Case Study 2
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Transcript of Case Study 2
Case Study 2
MERRILL LYNCH: SUPERNOVA
Merrill Lynch: Supernova
Prof. Rogelio Oliva, Roger Hallowell of the Centre for Executive Development, and MIT Sloan Nippon telephone and Telegraph Prof. of Management Science Prepared this case.
It is based, in part on research conducted by Bassim Halaby, Qunmei Li, Luca Dona and Mary Schaefer of MIT Sloan.
HBS cases are developed as the basis for class discussion.
Merrill Lynch
o Established in 1907
o Founders’ strategy: Bring wall Street to Main Street
o Delivering services to individual clients (retail brokerage) through stock broker and financial advisory services.
o One of the leading financial services firms in the world and was the largest of the broker dealer firms on Wall Street in 2003.
SUPERNOVA
About
Name given to a new way to manage client relationships that originated in one of Merrill Lynch’s Indianapolis offices.
A strategy set at the top.
Father of SUPERNOVA- “Rob Knapp”. Merrill Lynch’s Mid-West District.
Client Service Before Supernova
Three aspects of a relationship were critical to client satisfaction : The frequency and quality of contact
Rapid response to problems
Attention to details
12-4-2
Was the supernova description of what client’s minimum annual contact with their financial advisor should be : 12 monthly contacts
4 were portfolio reviews
2 were face-to-face meetings
Predicated upon the completion of a financial plan for the client at the beginning of the relationship.
ORGANIZATION
•Supernova provides administrative support.
•Administrative support through Client Associates by way of daily Folder System.
•Each folder clients details.
The Supernova service promiseSegmentation
Organization You will have a multi generation financial plan.You will be contacted by FA at-least 12 times every year.Response within one hour and resolution within 24 hours
ACQUISITION(The final part of supernova)
•Each year FA to acquire some new, high-quality clients .
•Least promising clients displaced by new clients to another FA, or Financial Advisory Canter .
•FA find 2 to 4 hours everyday for client acquisition, which FAs found more adequate.
PROCESS OF ADOPTING SUPERNOVA
Spread through road-show presentations
Used two part pitch to sell supernova
The Ultimate client experience
Supernova as plan, process and discipline
Service oriented , not transaction oriented
SUPPORT for FAs
FA buy-in (First Step)
Road shows
Managers
Segmentation (2nd step)
Financial planning
12-4-2
Organization
Acquisition
Known Challenges to Implementation
As part of his decision making, he reviewed data on Supernova results to date and projections for the future.
Selected Supernova Results and Projections
Resultso Average number of clients: 208 with average assets of $ 333,000
o Upon joining Supernova transferred 14 clients to another FA (average assets $ 153,000), and 67 clients to the centralized facility (average assets $30,000)
Projections
o $ 130 million annual increase in FA production (with 90% confidence)
o $16.6 million annual reduction in markets errors ( with 90% confidence)
o Total: $58 million in annual pre-tax profit requiring “some investment” to develop a supporting infrastructure
Contd..
Economic Backdrop
o In 2003, times were not good for retail brokerages; stock prices were down, and trading volumes were depressed.
o These conditions made people in the industry tense and directed the attention of Merrill’s top managers to immediate issues such as meeting earning Projections.
Politics and Recognition
o Supernova was seen as the child of its founders.
o Professional jealousy may also have played a role in negative reactions.
Conclusion
o A supernova FA commented: Historically, when we sold a product to a client, Merrill Lynch made money and the FA made money.
o Supernova helps to solve the dilemma that created.
o Supernova enables us to earn our money for handholding, and to do it really well.
o It provides a business process-not a product. We’ve never had that before.
Thank You