Financial Services Firms’ Missed Opportunity

Here’s the problem I have with all the hype about social media in the financial services industry: For all the talk about “joining the conversation,” few social media evangelists really get specific about helping financial services firms understand what to say in those conversations.

I think this is an issue, and here’s why: Based on research I’ve recently published, I don’t think that financial services firms are having effective conversations with their customers in any of the channels they interact with them in.

Aite Group surveyed 500 consumers — half of whom plan to retire in five years, the other half who retired in the past five years — and asked them what financial products were in their portfolio, and if they thought that those products are playing the appropriate role in their retirement portfolio.

Among mass affluent and high-net-worth investors, 99.5% identified at least one financial product that they believed should play either a larger or smaller role in their portfolio. Roughly four out of 10 investors who hold mutual funds, CDs or stocks believe each of these instruments should play a larger role in their portfolios.

And just because a product isn’t in an investor’s portfolio, it doesn’t mean that he or she thinks that it shouldn’t be. One in five investors without mutual funds think that they should have them, and one in four without CDs think that they should have CDs.

What this tells me is that although financial services marketers are adept at understanding the impact of life changes on the financial product needs of consumers, they don’t really know what’s on their customers’ minds.

Instead of asking what we asked — what do you have, what do you think should play a larger or smaller role in your portfolio, etc. — financial firms are asking about risk tolerance and desired (or expected) retirement lifestyles.

As a result, they’re missing opportunities to make product sales. Simply because they don’t ask the right questions in the conversations that they already have. I don’t see how engaging customers in online social networks is going to make those conversations any different.

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9 thoughts on “Financial Services Firms’ Missed Opportunity

  1. I keep asking a similar question about “Social Service” – if you can walk down to customer service and get a report on customer complaints and problems, then why have you not solved these problems yet?

    What is the advantage of forcing people to vent these same complaints and frustrations on the web? Are you (again) not going to fix the problems that you already know exist? Or is it different now that these problems are “publicly exposed”?

    It is different?

    So, let me get this straight – you can’t get anybody at the company to care about service *unless* the problems are publicly exposed?

    Wow, bigger business problems lurking there, seriously.

  2. Heh. What to say?

    This Aite study talks to people in the demographic of, based on average retirement ages in the US, between 57 and 67. First off, how in the hell does this apply to social media at all?

    If you’re going to market or have conversations with people, do it how they do, where they do, and through ‘social networking’ with this group is of course failure.

    And as far as what to say? Sorry boys and girls, you can’t figure out one line of questions to ask the entire customer base. If you’re worth your executive weight you will cater to the generations at minimum. Cater to common goals and/or problems each of these generations are facing in their life stages today and start coming up with questions based off of that. It will always evolve but that’s a place to start.

    Also, make sure those questions jive with what your FI is about and its goals. Be ok to turn people away that don’t fit your FIs goal. ING has been doing this for a while and despite it going again the goal of capitalism, I think it pays off longer term.

    No standard approach, customize and evolve per customer/member.

  3. Hi Ron, this is the “other” Jim Novo.

    I take it this was a phone survey? What I find remarkable about this study is that people would reveal these things to total strangers on the phone, yet (I guess?) not talk to their FI about them.

    What is it about the position the FI holds in the mind of the customer that could cause this? Could this be a downside to all the self-service that has been forced on this demo? The relationship has become so mechanical there’s a perceived lack of empathy?

    Could it be the customer simply thinks the FI “doesn’t care”, that the emotional Friction involved in approaching the FI on this issue is simply too high?

    “I don’t want to look stupid or be a bother…after all, I (was forced to) made these investment decisions myself…”

  4. RE: “99.5% identified at least one financial product that they believed should play either a larger or smaller role in their portfolio”

    I would bet that if you asked any customer of a brokerage company if something should play a larger or smaller role in their portfolio in the context of this survey, you would get the same answer.

    Leaping ahead … social media and internet in general. This group are significant users of internet, so @bradgarland, please don’r write them off. This group is more likely to act similarly to teenagers as they get their feet wet in the media.

    All that aside, if we work from the hypothesis that the role of social media here is to create better alignment between the advisor and the customer, we see a different picture.

    Internet offers the capability for consumers to be better informed prior to purchase. Social media is just a tool to advance that.

  5. @Jim (either one): I don’t think what the survey respondents were saying were “complaints”. Nor was it dissatisfaction w/ their FIs. Instead, I think it was discomfort or unease w/ what’s in their portfolio. They see articles like this:

    and wonder if they shouldn’t have more of their money in CDs (if indeed they have any).

    As for why they would reveal this info to strangers, I don’t find it all that surprising. It’s not like they wouldn’t say this to the financial professionals they deal with. The issue — and one of the core premises of the blog post and my report — is that NO ONE ASKS them those questions.

    Having said all this, you once again raise a great point regarding the role of market research. Why in the world marketers think they have to conduct attitudinal surveys to identify problems and complaints is beyond me, when all they need to do is ask Customer Service for a trend report on the types of issues/calls coming in. (If, however CS can’t produce those reports, or don’t adequately categorize calls… well, then, that’s a different story.

  6. @Brad: First off, to your question “how this applies to social media?” the answer is simple. Social media is supposedly about the “conversation”. The point I’m making in this post is that if financial services firms can’t have effective conversations with consumers who have been their customers for years, if not decades, then how the hell is slapping up a page on Facebook going to help an FI “join the conversation?”

    I’ve said it before, I’ll say it again: It’s time for the social media gurus to stop evangelizing, and start advising. The evangelism is wearing thin in the executive suite.

    Every day, slide share has some powerpoint deck (yeah yeah I know, you used a Mac and not a microsoft product — it’s still “powerpoint”) telling us how “traditional marketing” is ineffective and dead.

    But you know what, Brad? All I see are feeble attempts to put the same old advertising in front of consumers, only this time while they’re Facebooking w/ friends, instead of when they’re watching TV.

    My point in this post (and my report) is that FIs are not having “effective” conversations with their customers. The data set I’m relying on does come from a survey of mostly 50 to 65 year olds (Many people in their early 50s are 5 yrs from retirement, Brad).

    But if an FI can’t converse with this group — and uncover their wants and concerns — then all of your advocating that FIs should get involved in social media to attract younger consumers is bad advice.

    You also made a point that concluded with “with this group is of course failure.” Sorry, but I’m not clear what you’re concluding is a failure. If you’re saying that FIs that ‘t try to have conversations with pre-retirees/retirees through social media will fail, I might agree. Except that I’d go one step further and say that FIs that try to have conversations w/ younger consumers thru social media will fail as well — UNLESS they first determine what kind of conversations they should be having, and what they should be saying in these conversations.

    This isn’t easy stuff for FIs to do. It’s time for less evangelizing, and more practical advice. Which I challenge the social media experts/gurus to deliver on.

  7. Alright, let me clear some stuff up on my viewpoint.

    1) Using social media to older generations isn’t total failure, more of an uphill battle with boulders rolling down at you. The goal is talking with those folks they want to be engaged and each gen is different.

    2) ‘…wearing thin in the executive suite.’ This one made me laugh. I deal with executives and most don’t even have it on their radar. What do they do instead? Bring Gen Y’s in the room to help them. If they are looking for someone to advise them, tell them to give me a call. I’ll come up with a strategy geared towards their business and tie it back to their business goals BUT without executive buy-in, it will fail.

    3) I’m not one of the people that believe traditional marketing is dead. Depending on the use case, it’s effectiveness I DEFINITELY question but I don’t think it will or should go away.

    4) You’re 2nd to last paragraph, Ron. We’re talking the same point. There is no template for any generation.

    If that helped understand my viewpoint, great. If not, let’s just chat.

  8. @Brad: We’re getting closer to agreement. What I believe is “wearing thin in the exec suite” is evangelizing — about anything. Smart execs want rational business cases for making investments (please note that I said “rational” which does NOT necessarily mean an ROI calculation to two decimal places).

    p.s. while Gen Yers might “know” other Gen Yers better than us Boomers do, what Gen Yers DON’T have is perspective. We know how we’ve changed over the past 20-30 years. We were once like you. You just have cooler toys to play with.

    p.p.s ANYBODY — N E BOD E — can come up with a “strategy geared towards their business” and “tie it back to their business goals”. Telling an exec that “w/o exec buy-in it will fail” is patronizing. The advisors/consultants who get the big bucks are the ones who know HOW to get exec buy-in. The good execs don’t need to be told WHAT to do — they recognize that they need help with HOW to get it done.

    p.p.p.s Sincerely, thanks for your comments. I really believe that I don’t “learn” until I’ve tried arguing a point to see if I can really defend my point of view or not.

  9. Last point for me (I promise): Patronizing? Good, if I ruffle some feathers and it makes ppl pay attention, happy to be that guy if it forwards the CONVERSATION.

    This might tangent a bit oh well. Just delete the comment if you rather stay on track.

    I find it fascinating how people defend their generations like they do. Statements like ‘we just have cooler toys’ or ‘boomers don’t get it’ make me laugh.

    I’ve noticed as I grow in this business that my goal has been to become a better translator. Whether it be GenY to Boomer or to execs to find that way to convey the message to different levels or ages is always something I’m working towards.

    That’s mainly why I like arguing with you Ron but also because you just don’t get it. 😉

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