Client Advisor Research Articles

Falling Prey to Bias? The Influence of Advisors on the Manifestation of Cognitive Biases in the Pre-M&A Phase of Organizations

Our study demonstrates that the pre-M&A phase provides breeding ground for irrational behavior in the form of cognitive biases. These biases not only arise within acquiring and acquired firms, but M&A advisors themselves are also prone to effort-saving techniques and subconscious biases, which may be reflected in the client’s M&A decision-making process. Cognitive biases stem from the contractual client–advisor relationship that elicits time pressure, standardization, and emotionality—that is, circumstances that favor the employment of effort-saving techniques. These biases lead to complex decisions based on the selective collection, framing and evaluation of data, the overestimation of one’s rationality, ability and deal likelihood, the illusion of control, and one-sided views. Such a biased evaluation of information is likely to induce the selection of a non-optimal target or acquirer or simply forcing a deal that should not be made in the first place. Hence, these cognitive biases can be seen as a source for consequent M&A failure. With the identification of cognitive biases and bias-fostering circumstances, our study allows for awareness and consequent mitigation of such blind spots, thereby improving decision-making processes in the pre-M&A phase via the introduction of “debiasing” strategies and the creation of favorable conditions for rational reasoning.

Implications of AI-based robo-advisory for private banking investment advisory

PurposeAI-based robo-advisory (RA) represents a FinTech application that is already replacing retail investment advisors. In private banking (PB), clients also increasingly expect service provision across different digital channels, but with a higher degree of personalization. Hence, the present study investigates the impact of intelligent RA on the PB investment advisory process to derive both process (re)design knowledge and strategic guidance for artificial intelligence (AI) usage for PB investment advisory.Design/methodology/approachThe present study applies an AI process impact analysis approach by decomposing AI-based RA into three AI application types: conversational agent, customer segmentation and predictive analytics. The analysis results along a reference PB investment advisory process reveal sub-process transformations which are applied for process redesign integrating AI.FindingsThe study results imply that AI systems (1) enable seamless client journeys, (2) increase advisor flexibility, (3) support the client–advisor relationship by applying an omnichannel approach and (4) demand advisor skills to be augmented with technical and statistical knowledge.Originality/valueThe research study contributes (1) an AI process impact analysis approach, (2) derives process (re)design knowledge for AI deployment and (3) develops strategic guidance for AI usage in PB investment advisory.

An Algorithm of Decomposing the Trend and Cyclical Components of FDI Inflows: The Case of Ukraine

Authors: Bogdan A. Moskalenko, ORCID: https://orcid.org/0000-0003-3972-1705 Joint stock company “ProCredit Bank”, Business Client Advisor, Kyiv, Ukraine Pavlin Mitev, ORCID: https://orcid.org/0000-0001-5798-4192 Joint stock company “Raiffeisenbank EAD”, Credit Risk Policy Manager, Bulgaria Pages: 95-101 Language: English DOI: https://doi.org/10.21272/fmir.4(3).95-101.2020 Download: Views: Downloads: 26 7 Abstract The article summarizes the arguments within the scientific challenge on improving approaches to country investment potential evaluation. The main objective of the research is to systematize the existing statistical methods of decomposing macroeconomic time series into growth (trend) and cyclical components. Systematization of theoretical and methodological materials on solving the problem of decomposing the trend and cyclical components of time data series showed that the use of filtering series of economic dynamics based on the Hodrick-Prescott filter allows identifying long-term growth trends or recessions. The relevance of solving this problem is that the country investment potential evaluation is often based on investigating the impact of foreign direct investment`s determinants in a domestic economy while ignoring cyclical macroeconomic processes within and outside the country, on which those determinants often have not responded yet or reacted late. The methodical tools of the research are carried out in the following logical sequence: systematization of existing statistical methods for trend component decomposing; analysis of data that will be used in the decomposition process and in further country investment potential evaluation; application of the Hodrick-Prescott filter and trend component decomposing in foreign direct investment net inflows dynamics into the economy of Ukraine. The Research methods combine in following dimensions: comparative analysis, regression analysis and univariate methodology of time series decomposing. The period from 1999 to 2019 was chosen as the research period. The object of the research is foreign direct investment net inflows into the economy of Ukraine, as they are the determining element within the country investment potential evaluation process. The article presents the results of empirical analysis, which showed that the decomposing a trend and cyclical components of foreign direct investment inflows can improve the quality of investment potential evaluation, considering the impact of current economic cycle phase. The results of the research can be useful for a more accurate investment potential evaluation on the macroeconomic level and forecasting foreign direct investment inflows for the following time periods. Keywords: business cycle synchronization; country investment potential; foreign direct investment; Hodrick-Prescott filter; national economy.

Factors Associated With Hiring and Firing Financial Advisors During the Great Recession

From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic situation of households using the National Longitudinal Survey of Youth (NLSY) and analyzes the financial advisor–client relationship during the Great Recession to determine who fired or hired a financial advisor during this period. The results indicate that losing money, measured by a decrease net worth, was not the main reason why clients fired their financial advisor during the Great Recession. Interestingly, the results also show that experiencing a decrease in net worth was not the main reason why individuals pursued the services of a financial adviser during this period. Instead, current income and an increase in income were the primary factors that impacted the client–advisor relationship during the financial crisis. These results are consistent with consumer demand theory in which financial services are a normal good that people purchase less of when their income falls.

Policy advisory styles in the francophone Belgian civil service

In a context of the rising importance of ministerial advisers, this article provides empirical evidence about the nature of involvement of civil servants in policy work. Based on a survey of graduated civil servants in francophone Belgium, it shows that civil servants are much involved in policy work even in a politico-administrative system characterised by strong ministerial cabinets. Belgian francophone civil servants are ‘incidental advisors’. They are less process generalists than issue specialists who mostly deal with policy implementation. Their policy advisory style oscillates between ‘rational technician’ and ‘client advisor’. Despite a low institutionalisation of policy advice in the civil service, civil servants significantly serve the ministers in the policy formulation (for harmonization) phase, supplying information and analysis and participating to the writing of policy-related texts.Points for practitionersThe francophone Belgian case shows the importance of policy tasks conducted by civil servants. It also provides evidence about the importance of in-house policy-analytical capacity as it shows that civil servants primarily rely on internal information sources and consultation when involved in policy formulation.

The effects of the elaboration likelihood model on initial trust formation in financial advisory services

PurposeIn order for financial institutions to cope with increased competitive pressure from the financial technology companies, offering digital services such as a mobile service system (MSS) targeted for high net worth individuals (HNWIs) becomes critical. Despite long-term trustworthy relationships between HNWIs and financial advisors, studies suggest that the formation of initial trust poses a significant challenge. The purpose of this paper is to identify various features related to initial trust antecedents.Design/methodology/approachThe study was conducted using the survey data, and employs variance-based structural equation modeling (SEM) techniques to test hypotheses.FindingsThe findings from a closed experiment with 107 participants suggest that compared to more traditional service systems, customers are more prone to the construct of service quality, and specifically professional, prompt, dependable and timely financial advice.Originality/valueThe study validated key constructs that positively influence the initial trust formation process and ultimately the intention to use in an MSS for the financial advisory. The authorts particularly emphasized the rebalancing and monitoring steps in the financial planning process between HNWIs and client advisors.

Relationship between Biopsychosocial Factors and Financial Risk Tolerance: An Empirical Study

Executive Summary Financial risk tolerance (FRT) refers to the retail investors’ willingness to accept the negative changes in the value of investment or an outcome that is adversely different from the expected one. Understanding and assessing FRT plays a crucial role in individual choices about wealth accumulation, portfolio allocation, and all other investment and finance-related decisions, and in achieving financial goals. An advisor has to accurately assess FRT for achieving his/her goal or investor’s goal. Failure to do so leads to the choice of an investment option/portfolio which is inconsistent with one’s FRT, resulting in investor disappointment, that is, unbearable loss to the client. Such a situation may adversely affect the client–advisor relationship. Measuring FRT is challenging as it is a multidimensional attitude. Besides, it is an elusive concept that appears to be influenced by a number of predisposing factors such as demographic, environmental, and psychosocial factors. This study aims to identify the factors that are related to risk tolerance from outside the financial services domain such as psychology, economics, and bio-sociology. It deals most specifically with the relationship between biopsychosocial factors and FRT. Those who are interested in assessing and predicting FRT can move closer to a theoretical account that blends psychological and economic insights and supplements the understanding of risk-taking attitudes and behaviour of retail investors. Such an understanding will help financial advisors, policy makers, and researchers in identifying the determinants of an individual’s FRT to suggest the suitable investment alternatives to their clients. A single cross-sectional survey was conducted among 951 retail investors with various levels of investment experience through a structured questionnaire covering a variety of demographic factors. An analysis of the data collected through the questionnaire indicates that all the three factors—self-esteem, personality type, and sensation seeking—are positively related to FRT. This study adds to the extant literature on psychological determinants of FRT.

Maintaining professionalism: emotional labor among lawyers as client advisors

Dominant professional ideology dictates that lawyers behave professionally toward clients by using logical, rational reasoning and expression and by leaving emotion and personal feelings out of their work. However, this ideology overlooks the fact that lawyers who work in settings that feature high client contact often labor under very emotionally charged circumstances. As a result, lawyers must use emotional labor to cope with their own feelings while maintaining their professional display. Using qualitative data based on semi-structured interviews with twenty lawyers in the Midwestern United States, I show that the lawyers interviewed in this study cope with their own feelings by using emotional labor to suppress the spontaneous expression of personal feelings, while working to evoke a display of emotions that does not run afoul of traditional standards of legal professionalism. Their use of emotional labor to cope with their feelings came in four forms: expression of genuine emotion, deep acting, surface acting, and detachment. The findings suggest that despite wide scholarly discussion of alternative conceptions of professionalism, the need to expand these discussions among law students and practitioners is still pressing.

Using workplace changes as learning opportunities

Purpose – This paper aims to contribute to an understanding of how individual characteristics and perceived contextual conditions shape reflection in professional work, particularly in workplaces that provide a variety of work experiences related to changes. The authors examine the effects of personal initiative, self-efficacy and perceived psychological safety in work relations with colleagues and supervisors on individuals’ reflection at work. Design/methodology/approach – A sample of 84 client advisors who had recently been affected by major changes in retail banking workplaces participated in the study. The participants completed a questionnaire consisting of instruments to map their self-rated personal initiative, self-efficacy beliefs, reflection at work and perception of psychological safety in work relations with colleagues and supervisors. The data were analysed by performing correlation analyses and hierarchical regression analyses. Findings – The results revealed that both individuals’ personal initiative and self-efficacy significantly positively affect reflection at work. An individual’s perception of psychological safety – particularly among peers – positively predicts reflection. Originality/value – This paper enriches the research on reflection in professional work, particularly against the backdrop of workplace changes. This is done by emphasising the power of individuals’ proactive role and initiative-taking work behaviour; positive beliefs in their own capabilities, e.g. managing the various opportunities involved in workplace changes; and their perception of a psychologically safe environment within a work group that is characterised by interpersonal trust, mutual respect and supportive cooperation.

Determinants of bank advisor revenues

PurposeThe focus of this paper is to highlight the research findings with regard to the performance of client advisors in retail banking by analyzing their revenues and the underlying determinants of those revenues. Retail banking activities are increasingly important to understand in terms of productivity and performance management due to the high degree of competitiveness. This paper takes external and internal determinants of bank advisor revenue performance comprehensively into account. The author also derives practical implications for bank managers.Design/methodology/approachBased on the theoretical framework, empirical models are developed, which are based on a cross‐sectional ordinary least squares analysis. In total, four regression models are employed – being the base model, and the three variants of that using differing parameters in order to ensure the robustness of the results. The database encompasses quite sensitive and specific data on 521 retail banking client advisors in Switzerland. Additionally, it is enriched by explanatory variables on a regional level considering the degree of competitiveness and the population in a region, which are expected to be important determinants in retail banking.FindingsFirst, bank advisors with closer proximity to clients and less distance to the community, combined with a longer period of work experience in that field, are more successful with regard to revenue performance. Second, the size of client portfolios, measured in number of clients and assets under management, client acquisition, client retention, the upgrades and downgrades across client segments, all have significant effects on revenue performance. Third, the competition and the population in a specific region need to be included in performance measurement and management by bank managers in order to ensure useful comparability across regions.Practical implicationsThe hypotheses, as well as the findings, are also discussed with bank managers in order to validate the results and to enhance their practical relevance to the banking industry. Important practical implications are: first, regional differences and competitive pressures need to be taken into account in the performance measurement systems in order to ensure comparability. Second, collaboration across client segments is crucial and needs to be fostered by appropriate organizational structures and incentives. Third, retail bank advisors, which are close to the clients and have more work experience are most successful, which is important for hiring activities.Social implicationsA better understanding of the determinants of bank advisor revenue performance is crucial as performance management systems in banking are difficult to predict due to the varying methods of implementation by bank managers in their daily business. This is especially the case for performance measurement and incentive systems, which also entail social implications with view on potentially detrimental effects, for instance for too aggressive targets without properly taking the client's credit worthiness into account. Furthermore, retail banking is a pivotal area in banking as most people are depending on retail banking infrastructure, services and products.Originality/valueThis paper contributes to the current research by improving the understanding of a bank advisor's performance, as there is very limited research in this field to date, especially when considering the quality of empirical data. The paper adds to research by improving bank managers’ understanding of the determinants of a bank advisor's revenue performance. Especially original is the detailed inclusion of external factors such as competition and population, and their effect on the revenues. In addition the analysis is comprehensive and includes a broad range of relevant factors with a high degree of data quality.

Change at work and professional learning: how readiness to change, self-determination and personal initiative affect individual learning through reflection

Reflection offers an important means to learn effectively from changes induced by the workplace. The authors examined readiness to change and work-related self-determination as preconditions for reflection at work and expected personal initiative—defined as self-starting and proactive behaviour—to have a mediating effect. The study tested these relations using a questionnaire with 84 client advisors working in retail banking departments. These client advisors were about to undergo a range of changes in their workplaces at the time of the data collection. The changes—most importantly, the implementation of a new advisory concept accompanied by new advisory software—afforded these individuals the opportunity to learn. Further, the study conceptualised self-determination as an individual’s experience of autonomy, competence and social integration at work. Regression analyses revealed that social integration and perceived competence exert positive effects on reflection. The results indicate that personal initiative mediates the relationship between readiness to change and reflection as well as the relationship between all facets of self-determination and reflection. This paper discusses these findings in terms of their theoretical contribution to the literature on workplace learning and in relation to the practical importance of developing positive attitudes toward changes at work and active work behaviours for change-related learning activities such as reflection to succeed.

Sense and sensibility: The role of business incubator client advisors in assisting high-technology entrepreneurs to make sense of investment readiness status

For high-technology entrepreneurs, attaining an appropriate level of investment to support new ventures is challenging as substantial investment is usually required prior to revenue generation. Consequently, entrepreneurs must present their firms as investment ready in the context of an uncertain market response and an absence of any trading history. Gaining tenancy within a business incubator can be advantageous to this process given that placement enhances entrepreneurial contact with potential investors whilst professional client advisors (CAs) use their expertise to assist in the development of a credible business plan. However, for the investment proposal to be successful, it must make sense to fund managers despite their lack of technological expertise and product knowledge. Thus, this article explores how incubator CAs and entrepreneurs act in concert to mould innovative ideas into plausible business plans that make sense to venture fund investors. To illustrate this process, we draw upon empirical evidence which suggests that CAs act as sense makers between venture fund managers (VFMs) and high-technology entrepreneurs, yet their role and influence appears undervalued. These findings have implications for entrepreneurial access to much needed funding and also for the identification of investment opportunities for VFMs.

Error Orientation and Reflection at Work

Reflection on events at work, including errors is often as a means to learn effectively through work. In a cross-sectional field study in the banking sector, we investigated attitudes towards workplace errors (i.e. error orientation) as predictors of reflective activity. We assumed the organisational climate for psychological safety to have a mediating effect. The study participants were 84 client advisors from the retail banking departments in branches of a German bank. The client advisors’ were being affected by a range of changes in their workplaces at the time of the data collection. This situation afforded these workers opportunity for learning but also involved the risk of error by these staff. Regression analyses identified that error competence and learning from errors were significant predictors of reflection. The results confirmed the mediating role of psychological safety on the association between attitudes towards errors and reflective working behaviour.

The interplay between change and learning at the workplace

PurposeThe purpose of this paper is to analyse employees' perception of a change at their workplaces and the requirements for learning, and factors supporting or inhibiting learning in the context of this change.Design/methodology/approachData collection included personal face‐to‐face semi‐structured interviews with ten client advisors in the retail‐banking department of a German bank. The interviews took place during a time when the participants' workplaces were affected by a drastic change, namely the implementation of an integrated consulting concept. The data were analysed by a qualitative, content analysis approach, adapting Billett's framework for analysing workplace changes.FindingsChallenges and requirements for learning as a consequence of the workplace change were analysed. The results show that the employees realised many affordances of the modification of work routines, especially concerning work performance, professional knowledge, and professional role. Thus, employees recognised the change as an opportunity for the acquisition of knowledge and competence development.Originality/valueThis paper contributes to the understanding of workplace change's effect on employees' knowledge, work routines and professional development.

Client valuation in private banking: results of a case study in Switzerland

There is much evidence showing that client valuation in the service industry has come to be seen also as a central steering element and success factor in private banking. But until now, there was no specific client value model for the private banking industry developed. Thereby the value of a private client for the bank (from the provider's perspective) can be made up of different components/factors: monetary and non‐monetary, quantitative and qualitative. However, with a view to value‐based management, the calculation of client margin contributions and the lifetime value of a client relationship must be supplemented by key figures representing the qualitative client value drivers. The author addressed the task of developing a specific client value model for private banking based on existing models and findings from general research and practice at the world's largest private bank in Switzerland. In contrast to previous analyses, this study not only surveyed management staff, but also those who are directly responsible for shaping client relationships in their daily work, i.e. the client advisors. The survey sought to identify the criteria that make clients valuable for the private banking industry and also to what extent these criteria were actually implemented by client advisors in the valuation of their clients.

The spatial market of business advice and consultancy to SMEs

This paper demonstrates the existence of spatial markets for business advice services. A large sample of 3245 client–advisor links is investigated using GIS software. Seventy per cent of links are less than 25 km in extent, 93% are to the nearest local business centre, and only a few are with hinterlands or areas peripheral to main centres. The maximum reach of market areas varies by advisor type, averaging only 25–40 km for chambers of commerce and public sector advice services such as Business Link. The maximum reach is 48 km for accountants and banks, and increases to 64 km for customers and suppliers and 74 km for consultants. A threshold for regional level services in major centres can be identified, which ranges from 12,000 to 24,000 businesses in size, depending on advisor type. Service sector firms are generally more localised than manufacturing, and local sourcing of advisors generally declines with firm size and size of business centre. Regional differences are relatively small, but Scotland, Yorkshire and Humberside are the most self-contained for advice, whilst London and the South-East are the least self-contained. This is a contrast to earlier findings by O’Farrell and others. The paper demonstrates a hierarchical and spatial market structure for business advice services that is similar to that in retailing, with firm size and advisor type being the primary influence on differences in demand, and with regional centres most distinct from local centres of supply. Intense localised sourcing of advice from customers and suppliers does not appear to be frequent.