Digital Overtaking Branches as the Place Consumers Get Advice

Money-stressed consumers are turning for financial guidance to their primary financial institution more often, but are increasingly doing it digitally. Big banks are dominating the field with higher scores for both digital and branch-based advice, J.D. Power data reveals. Millennials in particular love getting financial 'quick tips' on their mobile device.

As transactions steadily migrate away from branches to online and mobile, one of the strongest arguments made in support of maintaining physical offices is that they will evolve into centers for advice. J.D. Power’s 2020 Retail Banking Advice study questions that widely held belief.

“Within the next year, digital will surpass the branch as the most commonly used retail banking customer advice channel,” states Paul McAdam, Senior Director of Banking Intelligence at J.D. Power. The portion of retail bank customers receiving advice or guidance through digital channels as of fall 2019 was 36%, just two percentage points below the figure for in-branch advice/guidance, the study found.

While the use of digital channels for advice has grown from 28% to 36% from 2018-2020, the use of in-branch advice fell from 43% to 38% over the same period.

Bank channels consumers use to get financial advice

Not only are digital channels (online, mobile and email) being used more often for financial advice, consumer satisfaction with digitally delivered advice and guidance is also rising. In-person advice still receives higher satisfaction numbers, but the gap is rapidly shrinking across four of the five attributes J.D. Power measures — “Quality,” “Relevancy to my needs,” “Clarity” and “Concern for my needs.” (In the fifth attribute, “Frequency,” digitally-delivered advice already has taken the lead.) If the trend continues at the same rate, the report states, “it’s likely satisfaction with digital advice will surpass in-person advice next year.”

J.D. Power uses a 1,000-point scale in its bank satisfaction research. Consumers’ overall satisfaction with advice and guidance from their primary financial institution increased by 14 points in 2020. That follows a 15-point gain in 2019. McAdam says that at the industry level, a ten-point change is statistically significant.

The increase was lopsided, however. The six largest U.S. banks had a 16-point gain in advice satisfaction overall in 2020 compared with an 11-point gain among the 17 regional banks included in the study. Significantly the big banks led not only in digitally provided advice, but in satisfaction for face-to-face advice, as well.

“Banks and credit unions have to be good at providing advice both digitally and in-branch. That is really challenging.”
— Paul McAdam, J.D. Power

“That is really challenging,” McAdam tells The Financial Brand, “because banks and credit unions have to be good at both, and clearly the banks ranked at the top are doing this.” He observes that many regional banks are doing well with in-branch advice, particularly when consumers are talking to financial advisors or business bankers, but fall short in providing advice or guidance digitally, which is of particular interest to Millennial and Gen Z consumers.

McAdam says J.D. Power views advice and guidance as related but somewhat distinct. They view guidance as essentially content that informs people and helps them make decisions. It would include financial management tools that help consumers track their position against budget, savings goals, etc. Advice is about helping consumers choose the most appropriate option. Often advice is more personalized than guidance.

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Millennials Love Financial ‘Quick Tips’

The study, based on input from nearly 4,000 people, found that for the third year, the percentage of consumers “Very interested” in receiving advice or guidance from their primary bank or credit union increased.

Consumers very interested in receiving advice from primary bank

This growing interest stems from the fact that two in five consumers are dissatisfied and lack confidence regarding their financial health, according to the report. Millennials, who comprised the largest demographic segment of the survey, at 41%, are particularly interested in guidance relating to ways to reduce debt and better manage their money, McAdam states. That makes sense, he says, because many Millennials are still carrying student loan debt in addition to other debt.

Being digital natives, for the most part, Millennials are attracted to interactive financial tools available online or as mobile apps — “quick tips” is the term the survey uses for the type of guidance younger consumers want. Much the same applies to Gen Z. The research found that while just over a third of all consumers receive guidance or advice digitally, that number jumps to 51% for Gen Z.

This is where the largest banks ,overall, have an edge. With huge development budgets, most have developed advanced financial management tools for consumers to use. That’s the main reason for their edge in advice satisfaction.

“The majority of advice delivered through the website or mobile app is through an interactive tool,” the report states. “Customers who use interactive tools for financial advice are significantly more satisfied, and feel the advice given is more personalized and better meets their needs than digital advice without an interactive tool.”

One Plus for In-Branch Advice: More New Business

The report points out one downside to obtaining advice on a mobile phone app or online: Taking action after receiving the advice is lower when a person obtains the advice digitally than when it occurs in a branch. That’s because interactive digital tools are used more to provide ongoing insights, as noted earlier. With branch-based advice, on the other hand, a person is likely to think, “I’m here and I’m doing something,” McAdam states, and so is more likely to open another account or take some other action.

Expanding on the point, McAdam notes that in-person advice tends to be more investment related, and business related, compared with simpler financial guidance sought by younger consumers.

“Investment-related advice,” in fact, is the type of advice/guidance consumers are looking for most, J.D. Power found, closely followed by “quick tips.”

Types of advice guidance people want to receive from primary bank

It’s not only younger consumers who are moving to digital, however. The J.D. Power report states that Baby Boomers have also experienced a “significant shift” from in-person advice to digital advice over the past two years. “Pre-Boomers [born before 1946] are the only generation to break the digital trend, with slight growth in in-person and mail advice during the past two years,” the report states.

Is Call Center Potential Underestimated?

The least-used channel for receiving advice and guidance is the telephone. It’s been steady at about 10-11% for three years, as shown in the first chart, above. However, while consumer satisfaction with advice received from their bank or credit union is up for all channels, it is up the most for the phone channel. McAdam dug into the numbers and found that people using the phone for advice most often are asking about buying or renovating a home, obtaining a mortgage, and managing and lowering loan payments. He also notes that “quality of advice,” “relevance of advice” and “concern for me” were the three attributes that stood out for the phone channel. “Basically bank and credit union phone reps do a great job,” he observes. It’s one area where community financial institutions may have an edge.

A related point is that satisfaction jumps when a financial institution representative follows up with a customer regarding advice that was provided. It was one of several factors that contributed to institutions getting higher advice satisfaction scores. McAdam notes that whether the follow-up is by phone or email doesn’t matter that much.

Read More: 16 Must-Have Mobile Banking Features that Raise the CX Bar

U.S. Bank, Citibank Notch Biggest Satisfaction Gains

Of the banks ranked in J.D. Power’s study, Citibank and Bank of America came out on top. Citi’s progress in particular has been rapid as it ranked just ninth in 2018 and was performing below the industry average on five of seven attributes, the report states. The third-largest U.S. bank now has the best scores in three attributes: “Clarity,” “Concern for my needs” and “Mobile interactive tools.”

Ranking of large and regional banks by advice satisfaction

U.S. Bank, however, had the biggest one-year improvement. While Citibank jumped 26 points on J.D. Power’s 1,000-point scale, U.S. Bank shot up by 52 points, McAdam told The Financial Brand. (A movement of 25 points is statistically significant at the brand level, he explains.)

U.S. Bank’s branch advice scores are strong, McAdam states, but digital advice is what powered it’s much higher overall score. U.S. Bank launched a completely new mobile banking app in the spring of 2019. It added interactive insight capabilities to the app several months later.

Commenting on a couple of other institutions on the list, McAdam observes that while Capital One Bank has good digital capabilities, and is widely known for its Cafe branches, the fact that the bank has reduced its branch network by 11%, may account for its lower position in the ranking because it impacts the portion of customers still using the branches for advice.

With TD Bank, McAdam notes that “they are very good at branching and convenience. They position their brand reputation around convenience and their customers really like that.”

With both TD Bank and Capital One as well as others, their strategies are working for them, McAdam points out. But those strategies have an impact on how they rank in terms of consumer satisfaction with the advice and guidance they provide. During recent investor meetings TD Bank officials have stated that the company was training a cadre of 40-500 financial services representatives to become financial planners to serve the mass affluent market.

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