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The digital revolution in human-centered advice

Dan Mercurio
May 18th, 2021 · 3 min read
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This article was originally published on BAI.

Ask someone in the financial services industry to define financial advice and most will point to wealth management and advisor-led financial planning for high net worth clients. But ask a customer, and they’ll give a more holistic definition that doesn’t set thresholds based on wealth, nor restrict advice only for long-term needs. This dichotomy presents an opportunity for transformative realignment.

In a 2020 report, Deloitte observes how “the worlds of retail banking and wealth management have started to collapse into each other.” Though financial institutions have historically offered generalized advice to retail customers through financial literacy seminars, blog posts and other educational tools, few have a vision of individualized advice.

But to win, retain and grow customer relationships, financial institutions must align their organizations around giving high-quality advice to all. Simply put, financial advice must expand beyond wealth to other areas of consumer need – decisions about saving, home-buying, automobiles, insurance, education, vacations and many other topics involve some amount of advice.

Digital channels are optimized primarily for simple transactions and tasks, such as opening accounts, viewing balances, depositing checks and making payments. Advice on digital channels are usually static blog posts, generic articles and one-size-fits-all video content. Why aren’t banks leveraging their now-robust digital channels to discover customer needs and efficiently connect customers with the right bankers and specialists?

Branch traffic has long been declining, a trend accelerated by the coronavirus pandemic. As branch visits went down, so did opportunities to engage customers in richer and deeper interactions that might have built stronger relationships and uncovered additional needs.

Even when people come back into branches, most will expect (or at least appreciate) a more efficient experience, with some digital pre-work and asynchronous follow-up to make that 10-minute meeting worth what might be a 30-minute trip to get there. Banks need to better understand their customers outside their branches and deliver advice wherever, however and whenever is best for the customer.

We think the branch will still play a role, but that digital needs discovery will continue to gain in importance. Ultimately, solution delivery will be digitally facilitated using remote human to human interaction. This will be done via specialists in specific events (such as buying a house, setting up an IRA and spousal death) as well as along demographic lines that include recent grads, HENRYs (High Earners, Not Rich Yet), high earning years and retirement decumulation.

All of these specialists can’t be housed in one branch, except perhaps at flagship locations. So while the specialists might still sit in a branch, they will engage with most customers digitally in some way (video chat/mail/phone) to deliver advice and offer solutions.

Despite historical consumer preferences to get advice outside their banks, three-quarters of American retail bank customers say they want their bank to offer them advice and guidance, with more than half preferring to get advice digitally, according to JD Power. Consumers increasingly demand convenience, which means that they expect to not only deposit a check on the go, but will be looking to get advice instantaneously and effortlessly.

Banks often miss out on the virtuous cycle of needs-driven customer service enabled by needs discovery. For the customer, needs-driven service means better financial products that enable financial success and satisfaction. And for the bank, deepened customer loyalty yields higher long-term value from increased wallet share and decreased attrition.

Enabling advice for all financial decisions across all lines of business is a stepwise process, so it makes sense to start with high-priority areas shared by customers. Looking for patterns in recent customer needs, including the actions of customers similar to them and taking macroeconomic and local trends into consideration, can help identify retail banking areas where advice is most needed.

Delivering advice requires having insights into customers’ needs, so it makes sense to invest in ways to discover needs at scale. Without accurate, real-time customer needs data, bankers are about as effective as radiologists without x-ray images.

Lastly, for bankers to provide consistent, high-quality advice to retail customers, they need to be incentivized to focus on advice, rather than just sales or service. Creating objective metrics to measure the success of advice delivery, as well as incentivizing advice-driven customer satisfaction through compensation, can provide the right behavioral structures to achieve organizational transformation.

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