Complacency is one of the biggest threats to any business. Even if a firm has a long track record of success, subtle shifts in customer expectations and satisfaction may pose hard-to-detect risks.
In our consulting work, we started to see evidence of a significant shift in consumer behavior, so we conducted a study to gauge those risks. We wanted to understand the extent to which the changes might impact advisory firms and how we might help them navigate going forward.
Therefore, we surveyed 1,000 consumers nationwide using a third-party firm. Respondents had more than $250,000 to over $6 million in assets; slightly more than 50% were male and about 70% were partnered.
Our survey confirmed that big shifts have indeed occurred during the pandemic period. These include changes in what consumers want and need from advisors and how they perceive and value them. While it's too early to say whether the changes will outlive the pandemic, advisors need to know what's going on so that they can decide how they should respond today and in the coming year.
Survey questions ranged from what made the respondents happy or unhappy about their advisor, to what specific technology they wanted to have available, to which methods of communication they preferred.
Of the respondents, slightly more than 60% said they employ a financial advisor. Four findings stand out as most important for advisors today.
1. Low Patience Tolerance
One of the primary observations about advisors was about availability. In other words, how fast consumers can get ahold of their advisor. We did not ask respondents to define timeliness.
One-third of respondents stated they want more contact outside of meeting time and 28% want virtual meetings. In other words, they want to talk to a human advisor outside of business hours and when they really need them.
In our consulting work, we know that clients' expectations in this area have changed dramatically. Instead of being content to wait 24 hours, or until the end of the day, the window of patience now appears to be about 90 minutes. If the advisor does not respond within that time frame, the consumer's trust in, and opinion of, the firm tends to decrease.
2. Questioning the Value of Financial Advice
Among the survey's most striking findings was that consumers, both those with an advisor and those without, are beginning to question the value of financial advice. In fact, 39% of men and 30% of women reported that they were unsure of the value that advisors provide.
We cannot yet define exactly what the consumer perceives as value, but we do see indications that they don't fully understand the process advisors go through behind the scenes in managing money and preparing advice. Questions about advisory value likely are intensified by slow communication on the advisors' part.
While advisors can show clients their financial plans or investment reports, a key component of their value is being able to articulate what they do behind the scenes for the client when not in the meeting.
3. Growing Lack of Trust
Our survey found that one thing making consumers most unhappy is a belief that advisors are making judgments on their personal decisions. Twenty-one percent of men and 19% of women are lacking trust. In other words, 1 in 5 people don't trust their advisors and the financial services industry.
We know that over the past year many consumers have taken an interest in cryptocurrency and private investments or left stable jobs in search of greener pastures. Some advisors may not support these kinds of decisions, and/or loss of income to an already determined financial plan. But along with slow response times, advisors' judgmental response gives consumers another reason to hide information and to question whether the industry is trustworthy.
