How to increase investor share of wallet

As consumers’ use of multiple investment firms has reached a decade-long high, recent research examines how financial services firms can increase their investor share of wallet.

The percentage of U.S. households with 2-plus saving and investing relationships is now at 64%, nearly double the 35% that it was in 2012, according to the Hearts & Wallets report, Stores & Success Metrics 2023: How to Compete for Share of Wallet Given Industry Consolidation and Asset Concentration.

The average household has 2.5 saving and investing relationships, up from 1.4 relationships in 2012. The average $1-million-plus household has 3.6 saving and investing relationships, up from 2.8 in 2012.

This increase in the number of relationships makes it harder for firms to achieve a high share of wallet, which the survey defines as being the primary store.

Morgan Stanley (60%), Fidelity (55%) and Edward Jones (55%) are industry leaders at serving as the primary store, doing so for over half of their customers, according to the survey.

Tips for increasing investor share of wallet

One of the most effective ways firms can use to increase their share of their clients’ wallets is to serve as the main source of retirement advice (MSRA) for retail investors, said Laura Varas, Hearts& Wallets’ CEO and founder.

Hearts & Wallets’ research finds that saving and investing relationships in which the firm is the MSRA have over two thirds or more of the percentage of investor share of wallet. This is compared to 30% to 40% share of wallet in relationships in which the firm is not the MSRA.

How advisors can serve as clients’ MSRA

Firms can take a few steps to serve as their clients’ MSRA, said Varas. First, they should carefully segment customers and prospects to understand their goals for retirement or work when they are older.

Not all consumers who are aged 55-64 are pre-retirees, she pointed out. And households aged 55-64 are evenly split among the retired (36%), those believing they are within 5 years of stopping full-time work (27%), and those believing they are not within 5 years of stopping full-time work (37%). Whether households are retired or not has very little to do with investable assets. One in 5 retired households continues to have income from employment.

Firms can appeal to older customers, said Varas, by offering the following:

• Comprehensive family wealth planning
• Income planning that accounts for multiple sources of income after the customer’s full-time work is over
• Guaranteed income products for lower-end solutions
• Income-management accounts

Younger consumers often have a disconnect with messaging around retirement, but they will respond to calls to action that will position them for success in later years, Varas said. For example, 39% of U.S. households nationally have a goal to have enough money to work less or spend time as they want when they get older, compared to 32% of U.S. households whose goal is to stop work or retire when they get older.
Firms should enhance their capabilities in advice, service and products that fulfill retirement needs, Varas added. And they should offer streamlined, cost-effective advice to meet the needs of lower-asset, younger households.

For customers with $2M-plus, firms should emphasize benefits of consolidation, ease of doing business with a single firm, and one-stop shopping by offering a comprehensive suite of services.

“Remember that the No. 1 reason for consolidation of money movement is simplicity,” Varas added. “Help your customers understand how your services and resources can help them simplify their finances.”

Varas then offered an important caveat: “Do not aim to be the MSRA if you cannot do it well. It is too big a responsibility to be taken lightly or executed poorly.”

Learning from leading firms

Varas also shared some useful information about firms that have a larger share of investor funds. For the average share of wallet across all customers, Morgan Stanley is No. 1 with 55%, Edward Jones is No. 2 with 51%, and Fidelity is No. 3 with 50%.

“Every store has a higher share of wallet when the store is also the main source of retirement advice (MSRA),” she pointed out.

Relationships in which the store is the MSRA have over two thirds or more of the percentage of share of wallet, compared to share of wallet percentages in the 30-50% range where the store is not the MSRA.

Firms that serve as the MSRA for at least 50% of their customers include Ameriprise, Edward Jones, and Morgan Stanley.

“Because the connection between serving as MSRA and share of wallet is so strong, the same stores that perform well on average share of wallet are also most likely to be the MSRA,” Varas said.

Overall, the trend across most firms is downward for serving as the main source of retirement advice as competition heats up with customers of all wealth levels who maintain multiple relationships, Varas added. One in 5 U.S. households has 4-plus saving and investing relationships, and the average U.S. household now has 2.5 saving and investing relationships.

Firms face tough competition since many customers are spreading their wallets across more firms than in the past. The firms with a high average share of wallet and MSRA stand out in several ways, which may provide competitive insights, Varas said.

For example, she explained, Fidelity covers a higher percentage of its millionaire customers with robust customer experiences than any other leader in the $1M-plus segment. And Fidelity’s relationship strength translates into a high share of the household wallet, resulting in a 17% overall share of assets for the $1 million-plus households.

Fulfilling customer wants

Ameriprise and Edward Jones appear repeatedly as “Top Performers” for customer wants in the Hearts & Wallets annual analysis of top customer wants, Varas added.

Customer wants include:

• “Unbiased, puts my interests first”
• “Explains things in understandable terms”
• “Investment ideas are knowledgeable, timely and tactical”

Ameriprise, Edward Jones, and Morgan Stanley are market leaders among firms whose customers hold them in high trust. So, Varas said, firms could take a page from these leading firms and do the following:

• Provide a wider range of advice experiences.
• Identify the top wants of their customers and strive to meet those wants.
• Build trust to enhance customer loyalty.

The research report is drawn from the section of the Hearts & Wallets Investor Quantitative Database. The latest survey wave was fielded from August 15 to September 15, 2022, with 5,993 participants.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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