What do consumers want from financial services firms?

What do consumers want from financial services firms? A new report by Hearts & Wallets is shedding light on financial services consumers wants, including the need for clear and understandable fees, and putting the client's interests first.

Nationally last year, the ranking of the top five financial services consumer wants from U.S. households was based on importance on a top-two box, using a scale of 1-10. According to the report, the top five wants are:

1. “Fees are clear and understandable” – 54%

2.  “Explains things in understandable terms” – 53%

3. (tie) “Unbiased, puts my interests first” – 52%

3. (tie) “Has made me money” – 52%

4. “Well-trained staff” – 51%

The report said that looking at asset groups, the top financial services consumer wants change. The top mass-market want (for households that have under $100,000 in investable assets) is: “explains things in understandable terms,” which is also among the top five financial services consumer wants for households in asset ranges of up to $3 million. For $3-million-plus households, the top want is “unbiased, puts my interests first.” And for the wealthiest households, “understandable terms” isn’t in the top 5.

Financial services consumer satisfaction gaps

The report also shared the biggest satisfaction gaps for financial services consumers. The biggest satisfaction gaps today relate to investment management and include: “has made me money,” “proactive when market changes/I’m losing money,” “unbiased, puts my interests first,” and “investment ideas are knowledgeable, timely and tactical.” The top gaps range between 10 to 7 percentage points in difference between importance and current satisfaction.

In explaining why some of the biggest satisfaction gaps are related to investment management, Laura Varas, CEO and founder of Hearts & Wallets, said that satisfaction gaps arise when the importance of a customer want exceeds the average satisfaction for the industry. The customer wants of “has made me money” and “proactive when the market changes/I’m losing money” are tied as the top satisfaction gaps nationally. The third biggest gap is: “unbiased, puts my interest first” where importance has risen steadily over the past decade, while satisfaction is largely flat at the industry level. The fourth biggest gap is “investment ideas are knowledgeable, timely and tactical.”

Proactivity in investment management is key when trying to close these satisfaction gaps, added Varas. “Consider more frequent updates – including proactive outreach during market changes – clear performance reporting at the account vs. the product level, stronger connection in advice between portfolio strategies and achieving goals, and increased focus in advice experiences on next-best actions to take,” she said.

In addition, advisors should choose from wants that are potentially emerging as satisfaction gaps (where importance is rising but satisfaction at the industry level is low) to find those where their firm could develop competitively distinctive capabilities or position those they already have more prominently. “Personal financial advice is an example of a want that has become more important over time, while satisfaction has remained flat, indicating a possible area for breakthrough competitive differentiation,” Varas said.

Key takeaways for advisors

So, what are some of the key takeaways of this report for advisors? According to Varas, advisors should understand that what clients want will differ, depending on their household wealth. They should clearly understand the top wants of clients and then explain to them how they are delivering these wants.

For the 88.3 million mass-market households (those with under $100,000 in investable assets), advisors should improve the understandability of explanations in order to compete more effectively, Varas added. The top want for mass-market clients is to have things explained in understandable terms. The top 5 wants for the mass market – understandable explanations, fees and statements, well-trained staff, “has made me money” – are becoming highly important to many more households over time. This top want of “explains things in understandable terms” is also in the top 5 wants for households in assets ranging up to $3 million, she said.

Conversely, Varas added, the top want of the wealthiest clients (those with $3 million plus) is to have firms that are unbiased and put their interests first. “Advisors should recommend the best actions, even if that means sometimes recommending other firms for certain needs, if another firm is the best fit,” she said. “Clients remember and value these altruistic actions, as Hearts & Wallets has often heard in our national focus groups. Tailor product line-up and advisor compensation to ensure that the client is put first, and make sure the client knows this.”

In addition, pricing remains problematic at a national level, with many customers not knowing how they pay for saving and investing, especially in workplace models, Varas said. As she pointed out, “customers do not know how they pay in 34% of saving and investing relationships, but with 20% of relationships reported as free, and 32% using basis points or flat fees. Customers are more aware of how they pay for retail investing relationships (74%) than workplace investing relationships (66%). And customers report increasing use of flat fees.”

Top performing firms

In addition, the report highlighted its list of “Top Performer Firms. Ameriprise, Edward Jones, Merrill, Morgan Stanley and USAA achieved one or more of Hearts & Wallets Top Performer designations in this year’s national customer buying and satisfaction ratings for brokers, banks and retirement platforms.

Top Performers (ratings are distinctively higher than those of other firms) for selected attributes include:

•  Fees are clear and understandable: USAA
•  Explains things in understandable terms: Ameriprise, Edward Jones
• Unbiased, puts my interests first: Ameriprise
• Well-trained staff: Edward Jones
• Understands me and shares my values: Ameriprise, Edward Jones, Merrill, Morgan Stanley and USAA

Leading firms provide insights

Advisors should also examine Top Performer Firms for insights, Varas added. Top Performer Firms get specific wants right for their customers. “Consider whether that Top Performer can be a good model for your firm, if the customer want aligns with yours,” Varas said. “For example, Ameriprise and Edward Jones are Top Performers for the want of “explains things in understandable terms.” What are those firms doing that might be relevant to your firm’s practice?”

Varas added this explanatory note: To earn a Top Performer designation, firms must receive ratings from their customers that are distinctively higher than the ratings that customers of other firms gave to those firms, and each firm included must have sufficient sample size. The report focuses on national ratings from all customer types because they are the most comprehensive and provide an easy-to-understand overview.

Insights into consumer buying patterns can lead to concrete business success in the form of improved flows into products, higher conversion rates, and enhanced engagement and satisfaction with service models that deepen “share of wallet,” Varas said.

Advisors should help consumers understand the pricing of their services so that they can purchase the saving and investing services they want at fair and economical prices. “Offer ways for customers to pay directly themselves where possible,” Varas said. “Consumers are wary of costs that are taken out behind the scenes and want more control as well as understanding.”

In addition, she said, “advisors should strengthen the connection between pricing and value proposition by building customer understanding of what their firm’s service models do on their behalf to earn the prices that are charged.”

The Wants & Pricing 2024: Top Performer Firms and Opportunities for Competitors to Differentiate in Biggest Satisfaction Gaps report examines the importance of wants, customer satisfaction and pricing and is based on the Hearts & Wallets Investor Quantitative™ Database. The latest wave was fielded from Sept. 11 – Oct. 6, 2023, with 5,846 U.S. households.

 

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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