It's not in your head: The majority of your clients may now be willing to leave you at the drop of a hat, but one leading industry analyst argues the best retention strategy is the cheapest one.
Canadians have traditionally been loyal when it comes to financial services – sticking with a bank or advisor for years regardless of service quality. But increasing expectations for better customer focus and loyalty rewards have put the majority of customers in play, with 61% saying they would switch financial service providers. The good news, the rewards clients are seeking don't have to cost you a cent.
“The rewards don’t always have to be monetary, and we find that the most powerful rewards are not monetary,” Paul Battista, partner and Canadian Financial Services Advisory Leader for Ernst & Young, told Wealth Professional. “They can simply be recognition, meaningful and relavent recognition of the relationship that has been built or developed with a particular advisor.”
Battista recommends that advisors reward customers for the size of their business and for the duration of the relationship, and that they think creatively about monetary and non-monetary rewards.
“If you look back even eight or ten years, the notion of rewards would be relatively absent from the market, and it has been relatively late to come to financial services," said Battista. "For many years financial services have been seen by Canadians as a utility, like water or electricity it’s something that you have but don’t expect much from.”
That has changed, big time. According to E&Y’s 2013 Canadian consumer banking survey although 71% of Canadians have been with the same bank for over a decade, approximately half would switch banks to receive more personalized experiences, such as financial rewards for bundling their services, and seamless cross-channel interactions.
”For many years on the advisory and wealth side – for advisors as well as the banks – the emphasis was really on pushing particular products, whether they be mutual funds or mortgages,” said Battista. “The emphasis has shifted quite a bit to be on the needs of the customer. When that shift happens there are pretty important changes that have to be made on the part of advisors in that they have to think through that customer lens rather than a product push.”
The survey found that the majority of those who have switched banks in the past five years were between the ages of 18 and 44. Consumers in Atlantic Canada and Quebec reported the highest loyalty with 68% and 62%, respectively, banking with the same institution for more than 15 years.
Still, although Canadians are becoming more likely to shop around for personalized services, Battista noted that they still remain complacent by global standards.
“We know through our global survey that there is less attrition in the Canadian market than there is at the global level of bank customers – substantially less – from that standpoint the customer base has been far more stable,” he said. “That presents some unique challenges for advisors quite frankly.”
Challenges, but also opportunities. While banks are putting more emphasis on loyalty rewards, it takes a long time for big institutions to shift focus. Nimble advisors may be able to adapt quicker and win new customers.
“In a market that has low attrition and low customer churn, loyalty and the notion of providing rewards for loyalty can be real triggers for bringing customers in,” he said. “For advisors that is clearly something they can do to lure customers away from traditional bank providers.”
The survey also found that customers want one-stop service. The results indicated that – to retain existing customers as well as attract potential switchers – service providers need to focus on getting the basics right, while offering better, more seamless cross-channel delivery of products and services. For advisors, that means broadening expertise and building a network of partners.
“The independent advisor has that unique challenge in that they generally have a domain area in which they can offer service very directly, but the needs of the customer – and this is something our survey drives home quite powerfully – is that the offers that are being made by a financial service advisor are relevant and reflect the needs of the customer,” said Battista.
“Those needs are varied, and if they can’t meet them, directly they need to establish the associations, the network and the partnerships that will allow them to meet those needs in the customers’ minds.”