Winning the war for the highest share of consumer wallet

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By Ayo Mseka

Exploding consumer engagement with financial services firms is requiring competitors to fight harder for their share of consumers’ wallets, according to a new Hearts &Wallets market intelligence report.

One in 4 (25%) of U.S. households now has 4 or more saving and investing relationships, compared to 10% in 2013, according to the report, Stores & Success Metrics 2024: As Banks Acquire Relationships, the Race for Primacy and Loyalty Is On.

One in 3 households with $1 million-plus in investable assets (33%) has 5-plus competing relationships today.

As consumers spread their wallets across more stores, earning the role of primary store, or the highest share of wallet (SOW), has become more difficult. The average industry SOW is falling, reaching a new low of 37%, which is down from 45% in 2020.

Trust is up

According to the survey, high trust is improving, with 45% of primary/secondary relationships being high trust today, up from 39% in 2013. Higher-asset customers are more likely to be in high-trust relationships and workplace providers achieved a notable increase in trust, now at 47%, up from 34% in 2013.

The likelihood to recommend is also up nationally, the survey pointed out. 44% of customers are now likely to recommend their stores, which is an increase from 36% in 2013. However, a high likelihood of investing more is flat. Intensifying competition is seen in fewer millionaire households with high intent to invest more at existing stores. This fell from 47% in 2013 to 34% in 2023.

Paths to growth

The average share of wallet is nearly three times higher when a store is the customer’s main source of retirement advice (71%) than when it is not (24%), the survey said. But competition to be the main source of retirement advice (MSRA) is heating up. Firms serve as MSRA in 1 in 4 customers relationships (25%) on average, which is down by 18 percentage points from the industry average of 43% a decade ago.

Customer experiences that deliver both service and advice are four times more likely to be MSRA (43% of relationships) than experiences that do not (11%), as demonstrated through Hearts & Wallets’ Inside Advice Grid. This is the proprietary, fact-based framework for industry-wide comparison of personal finance advice and guidance options.

“As consumers spread their assets across more stores, the firms that win will be the ones who stay on top of the trends,” said Laura Varas, Hearts & Wallets CEO, and founder, said. “Becoming the main source of retirement advice is a known way to grow SOW, but that’s getting more competitive. Providing a combination of service and advice on Inside Advice Grid is the way to gain the customer’s ear and earn higher share of [consumer] wallet.”

Consumer wallet success leaders

The survey also shared the names of success metric leaders.

Industry leaders for success metrics related to size include:

Household penetration – Bank of America Merrill NET, JPMorgan Chase, Fidelity
New customer acquisition – (for the top 10 biggest stores): JP Morgan Chase, Capital One (beyond the top 10 stores), Robinhood), Coinbase, Truist, Fifth Third Bank, Goldman Sachs and Nationwide
Asset share – Fidelity, Charles Schwab TD Ameritrade NET and Bank of America Merrill NET

Leaders in loyalty and primacy are:

Highest share of wallet – Ameriprise, Edward Jones, Fidelity
Primacy rate leaders – Ameriprise, Edward Jones, Fidelity
High trust, all account types – Edward Jones, USAA (all account types)
High trust, workplace accounts – JPMorgan Chase
High likelihood to recommend – E*TRADE, Edward Jones, USAA, Vanguard
High likelihood to invest more – Ally, Charles Schwab, Morgan Stanley and E*TRADE, USAA
Hearts & Wallets Loyalty Score (high likelihood to recommend and invest more) – E*TRADE

Winning the war

As firms fight harder to gain a greater share of their customers’ wallet, what does it take to win?
“First, understand that your clients probably maintain many competing saving and investing relationships,” said Varas. “Over two-thirds of U.S. households nationally (67%) have accounts at 2+ competing firms, up from 41% a decade ago and +3 percentage points year over year from 64% of households (2023 vs. 2022). Since many customers maintain multiple relationships, earning the role of a primary store, or one with the highest share of wallet (SOW), has become more difficult.”

Some stores have especially high percentages of customers who maintain many competing relationships. For example, Varas said, at E*TRADE by Morgan Stanley, over 70% of customers have saving and investing relationships with four or more competitors.

To gain share of consumer wallet, Varas said, “gather more information on your customers’ competing relationships, which will allow you to provide more effective advice and understand competitive opportunities. Account-aggregation technology is essential and allows for you and your customer to see the total household wealth in a single interface.”

Varas added the following recommendations:

Work to become the primary store, when possible, since serving as the main source of retirement advice is highly correlated with being the primary store. Hearts & Wallets research finds that stores that are the main source of retirement advice have an average share of wallet that is nearly three times higher than when the stores are not the main source.
Market the benefits of consolidation – one-stop shopping, single point of contact, ease of administration, and a total household wealth perspective. “Make switching easy for account aggregation. Consider online transfer of assets (TOA) and rollover kits to streamline administrative hurdles. Recognize and respond to differences in the number and types of relationships among asset groups,” she said.
Focus on wealthier customers who are the most likely to have multiple relationships. Keep track of transfers in and out of your firm and respond appropriately through timely service calls and client-retention efforts.

The importance of retirement advice

The report also pointed out that the average share of wallet is nearly three times higher when a store is the customer’s main source of retirement advice than when it is not. So why is retirement advice ranked so highly in the battle for customers’ share of wallet? Many households have significant amounts of their investable assets in a retirement account, Varas explained. Overall, about 2 of 3 dollars are in taxable accounts ($45.8 trillion of $69.7 trillion), while 1 in 3 is in retirement accounts ($23.8T) as of Q4 2022 (as shown in Hearts & Wallets U.S. Portrait of U.S. Household Wealth).

Many consumers take retirement assets out of their workplace accounts when they stop full-time work, and Hearts & Wallets research finds that older consumers struggle with workplace plans that lack advice on tax optimization, living situations (i.e., should they downsize), and work outlook. “Advisors can shine by helping aging consumers with those topics,” Varas said.

Building high-trust relationships

In addition, the survey reported that higher-asset customers are more likely to be in high-trust relationships than others. In explaining this finding, Varas said that higher-asset customers might be more satisfied with the service they are experiencing from their financial-services firms. Advisors should execute on the biggest trust drivers to build long-lasting relationships. They should take steps to be “unbiased” by putting customer interests first and make pricing easier to understand and more transparent. “Understanding how a firm makes money is the largest trust driver,” she said.

In addition, Varas said that Hearts & Wallets research finds that clients with $3 million and more in investable assets value certain attributes from their firms. “Unbiased, puts my interests first” is highly important to two-thirds of households with $3M+, followed closely by “fees are clear and understandable,” both increasing over the past few years. The importance of “unbiased” is up sharply over the past three years, as well.

Main takeaways

For advisors fighting to gain more share of consumer wallet, the main takeaway from the survey is to recognize that the lower likelihood to invest more and to recommend, which are metrics that Hearts & Wallets tracks by firm, are important signals that could indicate poor customer experiences, reactions to market volatility or a desire to shop around to more stores, Varas said. “Focus on asset groups that provide the most return for your organization, since maintaining share of relationships is challenging,” she said.

In addition, advisors should enhance capabilities in advice, service and products that fulfill retirement needs to help their firm become the main source of retirement advice, which helps build share of wallet. “Invest, where appropriate, to cover more customers with advice and service to help build higher share of [consumer] wallet,” she said.

Stores & Success Metrics 2024: As Banks Acquire Relationships, the Race for Primacy and Loyalty Is On analyzes retail financial services firms across select key metrics. This report is based on the Hearts & Wallets Investor Quantitative™ Database, recognized as the largest single dataset with over 120 million data points on saving, investing and advice behaviors from 76,000 U.S. households dating back to 2010. The latest wave was fielded 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].

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].