The prevailing wisdom is that in order to compete against fintechs, digital-only banks and other new competitors gaining share among consumers, traditional financial institutions must focus on delivering advice and financial wellness tools, rather than simply being transactional.
If that is the goal, it would appear that many of the largest banks are going backwards, according to findings from the J.D. Power 2022 U.S. Retail Banking Advice Satisfaction Study. The study is based on responses from 5,177 U.S. retail bank customers who received financial advice or guidance from their primary bank in the past 12 months. The study was fielded in January-February 2022
The study notes that overall customer satisfaction with the advice and guidance provided by national and regional banks remarkably is 30 points lower than a year ago. J.D. Power uses a 1,000 point scale, but 30 points is a significant downward movement.
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Consumers want their banks to proactively help them in their financial lives. Institutions that do that can expect more loyal and engaged customers.
“The downward movement can be seen across all attributes of satisfaction, but the largest declines are in customer perceptions of the frequency of advice/guidance about financial products and/or financial needs and quality of advice/guidance,” the report states. “All of this occurs despite the view from retail bank customers that financial firms should be helping them improve their financial situation, evident across different age groups and personal financial health categories.”
Out of the 14 large banks listed in J.D. Power’s ranking of advice satisfaction, only two had an upward movement that was significant statistically. Capital One, the top ranked bank on advice, gained 13 points and KeyBank, the fifth-ranked bank, gained 30 points. Ten of the 14 banks had declines of 20 points or more with the two most notable being third-ranked Bank of America, down 55 points and 14th-ranked TD Bank, down 57 points.
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Financial Health Tools Not Being Used … Or Used Well
Separate J.D. Power research released in April 2022 showed that customers want proactive help in improving their financial health, not simply tools to monitor it. 59% of banking customers expect their financial institutions to actively help them improve their financial health.
Not surprisingly, there are significant variations by generation, with 65% of Gen Z consumers saying it was either “very” or “extremely” important for banks to help them improve their financial health, compared with 48% of Gen X respondents who say that.
“The past few years have been tough on consumers in general, and many of the financial pressures they face may not subside all that quickly,” observed Jennifer White, senior director for banking and payments intelligence at J.D. Power in a statement.
“The data make it crystal clear: retail bank customers want guidance, but many aren’t receiving it,” White continued. “The tools banks have at their disposal aren’t always being used or, when they are, they are not used effectively. Neither banks nor their customers benefit from this dynamic. If banks don’t begin to make more progress in making advice content resonate, they could be facing significant attrition risk.”
Read More: The Future of Loyalty in Banking is at Risk
Financial Support as a Competitive Edge
Banks that can help their customers navigate difficult financial times and provide useful and timely advice can gain a competitive advantage and create stickier and more profitable customers.
When two or more instances of positive advice from their bank are recalled by customers, overall satisfaction increases 52 points, the survey found.
“But a cookie-cutter approach will not suffice,” J.D. Power maintains. “Advice and guidance must be personalized to the specific customer, delivered to the right person at the right time. When advice is tailored to meet customers’ specific needs, satisfaction is even higher.”
Customers who receive advice that is personalized — even just one time — have higher satisfaction than those who receive advice on five or more topics that are not personalized.
Nearly half of bank customers say they do not use even one financial health tool offered by their bank.
One clear and actionable way banks can drive positive sentiment is by getting customers to use their digital financial health tools more often, or create better digital tools that customers want to use or can use more easily. The J.D. Power research found a clear link between usage of financial health tools and the customer satisfaction with their bank’s support.
Examples of what they study includes under the category of “digital interactive tools” include: managing budget and spending, tracking subscriptions and recurring payments, estimating loan payments, saving for a large purchase, creating financial goals, managing investments, understanding financial wellness.
Only 46% of customers use any digital interactive financial health tool offered by their bank, a sobering figure considering how much banks invest in their digital apps. However, as the chart above shows, customer satisfaction with how their bank supports their financial health rises sharply with use of these interactive tools.
“When customers are very engaged with digital tools, satisfaction is more than 200 index points higher than when no tools are used,” J.D. Power notes.
To increase awareness and usage of financial health tools, says White, bank marketers must first understand the shift of tools from being transaction-based (e.g., mobile check deposit) to content or behavior-driven tools (e.g.., automated savings, debt payoff calculators). Secondly, the messaging they create must be based on consumers’ personal behaviors and customized to be relevant to their financial circumstances. “Showing customers how to save money, grow money, reduce fees, etc. is key to the message resonating and tool usage,” the analyst states. “Awareness first, then adoption.”
Bad Banking Advice Is Forgettable
Perhaps an indictment of the advice they are getting, fewer bank customers in 2022’s survey could recall specific financial advice they have received from their bank.
63% of those polled reported receiving advice two or more times in categories including financial planning; investment and retirement; savings, tips and information; or banking services. This is down from 70% a year ago.
Advice related to saving declined the most compared with 2021. The only category of advice not to see a decline was related to “borrowing and housing.”
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Rebuilding Advice Satisfaction
For banks to engender higher levels of satisfaction from their customers, it boils down to being stewards helping them on their financial journeys, Jennifer White stated, adding that “consumers of all ages seek feelings of empowerment.”
The firm advises banks to take advantage of all the data they possess on consumer spending habits, financial well-being and more and use that to deliver personalized content, help guide customer financial behaviors and offer reassurance, in addition to offering strong financial planning tools.