Magazine

Customer centricity as a success factor for financial products
From our projects

Jan 14, 2021
Silhouettes Group Menschen klettern auf den Berg und hilfen sich gegenseitig bei Sonnenuntergang.

"The fish must like the worm" - not only fishermen know this. Companies that act accordingly and tailor their products to the needs of their customers have a clear competitive advantage. This has long been common practice in the retail sector, but there is still room for improvement in financial products. Companies like the reconcept Group and Jäderberg & Cie. have recognized this. They prepare their financial investments differently for different target groups.

"The customer is king" is an old and timeless saying in business. But in the financial sector in particular, this sentence, which is actually self-evident, is too seldom put into practice. Too often, potential customers ask themselves: Will the products on offer be bought by me or sold by the financial services provider?

Customer centricity instead of customer orientation

U.S. economist Peter Drucker was the first to shape the understanding of the importance of customer centricity when he said in 1954:

"It's the customer who determines what a business is, what it will produce and whether it will be successful."

The concept of customer centricity and its benefits have been discussed for more than 50 years. Despite this fact, many companies still find it difficult to fully align themselves with the customer-centric paradigm. 

A study by the Frankfurt School of Finance & Management on the topic of "Customer Centricity in the Financial Industry" (study in German) concluded back in 2011 that a radical rethink is needed in the financial sector so that the industry puts the customer back at the center. This involves consistently aligning all of a company's activities with the demands, expectations and wishes of its customers.

"Financial service providers have recognized that they need to make significant changes to their customers. But they often do not take a radical enough approach. Customer orientation must become customer centricity. This requires a significant expansion of knowledge about customers and a stronger focus on selected target groups and their needs." Prof. Dr. Jürgen Moormann

Pioneer of sustainability and customer centricity: reconcept GmbH

One company that took the path of customer centricity early on is reconcept. Hamburg-based reconcept GmbH is considered a pioneer in the green investment market. Since its founding in 1998, reconcept has established itself as an expert for investments in renewable energies in Germany, Finland and Canada. reconcept capital investments finance the construction and operation of wind energy and photovoltaic plants as well as environmentally friendly hydroelectric power plants that do not require dams. Concrete green assets are thus brought together with investors. In addition to project financing, reconcept also acts as a project developer.

For reconcept, two aspects are at the core of its corporate philosophy: sustainability and the long-term success of its investors. reconcept Managing Director Karsten Reetz comments:

"We are convinced: only what is sustainable will last tomorrow. This applies to our projects, but also to each individual investment portfolio of our customers. Because the energy future is green."

The Hamburg-based company's focus on the long-term success of its customers is paying off handsomely. Since its foundation, reconcept has raised around 515 million euros from more than 10,000 private investors through various bonds and investment offers. The capital has been used to realize around 230 renewable energy plants in Germany and abroad.

reconept Windkraftanlage in Finland

"Our investors benefit from our many years of market experience. Conversely, reconcept benefits from the trust and willingness to invest of its customers. True to our motto: Good investments need strong partners. Because our work requires a sufficient capital base to be able to invest effectively in renewable energies and work for a good return for our investors." Karsten Reetz

reconcept's clientele is very diverse. They include not only private investors, but also professional ones. And even the private investors differ greatly according to various factors such as income, gender and age. They also differ in their willingness to take risks and in their desired investment horizon.

In order to do justice to this circumstance, reconcept has launched various products that address different target groups. For example, there is the RE14 Multi Asset bond. This is an indirect investment in renewable energies (wind, solar and hydropower) in Europe. The RE15 EnergieZins 2025 bond is another reconcept product. The capital raised will be used to develop renewable energy projects in the core markets of Germany, Finland, Canada and Cyprus. These include wind energy, hydropower and solar projects (read more about both products in the infobox).

With an investment in the reconcept RE14 Multi Asset bond you invest directly in renewable energies in Europe. The capital raised is used for the construction and operation of wind and solar power plants. The minimum investment amount is 1,000 euros. The investment has a term of 3 years (31.01.2024) and is linked to an immediate interest rate of 4.5 percent per annum.

With an investment in the RE15 EnergieZins 2025 bond, you support the expansion course of the Hamburg-based pioneer in green investments. The capital will be used for the development of renewable energy projects of the reconcept Group in the core markets of Germany, Finland, Canada and Cyprus. These include wind energy, hydropower and solar projects. The minimum investment amount is 1,000 euros. The investment has a term of 5 years (31.12.2025) and comes with an immediate interest rate of 4.0 percent p.a.. In addition, the investment has an attractive add-on in the form of inflation compensation, which is added to the fixed interest rate. If the inflation rate in 2020 is 1.5 percent, as in the previous year, the interest payment will increase to 5.5 percent.

In order to reduce the barriers to entry for its bonds, the reconcept Group is also offering the RE14 Multi Asset bond and the RE15 EnergieZins 2025 via Innovestment. The general conditions remain the same, except that the minimum subscription amount here is only 1,000 euros. Thus reconcept approaches that customer group, which would like to participate in the upswing of the renewable energy, but cannot afford the entrance with 5,000 euro (yet) or would like to spread more broadly. In this way, the Hamburg-based company is also opening itself up to a younger target group that is strongly motivated by the topic of climate protection and is binding them to itself at an early stage. Karsten Reetz explains this in an interview with Innovestment:

"The trend among consumers to buy digitally via online channels is unbroken and will certainly intensify. This also applies to the financial market. Investors increasingly expect not only to be informed online, but also to be able to act independently - in other words, to be able to subscribe to a financial product online. That is why we also offer the online subscription channel in addition to our established, analog processes. After all, we want to remain relevant for our customers."

Sustainable customer relationships: Jäderberg & Cie.

Another company that lives customer centricity and also comes from Hamburg is the impact investor Jäderberg & Cie (JC Group). The basis for a sustainable relationship with investors is first of all a sustainable investment. Under the project name JC Sandalwood, reforested mixed forests with over 300,000 sandalwood trees are operated on 700 hectares in the tropical north of Australia, promoting several of the UN Sustainable Development Goals (SDG): This is expected to generate harvest revenues of over one billion euros gross from 2028. About half of this belongs to the approximately 1,500 co-investors, while the other half belongs to the JC Group itself.

Sandalwood is unique in many ways. As early as 4,000 years ago, it became the sacred tree of Ayurveda. It contains sandalwood essential oil, which is used for its medicinal and olfactory stimulating properties in human and veterinary medicine, natural remedies and aromatherapy, and as a fragrance carrier, among other applications. However, its popularity has not only made sandalwood a very expensive, sought-after commodity, but due to overexploitation, the "royal tree" is threatened with extinction and is on the Red List of endangered species. As a result, global demand has not been able to be met for decades.

Taking advantage of this unique, long-term market gap, the world's only sustainable source of commercially relevant size is in Australia. Started as a government research project in the 1980s, the first commercial plantings took place in 1999, with the first harvest in 2014. To expand, the Australian global market leader invited a handful of institutional investors as plantation owners. These include the Abu Dhabi sovereign wealth fund, the Harvard University endowment fund, the Church of England - and the first, since 2009, the JC Group. In turn, the Hamburg-based company is the only one to offer investors access to its sustainable sandalwood investment.

Mitarbeitende des Plantagen-Betreibers Quintis kontrollieren den Sandelholz-Bestand auf einer Plantage.

For the investment in JC Sandalwood, the JC Group has from the beginning created tangible asset solutions that are as tailored as possible to meet the different customer profiles and investor wishes, whether private, professional or institutional. 

The asset investment JC Sandalwood Invest 10 is one such tailor-made product that offers private individuals the opportunity to participate in the sustainable financial investment Sandalwood. The capital flows directly into the various sandalwood sites and vintages of the JC Group. In addition to a projected return of 9.1 percent per year (after taxes), investors benefit from individual, flexible deposit and withdrawal options. 

Since among the JC investors the desire for a savings plan arose increasingly, the Hamburg Impact investor developed with the investment JC Sandalwood Invest 11 a suitable product. The initial investment of 2,400 euros is significantly lower than the one-time investment of 10,000 euros for JC Sandalwood 10. Subsequently, investors can save from 100 euros per month and have the option of making additional deposits. The product thus caters even more to customers' individual investment needs (for more information on the JC Group's products, see the infobox).

"In our savings plan, the initial investment does not serve to cover commissions and costs ahead of time, but so that the investor benefits financially from the tree growth from the outset. Therefore, the ongoing costs are always borne only proportionally by the savings installments. And with rate breaks the costs do not continue to run for the investor. This has been praised as a social return before." Peter Jäderberg

Praise is also known at JC Sandalwood in the form of the German Investment Award: both in 2017 ("best alternative investment"), as well as in 2019 ("best impact investment"). In 2020, further developments followed: "JC Kids", "JC Impact Pension Solutions" and the cooperation with Innovestment. With JC Kids, a solution was created to give minors a JC Sandalwood investment not only packaged in a child-friendly way, but also in a legally uncomplicated way. The legally required involvement of the guardianship court is no longer necessary.

With "JC Impact Pension Solutions", investments in real assets, such as JC Sandalwood, can be used in company pension plans. Together with industry experts, solutions have been created to build up long-term assets from the untaxed gross salary: on the one hand a "turbo" for the return, on the other hand a significant relief for the employer's balance sheet.

For Peter Jäderberg, the strategic partnership with Innovestment is also based on the further development of the quality of sustainability: 

"In keeping with the UN Sustainable Development Goals, access to attractive investment opportunities for every type of investor is also part of the equation. A particularly disruptive form of democratization of wealth can come through crowd funding. In Innovestment, we have found a partner with whom we both share these ideals in unison and add value for mutual investors."

Especially for a younger, online-savvy clientele, the JC Sandalwood Invest 18 investment on Innovestment is open as a digital subscription from as little as 500 euros. In line with demand and matching the sandalwood harvests, the decision was made in favor of a bullet subordinated loan, which offers a linear interest rate of 9.75 percent (before taxes) with a term of nine years. This product also takes into account the needs of customers in the form of flexible maturities: If investors need access to their capital before then, they can also demand repayment after just five years - with a correspondingly lower interest rate. More information can be found in the offer profile.

With a one-time investment starting at 10,000 euros, private individuals can participate in the asset investment JC Sandalwood Invest 10. The capital is used to acquire shares in the various sandalwood locations and vintages of the JC Group. From this, harvest revenues are expected from 2028 to 2033. The projected return is 9.1 percent IRR per year (after tax). Individual flexible deposit and withdrawal options are available.

The JC Sandalwood Invest 11 asset investment is a savings plan. Here the starting investment goes off with 2,400 euro, the monthly savings rate starting from 100 euro. At any time and individually the investor can adjust itself with additional payments to the future investment need selectively. The investment runs until 31.12.2033 (with an option to extend by up to 2 years) and includes 96 monthly installments. The effective interest rate p.a. (after taxes) is 6.4 percent.

With the current offer JC Sandalwood Invest 18 the possibility opens for investors of Innovestment to profit from the economic and ecological possibilities of sandalwood. The investment JC Sandalwood Invest 18 on Innovestment is open as a digital subscription from 500 euros. The investment is made via a bullet subordinated loan, which offers a linear interest rate of 9.75 percent (before taxes) with a term of nine years. Investors who need access to their capital before then can also demand repayment after five years - with a correspondingly lower interest rate.

Both "JC10" and "JC11" are regulated as asset investments, and the prospectuses were approved by the German Federal Financial Supervisory Authority (BaFin) after formal review. In the case of "JC18", the "asset information sheet" has been approved by BaFin. The JC Group thus offers its various customer groups a wide range of products and caters to different needs. Peter Jäderberg explains the motivation behind this in an interview with Innovestment as follows:

"Why does a manufacturer go to market with different products? Why does Ritter Sport have different flavors? Because not necessarily the tastes are different with investors, but the investors are different. Now, investment doesn't have anything directly to do with taste; it's about catering to the different types of investors that exist. There are institutional investors like pension funds, there are professional investors like family offices or foundations. They have very different investment structure requirements than a private investor. And private investors can also either invest a lot of money or less. To satisfy all these different tastes, we come to the market with different offerings."

The examples of reconcept and JC show that financial services providers have already developed various approaches to put the customer back in the spotlight by offering them customized financial investment products tailored to their needs. This gives customers an investment experience that is tailored to their needs. This is the only way to build sustainable customer relationships that add long-term value for both parties.

Are you curious about the products of reconcept and JC?
Then take a look at our investment projects.

Warning: The acquisition of this investment involves considerable risks and can lead to the complete loss of the assets invested. 

bhp