AU2007100021A4 - Client Value Management System - Google Patents

Description

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Process to determine the value of a client base based on individual client values and to establish the next most profitable new business activity.

This invention relates to the improvement of the way in which financial services clients are viewed when managing a client base from the perspective of placing a commercial value on a client relationship and determining the next most profitable activity for a specifc client or group of clients.

0 0 Valuing a client base 0 Normally a cl ent base is valued based on the characteristics of the entire client base, or segments of the client C base. A frequent valuation is a multiple based on the gross income currently being earnedby the client base.

Another method is to look at the net proft earned by the entity managing the client based and multiplying this amount by a multiple.

The CVM System determines the individual net present va ue (NPV) of each client in terms of net current income and potential future income off current services as well as other services that could be introduced to the client in the future. Certain product may produce income for a fixed term Term Risk policies) whereas investment products may produce income unti the client passes on The term used for the NPV calculation is based on the product life or the expected life expectancy of the client. The discount rate is related to the risk of a similar practice.

In terms of costing, the CVM allows for each cdient to have a different set of servicing criteria which is then used to determine the cost of serv cing that particular client and thereby the net income and associated NPV for that client.

For example, Client A has been classified as a premium client and would be entitled to a specific service level accorded to premium clients of the servicing company. However in addition to the set services components, Client A insists that monthly statements be sent to his home. The change in this servicing level woul iin the CVM System automatically lead to a re-evaluation of the commercial value of this particular client based on a NPV calculation.

Existing valuation systems do not make use of NPV valuat ons at the individual level.

0 0 Cl Establishing the next most profitable new business activity For existing clients, the CVM System establishes the next most profitable new business activity that should be ON undertaken based on either NPV or an annualized yield.

Financial services groups are increasingly looking at marketing additional services to existing clients. The CVM System ranks which activity would be the most valuable to market to a particular client based on the client's age and income 0 group.

0 0 The tables below should the revenue, service cost and profit expressed as a percentage for a range of possible r products for clients in different age (Single or Married) and income groups B, C etc.).

Cl 91:ii^faii iiii n ep r t 67%w U4 t; 82 -9 24% 17.

-784 1% 9% Once the profit per c ent 1s determ! ned (ether ndvdual y o r per segmen t) it s thenr possibke to f rsthy dentify a nd then rank the most profitable new b us ness act vty. The tablebtehw shows the top ten most profitable acvtes (rnged) for this particular dent grouping I D bfG~a 23 t;3- 29 1)~j viated (ap :mf i £i The CVM System alos for the profitabi ig raning to take place per client of pe segient (as shown above -where ihe most profitable activitiesare high ighted these are carried through to a tabl) This process obtously highlights which ci es to target rm a proiitability perspectte: Usng siiar logic, a NPV ranking of net rost profitabe newbusiness activities persp-ectve. Us n inia aNTis also produced by the system where future nregtive and potye cashi l ws for each activity are discounted.

Currentil, there is no system that identifies specific or grous of cdients to whom new services should be offered using a profitabii ty process as above Finan al Servic organizations currently realize the value of cross sell ing serv ces and apply group valuationsto estimate increases in pifitability but do not have the detailed an ysis shown above.