IBM: Majority of U.S. Wealth Management Clients Are Not Advocates of Their Firms
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An IBM (NYSE: IBM) Institute for Business Value study of more than 1,300 U.S. wealth management clients reveals more than half (57%) are not advocates of their firms and over 40% do not consider their firm a "trusted advisor" to help them meet their financial goals.
The study, "Building Client Advocacy: New Opportunities for Wealth Management Firms," comes at a time when firms are scrambling to differentiate themselves and meet changing consumer demands for new investment products and services, especially from a burgeoning baby-boomer population in its peak years of asset accumulation.
"Wealth management firms have attempted to become more client-centric and respond to their clients' needs and expectations by placing more personnel on the front lines. This strategy has met with limited success with costs often outstripping gains resulting in minimal improvement of client satisfaction," said Douglas Butler, financial markets leader, IBM Global Business Services. "We believe firms must move away from traditional client satisfaction metrics and start focusing on client perceptions about the overall business relationship. For example, firms that can strategically use client attitudinal information to target and improve high-impact service interactions can strengthen their ability to improve client loyalty, wallet share and business performance."
As part of the study, IBM deployed a unique measure of customer loyalty, the Customer Focused Insight Quotient (CFiq), to determine if a client considered themselves an advocate, antagonist or apathetic. Unlike other satisfaction or promoter measures, the CFiq goes beyond a single measure of satisfaction by combining wealth management clients' ratings of three statements:
I would recommend my primary wealth management firm to my friends and family members.
If I needed a new financial service or product, I would go to my primary wealth management firm first.
If another wealth management firm offered a set of competitive products or services, I would not switch firms.
The resulting scores are used to group clients into three advocacy segments:
Advocates - Clients who strongly agree with the CFiq statements
Apathetics - Clients who agree with the CFiq statements
Antagonists - Clients who disagree with the CFiq statements
Only 43% of wealth management clients indicated they are advocates of their wealth management firm. These results should be disappointing to managers in an industry that defines itself by product and service excellence. The scores fall below Property and Casualty insurance (P&C) scores, but are above retail banking scores (51% and 24% advocates, respectively). One out of every five wealth management clients (19%) is an antagonist–meaning they have negative attitudes. Another two of the five (38%) are apathetics. Such attitudes may be indicative of a failure on the part of the firm, despite likely investments in better products, improved channel experiences and sophisticated advisor programs.
