“Robo version 2.0 – self-directed advice – will swing the pendulum back to provide more value to clients, who are better educated and more financially literate.
“We believe that by linking advice to specific investment objectives, robo 2.0 will be able to deliver better client outcomes.”
The path to success isn't always smooth
The success of Bell Direct’s client-focused strategy saw the company rated Best Online Broker in 2013, 2014 and 2015 by Smart Investor, and awarded number one in overall client satisfaction in 2013, 2014, 2015 and 2016 in the Investment Trends Online Trading Survey Report.
However Selvarajah says the path to success wasn’t always smooth. Initially, Bell Direct aimed to break even within its first four years, based on achieving a 3 to 5 per cent share of the online broking market. That goal was dampened by the global financial crisis.
“After peaking in 2007, online broking volumes across the industry fell by about 40 per cent by 2010,” he says. “We actually achieved our market share target in that four-year period, but the problem was that the underlying volume wasn’t there – so it took us six years to break even.”
Today, Bell Direct has 127,000 client accounts and holdings of around A$10 billion. “We’re the classic case of overnight success after nine years,” says Selvarajah.
Selvarajah has added strategic direction to his remit.
“I think strategy is the job of the people running the business. You can create the best strategy in the world, but it’s not going to deliver you an ounce of profit or a dollar of profit if you can’t actually execute it.
“One of the things I have sought to do at Bell Direct is create a learning organisation. We created an environment where we would do, we would learn, we would improve. And then we would do again.”
As always, the clients are central to this strategy. “We’ll get feedback from our clients on what they like and what they don’t like, and we’ll continue to evolve to reflect the client feedback.”
Professional Development: Crafting a business strategy that executes: learn how to evaluate strategic initiatives and then prioritise, assign accountability and translate those initiatives into short-term actionable targets.
3 tips for a successful strategy
1. Stay in the real world
“I have seen great strategies that would never exist in a real-world environment,” says Arnie Selvarajah.
“I think you have always got to be planted in the real world and make sure that the implementation component is possible, given the current environment and the capabilities of the business at that time.”
2. Consider the timing
“Timing is important,” he says. “Sometimes you might have a great idea and a great strategy, but you might need to sit on it until the environment is right for you to implement. The same strategy can completely fail if you implement too early and be completely useless if you implement too late.
You need to ask yourself: is it bleeding edge, leading edge or over the edge?”
3. Remember – it depends
“One thing I learned in my MBA is that the answer to every question in strategy is ‘it depends’,” says Selvarajah. “Just because a strategy worked in a particular organisation doesn’t mean you can transport that to a different organisation – even if it’s in the same industry and at the same time.
"Your success will always depend on you doing the work and getting an underlying understanding of the client and how the strategy meets their needs.”
Arnie Selvarajah's greatest influences
Selvarajah says he has been influenced by a mix of business thinkers. Here are his top three:
1. Richard Branson, entrepreneur
“One of the things that I think a lot about from Richard Branson is his client focus. His drive was always around creating a superior client outcome.
The other interesting idea he talks about is how do you run a big business like a small business? That’s all about making sure people have accountability. They have input into decision-making and it’s all team based.”
2. Michael Porter, academic and author
“Michael Porter did a lot of work around strategy in the early days, but the thing that resonated for me was this idea that creating a sustainable competitive advantage isn’t about just one thing, but a combination of connected elements. He draws it like a molecule that is made stronger through the connections.
If you can find a number of different elements that create your competitive advantage, rather than just one thing, it will be more sustainable and more defensible.”
3. Robert Cialdini, psychologist and author
“In his book Influence: the Psychology of Persuasion, Cialdini talks about influencing people in a moral, credible way. He says one of the core principles of influence is being credible and open with people.
He also explores the concept of reciprocity: if you want someone to engage with you, then do something for them first. That’s helped me think about how we market and engage with our client base.”