Fickle Financial Customers Require Advocacy

A new study highlights significant trends showing that consumers lack confidence in financial providers, and are more interested in controlling their investments and financial lives to a greater degree. This assessment that U.S. consumers are becoming more mistrustful, more insecure, and more hands-on in their financial lives is the focus of "Winning The Changing Financial Consumer," a new report from Forrester. The market researcher has surveyed nearly 1 million consumers since 1997 in an effort to track attitudes about money and technology, officials say. The new research claims there is a critical shift in the consumer mindset. The study also notes that shifts can be addressed through increased customer advocacy. That means offering products and services that are best for the customer, rather than doing whatever is beneficial for the financial firm's bottom line. Ekaterina Walsh, a senior analyst at Forrester, says that although the changes in consumer behavior have been gradual, they are deep and sweeping and won't dissipate with a recovered economy. The study says that while 79 percent of Americans remain optimistic about the economy, there are significant trends showing that consumers lack confidence in their financial providers. The youngest consumers, who are the core market of the future, show the most pronounced insecurity and need for control over their personal finances. Seventy percent of those GenXers say that want more control over their financial future and do the most research before investing. Fifty one percent of baby boomers and 44 percent of working seniors say they will never be able to retire, according to the study. The research shows that nearly 50 percent of U.S. households have switched financial providers at least once, because they were not satisfied. More than 33 percent of those dissatisfied consumers have switched providers more than once. Nearly one third of financial services customers with at least $1 million in assets got information about their current financial adviser from a friend, family member, or business associate. Forrester says customer retention and satisfaction can be increased if financial firms focus on customer advocacy. Credit unions, and local banks are seen as customer advocates, and are best positioned to retain the evolving financial consumer. Forrester says that firms' customer advocacy is more than just good customer service. A financial services firm will succeed in providing customer advocacy by becoming more transparent about how it makes money. The market researcher says banks that provide detailed fee-structure information on their Web sites and advise customers on ways to reduce their fees receive high marks for customer advocacy. Three factors distinguish the financial services firms that fall into the leader category. A cohesive company culture plays an important role--firms that have grown organically, rather than through acquisitions, are better able to maintain a unified culture and are thus seen as more effective customer advocates. Also, firms that do business with many consumers directly receive higher marks for customer advocacy. Those firms that rely on brokers and agents can up their advocacy quotient by investing heavily in training, so that customers are offered products and guidance that serves their best interests. Finally, firms that rely on technology to serve their clients' best interests score high on customer advocacy, according to the Forrester study.