In thinking about the relationships that many consumers have with their financial provider, particularly around retirement planning, a dysfunctional marriage is what first comes to mind. Being a single guy with no marriage experience, I really have no idea what a dysfunctional marriage feels like, but I have a pretty good idea of that characteristics of a relationship gone south looks like.
As far as I can tell, it’s a downward spiral that continues to get worse as trust is lost, important dates are forgotten, a feeling of dissatisfaction sets in… sometimes leading to “irreconcilable differences” (or “switching” if you’re in the financial services industry).
Over the last year I’ve been paying particular attention to the relationships between investors and their financial providers- the news isn’t good. Between 2004-06, McKinsey Consulting found that consumers perceived that most financial services companies were increasingly unable to address their retirement needs. Brokerages saw a 21% drop in perceived ability, while investment firms fell 17% and insurance companies declined by 12%. That’s just a 2 year period.
Yesterday, I was talking to someone who does research on retirement and they suggested that there many be a real opportunity to help the consumer-provider relationship find common ground. At startups, we tend to think of innovation mostly in terms of disruption and disintermediation, but after reflecting on the best way to help the consumers reconcile their issues with providers, a more harmonious solution started to make sense.
Recognizing that where there is growing consumer dissatisfaction, there is opportunity, I started thinking, “Why not play the role of the marriage counselor and bring them closer together?”
Here’s what I think would have to happen in order to make things right:
- Get personal (or at least customized)
This is where providers get down on their hands and needs and beg for forgiveness. Kidding. Actually, this is where the providers pick up the slack and admit that they haven’t been the best partner and want to make it up to their customers. They start to roll out new fiduciary, 3rd party services where they’re not in control of the advice. This creates space for trust to grow again, a virtual middle ground where consumers can get retirement advice from someone who is an independent third party. This would require certification on the part of the fiduciary, since a hired service is obviously suspect to consumers.I know that giving up direct control of an advice product aimed at delivering customized, ongoing retirement planning services to customers sounds like a wild prospect (particularly to executives), but what are the alternatives?They can continue to create slick tools that generate leads, but do nothing to promote trust. They can let loose more reps who are probably not qualified to offer sound retirement planning advice and may only exacerbate the negativity consumers are feeling toward their providers. Even in-house software is questionable from a consumers perspective, because it’s often hard for the average consumer to understand and it’s difficult to grasp the impact of all the assumptions that are hard-wired into the calculations.A fiduciary 3rd party provides credibility in a relationship undercut by the (consumer) perception that providers are out to move products, potentially at the expense of the consumers’ interests. The role of a fiduciary is one that an independent financial advisor would play, if only these consumers had more than $500,000 in investable assets.
- Connect them to knowledge, not content
Create an online place where consumers can interact and share their aspirations, find out what people like them are doing to prepare for retirement and connect with experts at their financial provider. Again, a loss of control, but a big boost in trust as consumers realized that their financial provider is actually going out of their way to promote solutions that have no direct bottom line impact. Not only that, they are promoting connections within their groups of consumers, by putting them in touch with real life experiences, not just copy on a website. The larger overall impact in customer satisfaction certainly has knock on effects. Service and assistance mean a lot.
- Help them track their progress
Give consumers both the means and a reason to keep coming back when they want to find out if they’re still on track for a secure retirement. Don’t just give them a dollar value that they need to save, but give them a process to get there. A process that is trackable and simulates the best practices used in the independent financial planning community.Everyone wants a secure retirement. Companies who can clearly lay out the path to get there, while also providing the necessary guidance and support will win big time. And so will their customers, which is the whole point.
By helping reconcile different viewpoints and bringing the needs of consumers and financial providers into alignment, both sides win. Just think of all the money they’ll save in lawyers fees and alimony payments.