PLEASE READ SCENARIO, AND ANSWER QUESTION Introduction Ropemin and Cheatem is a Denver-based investment firm that perfor
Posted: Sun Jul 03, 2022 4:27 pm
PLEASE READ SCENARIO, AND ANSWER QUESTION
IntroductionRopemin and Cheatem is a Denver-based investment firm that performspersonal investing services forprivate clients. Since its inception seven years ago, the firm hasgrown to manage a financial portfolio ofover $17.5 million in equities for two main customer servicesegments – a) individuals with a net worthvalued below $100K, and 2) clients with a net worth of $100K andabove. While over 75% of itscustomer base comes from clients in the smaller net value tier,over 60% of R&C’s revenues stem fromnew and returning customers in the higher, ‘select’ segment. Basedupon the company’s ability to provideunparalleled customer service, particularly with the exclusiveclient tier group, and keen investingacumen, its brokers and financial counselors have a reputation ofunparalleled quality and financialreturns.Unlike competitors like Fidelity Investments and Charles Schwab,R&C’s customer base does not extendnationally or globally. Instead, the company has remained local infocus, maintaining its reputation as apersonalized firm – one that caters to the specific needs of itsDenver and Western region customers. Thecompany is small, with only ten investment counselors, five brokerassistants, three administrative staffmembers, an I.T. service person, a chief operating officer and achief executive officer. For the most part,this close-knit environment has fostered a strong ‘family feel’from within the company. However,despite the intimate corporate dynamic, there have been a number ofcomplaints over the course of thelast few years that center upon the fact that while the overalllevel of employee benefits is strong, mostWhite employees seem to get preferential treatment from management.They are given a great deal oflatitude in scheduling flex-time while most minority groups have tomaintain a standard 8a-5p schedule.In addition, at the investment counselor level, two White malebrokers have been given significant help incultivating and developing lucrative client lists while the otherthree brokers, of color, are ‘on their own’to find new sales strategies. Furthermore, although there are anumber of Black, Hispanic and female‘support staff’ members who have been employed at R&C for manyyears, they have been provided fewadvancement opportunities. ‘Perks’ such as these include access tocompany-based training materials andfunding to take various industry-based certification exams, such asthe Series 7 and Series 63.A ‘people of color’ affinity group within the firm has formed toaddress these issues with seniormanagement, who, with advice from the firm’s legal counsel, hasrealized that it is time to be moreproactive toward its diversity efforts with its staff. Managementis currently evaluating what it can do andis consulting with an outside consulting firm to determine itsoptions.In addition to the aforementioned issues of advancement, thecompany has another troubling issue that forsome reason it has not been able to overcome since its inception –that of Asian Americans in its ranks.While management feels that it is providing equal opportunities forthis demographic segment within thefirm, very few Asian Americans get hired on an ongoing basis,despite their high education levels andstrong scores on the firm’s prequalification tests. In addition,the turnover rate for this group hashistorically been very high. Few, if any members of the staff havestayed for longer than one year.
Presently, there is only one Asian (Chinese) American member onthe staff – Nin Hong. Nin is aninvestment counselor and is very talented. He is diligent,detail-oriented, analytical and very customerfocused, but somewhat quiet when he is not with customers. He hashelped grow R&C’s business steadilyover the last nine months since he started but is concerned thathis advancement potential is starting toplateau. In addition, he has expressed comments to his peers thathe often feels like a ‘token Asian’ withinthe firm and that ‘his people are grossly underrepresented there.’Management is aware of this issue andconsidering the general underrepresentation of Asian Americans atR&C, has committed to recruit andsupport Asian Americans more proactively. In the meantime, it hasalso vowed to work with Nin to assignhim to more high-yield clients, from the ‘select’ segment.Economic ImpactIn a larger context, with the current troubled economy, there areconcerns within R&C that the company’smarket share is starting to slide and that profits may begin towane. There have been reports from thesupport staff, who deal with the firm’s clients on thetransactional aspects of their accounts, that manycustomers are being lured by other brokerage houses by their lowermaintenance costs. Management isvery concerned about this issue and has solicited the employees asto what the firm can collectively do to‘ride out the storm intact.’ Although R&C has acknowledged thatit is willing to concede some ‘second-tier’ clients, it reinforces to the staff at a recent sales meetingthe need to maintain and even grow itsprofitable, ‘select’ segment. This will be the firm’s savinggrace.A Potential Windfall or a Potential Problem?Amidst the economic turmoil and turbulent investment markets,R&C does manage to maintain themajority of its high-end clients for the next few months. Throughguarantees of highly personalizedcustomer service and promotional offers of reduced fees, the firmretains its key customers. In addition,thanks to a three month ‘heavy-up’ period where R&C conductedtargeted advertising, it is even able toattract a number of new potential investors.Earl Stipe, a very wealthy (White, 50+) businessman who mademillions during the oil boom in Colorado,is one of these potential clients. Based upon the information thathe received at a free informationalseminar that the company conducted in conjunction with the AARP,and at the recommendation of afriend who is also a high-end investor with R&C, he walks intothe firm one day with a few copies of hisbank statements, previous investment reports and his checkbook. Hesays that he wants to speak to thefirm’s ‘best investment broker’ and that he is ‘ready to sign onthe dotted line’ and give the firm hisbusiness if they can convince him to do so.Considering the diversity issues the firm is facing, particularlywith Nin and the (lack of an) AsianAmerican population, the firm assigns Nin to the prospectivecustomer. Nin spends an hour with Mr.Stipe, explaining the different investing options that are open tohim and walking through themathematical calculations behind where Mr. Stipe’s previous brokermay have gone wrong. During andafter the meeting and after, Nin is confident that he has done agood job of enticing Mr. Stipe as a new
customer. He feels that his soft-spoken manner, his laid-backstyle and his ability to ‘run the numbers’will win this client over. He offers to be of service in any way asMr. Stipe leaves the office and promisesto follow up with him in a few days.The day after the meeting, Mr. Stipe returns to the firm and asksfor a private meeting with the two-member executive team. Nin and the support team are excited thatMr. Stipe wants to get on board withR&C, and they quietly start planning efforts to manage hisaccount.However, in the meeting behind closed doors, the tone is quitedifferent. Mr. Stipe explains that while heis excited about working with the firm, he doesn’t want a ‘slopehead’ to be his customer servicerepresentative. He is insistent that although ‘old what’s his name’(Nin) probably knew what he wastalking about, he ‘couldn’t understand a word the guy wassaying the whole time, and that the firmshould get him some language training.’ The managers are surprisedby these accusations and insist thatMr. Hong is native born, speaks impeccable English and is one oftheir best broker advisors. However,Mr. Stipe doesn’t seem to accept their explanation and retorts that‘ever since my days in Viet Nam,’ Ijust don’t trust those people. They’re sneaky, non-assertive anddon’t bother to interact with anyone buttheir own kind’ He reiterates that ‘these folks should be left toback room jobs where they can ‘run thenumbers’ in private. They shouldn’t be in customer service ormanagement jobs or working withcustomers face to face because they cannot be trusted’ Toemphasizes his words as well as the sizeablefinancial clout he will have at the firm, he gets out his checkbookand shows the two executives the sizeof his bank account – and the related amount he is able to investwith the firm (over $1 million) if theyjust take Nin Hong off the account and give him a ‘talented butnice White guy, as that would make mefeel much more comfortable.’ The managers are stunned by thiscommentary and in a desperate measureto save face, they thank Mr. Stipe for his time and inquiry, andtell him that they will discuss the issue andget back to him in the next few days...Implications:Considering the dilemma the executives are faced with, what do youthink they should do? If they removeNin from the account and give it to a White broker, there will beserious repercussions within the firm.However, if the executive team doesn’t meet the demands of thispotential, high value customer, theycould miss out on a very lucrative piece of business, which wouldhelp guarantee the firm’s survival.For the threaded discussion, be prepared to discuss the followingquestions, regarding the scenario at thefirm, what options the managers can pursue, the implications of thedifferent course of action and whatyou believe to be the appropriate way to proceed:1) What do you feel is the appropriate course of action, andwhy?
IntroductionRopemin and Cheatem is a Denver-based investment firm that performspersonal investing services forprivate clients. Since its inception seven years ago, the firm hasgrown to manage a financial portfolio ofover $17.5 million in equities for two main customer servicesegments – a) individuals with a net worthvalued below $100K, and 2) clients with a net worth of $100K andabove. While over 75% of itscustomer base comes from clients in the smaller net value tier,over 60% of R&C’s revenues stem fromnew and returning customers in the higher, ‘select’ segment. Basedupon the company’s ability to provideunparalleled customer service, particularly with the exclusiveclient tier group, and keen investingacumen, its brokers and financial counselors have a reputation ofunparalleled quality and financialreturns.Unlike competitors like Fidelity Investments and Charles Schwab,R&C’s customer base does not extendnationally or globally. Instead, the company has remained local infocus, maintaining its reputation as apersonalized firm – one that caters to the specific needs of itsDenver and Western region customers. Thecompany is small, with only ten investment counselors, five brokerassistants, three administrative staffmembers, an I.T. service person, a chief operating officer and achief executive officer. For the most part,this close-knit environment has fostered a strong ‘family feel’from within the company. However,despite the intimate corporate dynamic, there have been a number ofcomplaints over the course of thelast few years that center upon the fact that while the overalllevel of employee benefits is strong, mostWhite employees seem to get preferential treatment from management.They are given a great deal oflatitude in scheduling flex-time while most minority groups have tomaintain a standard 8a-5p schedule.In addition, at the investment counselor level, two White malebrokers have been given significant help incultivating and developing lucrative client lists while the otherthree brokers, of color, are ‘on their own’to find new sales strategies. Furthermore, although there are anumber of Black, Hispanic and female‘support staff’ members who have been employed at R&C for manyyears, they have been provided fewadvancement opportunities. ‘Perks’ such as these include access tocompany-based training materials andfunding to take various industry-based certification exams, such asthe Series 7 and Series 63.A ‘people of color’ affinity group within the firm has formed toaddress these issues with seniormanagement, who, with advice from the firm’s legal counsel, hasrealized that it is time to be moreproactive toward its diversity efforts with its staff. Managementis currently evaluating what it can do andis consulting with an outside consulting firm to determine itsoptions.In addition to the aforementioned issues of advancement, thecompany has another troubling issue that forsome reason it has not been able to overcome since its inception –that of Asian Americans in its ranks.While management feels that it is providing equal opportunities forthis demographic segment within thefirm, very few Asian Americans get hired on an ongoing basis,despite their high education levels andstrong scores on the firm’s prequalification tests. In addition,the turnover rate for this group hashistorically been very high. Few, if any members of the staff havestayed for longer than one year.
Presently, there is only one Asian (Chinese) American member onthe staff – Nin Hong. Nin is aninvestment counselor and is very talented. He is diligent,detail-oriented, analytical and very customerfocused, but somewhat quiet when he is not with customers. He hashelped grow R&C’s business steadilyover the last nine months since he started but is concerned thathis advancement potential is starting toplateau. In addition, he has expressed comments to his peers thathe often feels like a ‘token Asian’ withinthe firm and that ‘his people are grossly underrepresented there.’Management is aware of this issue andconsidering the general underrepresentation of Asian Americans atR&C, has committed to recruit andsupport Asian Americans more proactively. In the meantime, it hasalso vowed to work with Nin to assignhim to more high-yield clients, from the ‘select’ segment.Economic ImpactIn a larger context, with the current troubled economy, there areconcerns within R&C that the company’smarket share is starting to slide and that profits may begin towane. There have been reports from thesupport staff, who deal with the firm’s clients on thetransactional aspects of their accounts, that manycustomers are being lured by other brokerage houses by their lowermaintenance costs. Management isvery concerned about this issue and has solicited the employees asto what the firm can collectively do to‘ride out the storm intact.’ Although R&C has acknowledged thatit is willing to concede some ‘second-tier’ clients, it reinforces to the staff at a recent sales meetingthe need to maintain and even grow itsprofitable, ‘select’ segment. This will be the firm’s savinggrace.A Potential Windfall or a Potential Problem?Amidst the economic turmoil and turbulent investment markets,R&C does manage to maintain themajority of its high-end clients for the next few months. Throughguarantees of highly personalizedcustomer service and promotional offers of reduced fees, the firmretains its key customers. In addition,thanks to a three month ‘heavy-up’ period where R&C conductedtargeted advertising, it is even able toattract a number of new potential investors.Earl Stipe, a very wealthy (White, 50+) businessman who mademillions during the oil boom in Colorado,is one of these potential clients. Based upon the information thathe received at a free informationalseminar that the company conducted in conjunction with the AARP,and at the recommendation of afriend who is also a high-end investor with R&C, he walks intothe firm one day with a few copies of hisbank statements, previous investment reports and his checkbook. Hesays that he wants to speak to thefirm’s ‘best investment broker’ and that he is ‘ready to sign onthe dotted line’ and give the firm hisbusiness if they can convince him to do so.Considering the diversity issues the firm is facing, particularlywith Nin and the (lack of an) AsianAmerican population, the firm assigns Nin to the prospectivecustomer. Nin spends an hour with Mr.Stipe, explaining the different investing options that are open tohim and walking through themathematical calculations behind where Mr. Stipe’s previous brokermay have gone wrong. During andafter the meeting and after, Nin is confident that he has done agood job of enticing Mr. Stipe as a new
customer. He feels that his soft-spoken manner, his laid-backstyle and his ability to ‘run the numbers’will win this client over. He offers to be of service in any way asMr. Stipe leaves the office and promisesto follow up with him in a few days.The day after the meeting, Mr. Stipe returns to the firm and asksfor a private meeting with the two-member executive team. Nin and the support team are excited thatMr. Stipe wants to get on board withR&C, and they quietly start planning efforts to manage hisaccount.However, in the meeting behind closed doors, the tone is quitedifferent. Mr. Stipe explains that while heis excited about working with the firm, he doesn’t want a ‘slopehead’ to be his customer servicerepresentative. He is insistent that although ‘old what’s his name’(Nin) probably knew what he wastalking about, he ‘couldn’t understand a word the guy wassaying the whole time, and that the firmshould get him some language training.’ The managers are surprisedby these accusations and insist thatMr. Hong is native born, speaks impeccable English and is one oftheir best broker advisors. However,Mr. Stipe doesn’t seem to accept their explanation and retorts that‘ever since my days in Viet Nam,’ Ijust don’t trust those people. They’re sneaky, non-assertive anddon’t bother to interact with anyone buttheir own kind’ He reiterates that ‘these folks should be left toback room jobs where they can ‘run thenumbers’ in private. They shouldn’t be in customer service ormanagement jobs or working withcustomers face to face because they cannot be trusted’ Toemphasizes his words as well as the sizeablefinancial clout he will have at the firm, he gets out his checkbookand shows the two executives the sizeof his bank account – and the related amount he is able to investwith the firm (over $1 million) if theyjust take Nin Hong off the account and give him a ‘talented butnice White guy, as that would make mefeel much more comfortable.’ The managers are stunned by thiscommentary and in a desperate measureto save face, they thank Mr. Stipe for his time and inquiry, andtell him that they will discuss the issue andget back to him in the next few days...Implications:Considering the dilemma the executives are faced with, what do youthink they should do? If they removeNin from the account and give it to a White broker, there will beserious repercussions within the firm.However, if the executive team doesn’t meet the demands of thispotential, high value customer, theycould miss out on a very lucrative piece of business, which wouldhelp guarantee the firm’s survival.For the threaded discussion, be prepared to discuss the followingquestions, regarding the scenario at thefirm, what options the managers can pursue, the implications of thedifferent course of action and whatyou believe to be the appropriate way to proceed:1) What do you feel is the appropriate course of action, andwhy?