Expert Comment

Evolution of customers and advice

A combination of evolving fee models and fee compression increases the demand for truly comprehensive advice and democratisation of investing will force business models to change or be commoditised. Craig Martin, managing director, global head of wealth & lending intelligence at J.D. Power, writes


arge firms like Chase, Goldman Sachs (Marcus), Morgan Stanley / E*Trade and others are already evolving to serve a much broader spectrum of consumers than the wealth management industry has traditionally focused on.

At the same time, fintechs and non-traditional players are challenging the standard operating model. Firms of all sizes will increasingly be challenged to demonstrate what their unique value proposition is to the consumer or risk losing assets and customers to competitors.

Clients’ core expectations include omni-channel service that is a combination of availability of live interactions and digital solutions aligned to their preferences. Striking the optimal balance of digital and human interaction is critical to a firm’s future success. Executives have long recognised the potential impact digital can have on the bottom line and customer experience but have struggled to fully capitalise on the opportunity.

The ROI shortfall is due in large part to a failure to recognise the critical role of humans in determining the success of the technology solutions created. In J.D. Power’s 2021 Full Service Investor Satisfaction Study:

  • 17% said they hadn’t used the website in the last 12 months
  • 49% said they hadn’t used a mobile app in the past 12 months

The difference is meaningful with a double-digit difference in Net Promoter Score (NPS) when comparing those who never use either the website or mobile app vs. those who regularly leverage those channels.

To ensure resources are optimised, wealth management firms need to ensure they have a solid grounding in what is important to all the relevant constituents. In the simplest terms, the focus must be on the unchanging needs that must be met rather than the changing ways to meet the needs.

In the early 2000’s the concept of personalisation began to take off and today it’s a buzzword that is pervasive across industries. Increasingly the wealth management industry has pushed the idea of personalised investing but the experiences customers report frequently don’t match expectations. In J.D. Power’s 2021 Full Service Investor Satisfaction Study:

  • Only 44% of respondents indicated the products and service provided by their firm addressed all their wealth management needs;
  • 1 in 3 respondents said their advisor use terms they don’t understand and the same total indicated that they didn’t agree with the idea that their advisor’s recommendations were in their best interest, and
  • Nearly 30% indicated their financial advisor didn’t understand their financial goals / needs

While intended attrition among consumers remains very low, this high rate of failure in delivering critical elements of a meaningful experience places many relationships at greater risk than it would first appear. The data implies that many customers are staying because they don’t see a specific reason to leave rather than recognising the value of staying. As competition increases there will be more incentives provided to switch and without a strong case to stay many ‘satisfied’ customers will be at great risk.