Financial institutions

Consumers turn to their financial institutions for guidance and advice, but banks fall short: study

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Stressed woman working on a laptop in an office.

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JD Power released its 2022 U.S. Retail Banking Advice Satisfaction Study last week, revealing a downward trend in customer satisfaction with their financial institutions.

The study found that while 59% of banking customers expect their financial institutions to improve their financial health, only 47% of financially healthy consumers have received advice. Of the remaining 53% of consumers, 28% of vulnerable consumers, 16% of overwhelmed consumers and 9% of stressed consumers said they had received advice.

According to JD Power, financially healthy consumers are consumers who can meet their immediate financial needs while planning for the future. Financially vulnerable consumers are consumers who struggle to meet their immediate needs – like monthly bills – and who cannot think about future financial stability.

Overstretch consumers are defined as consumers who may have savings for the future — like a 401k — but struggle week to week. Stressed consumers are those who can pay their bills but find it difficult to save for the long term and plan for the future.

In addition to the above findings, the study found that overall satisfaction with the advice and guidance consumers received is down from last year, with the biggest drop being both the frequency and quality of advice regarding financial needs.

Additionally, the study found that 63% of consumers reported receiving advice two or more times, compared to 70% of customers a year ago. The biggest drop has been in advice on saving, at a time when it is perhaps most needed.

Capital One had the highest satisfaction rating for retail banking advice, followed by Citibank and Bank of America. Bank of America had the highest rating for supporting financial health. American Express earned the highest rating for supporting financial health among credit card issuers, followed by Bank of America and Discover.

JD Power's 2022 U.S. Retail Banking Advice Satisfaction Results.

Source: JD Power

The advice consumers need

With inflation, interest rate hikes, record gasoline prices and the rising cost of necessary goods weighing heavily on the minds of many consumers, it has never been more important for institutions to support the financial health of their clients. So why are they missing the mark?

Also: Financially healthy consumers fell to 43%. Here’s how banks need to step up

“Personalization is the current roadblock,” Jennifer White, senior director of banking and payments intelligence at JD Power, told ZDNet. “The data we have in this annual study shows that 63% of clients recall receiving two or more types of advice. This is down from 70%.

According to White, it’s not just one area of ​​advice from financial institutions that is being denied. These include financial planning, lowering fees, investment advice, quick tips, and how to save for emergencies, among others.

“I find it hard to believe that institutions as a whole have started marketing less and sending less information,” she said. “So that tells me that messaging resonance and its marketing, whether it’s mobile apps or online banking, doesn’t connect.”

This means that the problem is not with the frequency, but with the content itself. According to JD Power, when the advice consumers receive is generic, bland or cookie-cutter, consumers are less satisfied.

On JD Power’s thousand-point scale, a single personalized tip contributes to a consumer satisfaction score of 697, compared to a score of 583 for a consumer who received five generic tips.

Personalized advice is advice that meets the consumer where he is. It could be how to avoid a charge they just paid or an alert directly related to their account activity. If the bank suggests a financial product that it believes would be more suitable for consumers based on their behaviors, customer satisfaction increases significantly.

White said healthy consumers seek advice on wills, estate trusts, measuring their financial health and what action to take. Financially vulnerable consumers are more likely to want to sit down and discuss their financial situation and the best way to deal with the debts they are facing. But both populations want to know if they’re doing it right, if they’re on the right track with investing and retirement, and if there are digital technologies or services that can help them.

Advice can also take the form of reinsurance. This can be a message confirming that the transaction initiated by the customer has been completed successfully or a message informing the consumer that it has been initiated but will take two days.

“It’s about personalizing the message in a way that it connects with the customer,” White said. “And for a customer to perceive a message as relevant, the bank needs to recognize the customer’s financial health in addition to their behaviors. Combine those two, and relevance and resonance should increase.”

How banks can get personal

“Customers are looking to feel connected, and that can be done digitally. How [completely] online brands in any industry, building loyal customer bases? By providing customer-relevant content,” White said.

Most online brands do this by leveraging data collected using artificial intelligence (AI) technology. Something, according to White, that most consumers expect from their primary banks to create truly personalized advice and guidance. So why haven’t the banks done it?

It has to do with regulation, lack of trust in the technology, and debates over whether it would produce the desired results. That said, banks have embraced some aspects of AI technology, with industry investment in AI and automation expected to reach $182 billion in 2022.

Institutions such as Wells Fargo and Goldman Sachs are also using AI for robotic advisory investment platforms. It seems only a matter of time before banks start integrating technology into their marketing.

However, offering increased personalization in terms of advice is not the only challenge that banks face in their efforts to increase customer satisfaction.

Bridging the gap between physical banking and digital banking

As things move from a physical banking experience to digital, it is increasingly difficult for banks to provide the level of service that many consumers have come to expect. According to S&P Global Market Intelligence, bank branch closures in the United States increased by 38% in 2021.

“Digital, as wonderful as it is, is not a 100% substitute for a personal, intimate conversation about your finances with a bank representative,” White said. “But it can put you on the right track. And for many customers, that’s all they really need. But for other customers, it’s not the same. As a result, customers who only engage digitally – which is not necessarily a high proportion – tend to have lower overall satisfaction scores than those who mix channels in some way.”

With fewer face-to-face interactions, banks have fewer opportunities to provide advice in an environment where consumers are more likely to retain it. They also face more challenges in terms of building a relationship with the customer. But this does not mean that it is impossible to comply with these two measures. According to JD Power, digital tools are the key to bridging the gap between the physical and digital banking experience.

Using digital tools to reinforce what was discussed in-branch could be key to increasing overall customer satisfaction with their financial institutions, whether that be their bank or an issuer. of credit cards.

“If you don’t have the digital tools that back up the messages that go out, if you don’t have the tools that are really almost omnichannel with what your bank reps are offering, then you have a missing piece of the puzzle. said White.

Offering personalized advice is only one aspect. Another is to create tools that give consumers more control over their financial situation. Tools that empower consumers to truly manage their finances in times of financial stress.

“Brands that have integrated digital tools specific to advice and guidance or key areas that really affect financial health – saving, budgeting, managing expenses, paying off debt or even just managing your loans from a one way or another – and are complemented by those same in-branch services, these brands outperform brands that have a suite of comprehensive digital tools but are more transaction-focused,” White said.

The convenience that digital tools can offer consumers, coupled with an in-person representative, can go a long way in ensuring customers feel supported by their financial institution.

“Have a strong agency background which is complemented by the ability to replicate that digitally [can empower clients] to manage [their] finance,” White said.

The study includes responses from 5,177 U.S. retail banking customers who received advice or guidance from their primary bank on relevant products and services or other financial needs in the past 12 months. The study took place from January to February 2022.