US consumers are becoming more mistrustful, more insecure, and more hands-on in their financial lives. Since 1997, Forrester Research, Inc. (Nasdaq: FORR) has surveyed close to 1 million US consumers in an effort to track their attitudes about money and technology. “Winning The Changing Financial Consumer,” a new report from Forrester, uncovers critical shifts in the consumer mindset and outlines changes firms can implement to secure high consumer retention through increased customer advocacy ¿- offering products and services that are best for the customer, not just for the firm’s bottom line.
“Although changes to consumer behavior have been gradual, they are deep and sweeping -¿ and they won’t dissipate with a recovered economy,” said Ekaterina O. Walsh, Ph.D., senior analyst at Forrester. “In fact, while Americans are fairly optimistic about the economy, there are significant trends showing that consumers lack confidence in their financial providers, and they are more interested in controlling their investments and financial lives to a greater degree. The youngest consumers, who are the core market of the future, show the most pronounced insecurity and need for control over their personal finances.”
Nearly half of US households have switched their financial provider at least once because they were not satisfied with their previous provider, and more than a third of these dissatisfied consumers have dumped their providers more than once in the past. In an effort to increase and maintain high levels of client retention, firms must focus on initiatives that increase customer advocacy. For example, firms will succeed in providing customer advocacy by becoming more transparent about how they make money. According to Forrester, 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.
The Vanguard Group, Edward Jones, Fidelity Investments, credit unions, and local banks are seen as customer advocates and are best-positioned to retain the evolving financial consumer. Three factors distinguish the financial services firms that fall into the leader category. A cohesive company culture plays an important role in how a firm is graded on the customer advocacy scale. 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. Secondly, firms that do business with many consumers directly receive higher marks for customer advocacy. Those firms that rely on brokers and agents should invest 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. These firms understand that their clients expect them to be at the forefront of technological advances in the financial services industry.