There isn’t a lot of love out there for financial services companies.
This was underscored most recently with the release of The Reputation Institute’s annual survey of consumer perceptions. For quality of reputation, financial services came in dead last out of 17 industries — scoring even lower than the widely despised cable companies!
Financial services is an industry that many consumers love to hate – thanks to hidden fees, complex documents, and a generally poor customer experience.
Yet I encounter many financial services professionals who feel their industry gets a bad rap – that the negative reputation is undeserved, or merely the consequence of peddling an unglamorous product that must be sold rather than bought.
I think that view is a bit too charitable, though. The fact is, the financial services industry is often its own worst enemy. Few other verticals antagonize consumers the way this one does, with business practices that alienate rather than endear.
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At its core, this is a story about an industry that’s increasingly disconnected from the needs, wants and emotions of its customers. It’s an industry that seems to disregard the optics around its words and actions. It’s an industry that is, in a word, tone-deaf.
That shortcoming is currently on display in the industry’s vigorous fight against the application of a “fiduciary standard” to a wider body of financial professionals, such as insurance agents and investment brokers. A fiduciary standard obligates the financial professional to act in the best interests of his or her customer (what a groundbreaking concept!).
However, many financial services providers want to be held to a looser standard – recommending products that are merely “suitable” for the customer, but not necessary best for the customer. (Why would they do that? They might get a higher commission for recommending one product over another.)
Fiduciary standard. Suitability standard. They’re just more terms of jargon that make the average person’s head spin. Here’s what most consumers will take away from the debate, as crystallized by this recent New York Times headline:
With press like this, is it really any wonder that financial firms have a reputation problem?
Some in the industry may argue that the headline is unfair, that it oversimplifies a complex issue. But that’s almost beside the point. In the arena of customer experience, perception is reality. If financial firms’ position in this debate is simply too convoluted to explain to the average consumer, then the industry has already lost the battle.
(That industry position, incidentally, is that the higher regulatory costs imposed by a fiduciary standard would lead brokers to stop servicing lower-value clients.)
Perhaps there are legitimate circumstances when adherence to a “suitability standard” actually makes sense, not just for the provider but also for the consumer. But if those circumstances truly exist, the industry has done a poor job describing them.
In the end, what will matter to consumers is advocacy – one of the pillars of a great customer experience, in any industry. Few things are as engaging to a customer as knowing that the company you patronize puts your interests ahead of theirs.
For financial professionals who already embrace the fiduciary standard, it represents a key selling point that deserves to be accentuated, particularly as consumers become more aware of the distinction.
And for all those brokers who cling to the suitability clause, it’s time to adapt – either by embracing a fiduciary standard, or by making a cogent case to the consumer about why a suitability-oriented broker can still effectively serve their needs.
Whatever the outcome of that debate, it’s merely one battle in a larger war to build trust in an industry where it is sorely lacking.
Financial firms need to step back, consider their customer’s point-of-view, and then craft a credible and trustworthy value proposition that will resonate accordingly.
Until that happens, many financial services providers will find their “message to the market” still falling on deaf ears.