Will Silicon Valley Or Hollywood Solve Wall Street’s Churn Problem?

In this year’s annual letter to shareholders, JP Morgan’s CEO Jamie Dimon warned that “Silicon Valley is coming.” From investing to payments and lending, the rise of fintech has left many of the big banks and brokerages worried. In a March research report, Goldman Sachs estimated that 7 percent of annual bank profits ($11 billion-plus) may be at risk to non-banking entities over the next five years.

While Silicon Valley startups may be causing some unease on Wall Street, it appears that a growing number of companies in the financial services industry are turning to the Valley, and even Hollywood, for help removing the latest thorn in their side: churn.

Wall Street’s Growing Churn Problem

The growing ease in which traders can change brokerages online, combined with large welcome bonuses offered to new customers, has resulted in a number of traders switching brokers with the same casualness as switching outfits.

The magnitude of this problem is illustrated by the fact that almost half of the talks on the first day of the upcoming IFXExpo, a major annual conference for the B2B finance industry, are on the topic of retaining traders.

In response, brokers have been forced to think outside of the box in terms of how they retain their users. As it happens, this thinking has led many of the large banks and brokerages directly to the doorsteps of Silicon Valley startups and Hollywood directors who are offering solutions to help these companies keep traders engaged.

Retention on Auto-Pilot

One of the most popular solutions for improving retention rates that’s being adopted by companies in the financial industry is marketing automation software, which allows companies to detect signs of inactivity in advance of a customer deciding to close their account.

This provides a valuable window of opportunity, where automated messages are triggered to re-engage the customers and incentivize them to stay.


Over the past five years the marketing automation software industry has grown from a value of $225 million to $1.65 billion. According to a study by Mintigo, the financial services industry are among one of the top industries to have adopted automation software.

Social Stickiness

Social trading is a relatively new concept that combines aspects of social networking websites with traditional online trading features. Most social trading platforms work by enabling users to follow and copy the trades of other users whose track records are made public on the site.

While social trading provides many benefits to traders, it has also become an attractive way for brokers to increase their customer retention rates.

In the same way that Facebook makes it difficult to leave your account, brokers are adopting social trading in the hopes that the social networking aspects will make their services ‘stickier’ and therefore harder to leave.

Will Hollywood Save the Day?

One company has decided to look beyond the Valley towards the Hollywood Hills to improve trader retention. Social trading platform TradeSocio has recently announced plans to launch a reality show featuring a group of amateur traders competing against each other for a grand prize.

The company is creating this show to try to differentiate its service from the competition while providing traders with an opportunity they can’t find elsewhere.

“The reality is that this industry is about to get upended. If brokers want to develop loyalty among their traders, they need to offer them something that they can’t get elsewhere,” TradeSocio founder Rohan Hall said. “That may be the opportunity to be in a Hollywood TV show, a better trading experience, or something else. At the end of the day, the tactics that used to work are becoming increasingly ineffective, and if brokers don’t adapt, they’ll find themselves without a sustainable customer base.”

Regardless of whether the industry gets upended or not, examples like this make it clear that brokers are taking the threat of customer indifference seriously and are willing to experiment with creative solutions from the least likely of places.

It’s Time for Brokers to Place Their Bets

The brokerages and banks of Wall Street have had a good run of being in control. The widespread adoption of the Internet and the recent surge of innovation in fintech is beginning to shift some of that control back to the users.

With less control, the established financial services companies are being forced to place their bets on different ways to regain their customer’s loyalty. From implementing marketing automation software and social networking features to hiring Hollywood TV companies, it’s unclear at this stage which bets will pay off.