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Accentuate the Positive: Building Banks' Retirement Brand
BY PAUL MCADAM
Building a brand in the retirement market needs to go beyond marketing to include improved expertise, products and online tools.
SYNOPSIS | Mass affluent consumers don’t consider their bank to be the first choice financial services provider for their retirement needs, according to BAI Research and Mercatus LLC. But a recent study by these firms also shows the way for banks to build a strong brand in the retirement business by elevating retirement as a central marketing theme, improving online information and planning tools, offering simple yet not simplified product offerings and hiring specialists with the requisite knowledge and expertise.
When it comes to retirement, the banking industry has an identity crisis. That is to say, the vast majority of consumers do not readily identify banks as the first choice financial services provider for their retirement needs.
According to a survey of nearly 3,000 U.S. mass affluent consumers conducted in 2007 by BAI Research and Mercatus LLC, being perceived as a “well-know retirement provider” is by far the leading factor in cultivating success in retirement services. In short, this means establishing a brand in the retirement space that is recognized, relevant and credible. Many bankers agree that banks have failed to carve out a well-defined image and thus have lost ground over the years to investment firms and brokerages (see chart, “Investment Firms on Top”). In fact, our research reveals that only 15% of U.S. mass affluent consumers consider a bank to be their primary provider of retirement solutions and savings.
What steps will be required for banks to strengthen their brands in the retirement marketplace? Certainly, banks would be well-served by elevating retirement as a central marketing theme. After all, at investment firms such as Fidelity Investments, the Vanguard Group and Ameriprise Financial Inc., “retirement” is the key marketing message. But a brand is the promise of an experience. And before banks begin to plow money into retirement marketing, it would be wise to first consider how well they are delivering upon the actual retirement planning and savings experiences that customer’s desire.
While marketing can serve well as a promise-making machine, actual customer experiences are the eventual determinants of perceptions regarding a brand. And unfortunately, the results of our research and banks’ weak historic performance in the retirement marketplace provide ample evidence that the actual retirement experiences delivered by banks are falling short of consumers’ expectations.
Fortunately, our research un-covered three sets of capabilities in the retirement marketplace that are quantifiably linked to brand equity development and wallet share gains among mass affluent consumers:
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Online retirement information and planning tools that educate consumers, guide decision-making and reduce the sources of intimidation that surround retirement.
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A simple, yet not simplified, set of retirement product offerings that have sufficient breadth but also remain affordable to mass affluent consumers.
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Retirement specialists who demonstrate knowledge and expertise in investing for retirement.
The implication: brand development in retirement must be supported by the delivery of consistent customer experiences within these three capabilities. Indeed, several bankers say they are enhancing their online tools, products and staff skills while playing to their strengths by working from the existing relationships that they have with customers in other areas, such as deposits and loans. Banks emphasize that they can offer products that go beyond the usual mutual funds or exchange-traded funds offered by investment firms and incorporate bank products, such as reverse mortgages, into the retirement plan.
“Banks in general need to get a little swagger back,” says Ken Yarborough, senior vice president and director of retirement strategies for Atlanta-based SunTrust Banks Inc. “Retirement is a place to dig our heels in the sand by establishing shelf space for our products in marketing and lobby promotions and incentive programs. The swagger is that we’re going after this business and we’re going to win because we’re good at it.”
All About the Brand
The importance of brand is critical in the retirement marketplace, which currently comprises over $16 trillion in assets. Of the mass affluent customers surveyed as part of the BAI Research/Mercatus study, 48% ranked being “a well-known retirement solution provider” as a top attribute for a financial services firm they would choose. But, when it comes to consumers’ perception of which financial institutions offer the best retirement expertise, banks lag behind the leading investment firms (see chart, “Still a Ways to Go”).
“We see a number of banks, large banks, trying to engage clients more around this topic,” says Martin Skea, senior vice president and head of marketing for San Francisco-based Wells Fargo & Co.’s wealth management group. “But if you asked anyone walking down the street, ÔWho does retirement?’ they’d say Fidelity or Schwab. That’s where the focus has been.”
Keith Piken, managing director of personal retirement solutions for Charlotte-based Bank of America Corp., previously spent five years working at Fidelity Investments and has seen both sides of the fence. “I know the internal workings of a firm that has a real identity in retirement; investment firms made a commitment to that business,” Piken says. Banks, by contrast, have suffered from a “lack of awareness” on the part of bank management and their customers, he says.
But Piken also says those attitudes are changing: “Customers have told us their number one need is retirement.” Bank of America, he says, has placed much more emphasis on retirement in its marketing and advertising campaigns in recent months. Last November, the company announced a $35 million national print and online advertising campaign to promote its IRA and 401(k) retirement savings plans.
Some bankers say the issue has not been so much a lack of awareness or interest among banks but rather a “shelf space” issue. In other words, for banks, retirement has traditionally been just one point in a wide-ranging spectrum of products and services. Meanwhile, investment firms and brokerages have had the luxury of focusing on a more select number of financial offerings, retirement being a key component. “Banks have to do other things,” says SunTrust’s Yarborough. “We have deposits and loans and commercial banking services that all need to have shelf space and that crowd out retirement.”
Ken Thompson, senior vice president in charge of investment products for M&T Bank Corp. of Buffalo, N.Y., brings up another obstacle: a lack of breadth in bank retirement products. “Ten or 15 years ago, banks would stick with the basic 401(k) and mutual fund investments and just sell their own proprietary investments,” he says. But now, “banks are living in an open architecture world,” where customers expect products from banks and investment firms under one roof. M&T, for example, is now selling investment products from Fidelity and Vanguard alongside its own, Thompson says.
Indeed, many bankers are trying to leverage the expertise of their nonbank rivals not only by selling their products but also by building off their marketing efforts. Alan Kizor, senior vice president and manager for retirement solutions for Union Bank of California in Los Angeles, says that banks looking to engage customers in retirement discussions can “stand on the shoulders” of their investment firm rivals, many of whom have “used their sizable war chests to build a brand on a national scale.”
“The investment firms are creating huge awareness. Fidelity alone has made an enormous investment in retirement over the years, talking about retirement investment and savings in the workplace,” Kizor says. “It’s doing all of us a favor by raising the general awareness about retirement, especially with the Baby Boomers starting to reach retirement age.”
Taking Retirement Online
Banks have come to realize that serving the retirement needs of their customers requires more than just a deeper commitment to marketing and a better range of products. It also requires better service in their online channels.
Online information and education, calculators and planning tools related to retirement are key components of a bank’s offering. Accentuating these do-it-yourself tools makes it more cost-effective for banks to proactively serve the broad pool of mass affluent customers who still want hands-on help but also want to track their investments through other channels. A full 57% of mass-affluent consumers surveyed pointed to online tools as one of the top attributes they look for in picking a financial services provider for retirement.
“Web-based tools have become more critical in every industry, from booking airline tickets to finding out what movies are playing,” Yarborough says. “You’ve got to find a way to let customers know where they stand and see the impact of making changes.”
Here again, investment firms have achieved an early head start in creating a Web presence that often includes retirement investing information/education and interactive planning tools and calculators to help investors figure out if they’re saving enough and how they could do better. The retirement section of Vanguard’s Web site, for example, offers information and tools aimed at setting retirement goals, allocating assets, establishing retirement accounts, comparing its own funds with comparable non-Vanguard funds and calculators to help determine the tax impact in choosing between different funds. Fidelity’s online Retirement Resource Center and its NetBenefits site for customers of workplace savings plans offer similar tools and information.
Some banks are trying to bridge the gap. Union Bank of California, for example, plans to give its online site “a major overhaul and introduce new interactive tools” in the coming months, according to Kizor.
In February, Wells Fargo launched a national print and radio campaign promoting its Retire Secure Index (RSI), an interactive online calculator that estimates the number of years a person’s retirement funds will last after they stop working. The RSI tool takes into account what a person has already saved, when they want to retire and how much they think they’ll need to live on. It features a Flash video of a bank representative that walks the user through a half dozen simple questions. After prospective customers have generated their own RSI score, they’re prompted to set up an appointment with an adviser at one of the bank’s branches.
ING, the Dutch bank that has been gobbling up deposits in the U.S. in recent years with its heavily marketed “Orange” online savings account, also recently introduced its own national advertising campaign aimed at the retirement market. The television ads promoting ING’s retirement products underscore the importance for customers of determining “your number” Ñ how much money you need to comfortably retire.
Skea says Wells Fargo will be adding more tools and information to the retirement section of its Web site over the next several months, including interactive questionnaires about life stages and the user’s goals and objectives for retirement. “There’s a lot of opportunity for us in this area,” Skea says. “We have been a leader in online banking and what we’ve had on our site hasn’t fairly represented us and all we can do in retirement.”
Bank of America too “has a long way to go” in building out its retirement capabilities online, according to Piken. But with more than 10 million customers hitting its Web site every day and more active online banking customers than any other U.S. bank, “we already have that behavior of Internet use ingrained,” he adds. The bank plans to add more tools that help customers gauge how much they should be saving every month, how they might want to change their investment product mix over time, and what tax implications may arise from these portfolio shifts, Piken says.
Specialists Required
While bankers want to make their online offerings useful and engaging, their real goal is to draw consumers in to consult with the bank’s human advisers. “We want to offer as much information as possible, but not make it a do-it-yourself experience,” Yarborough says. “We want customers to sit down with a broker and plan their retirement out.”
In fact, the BAI/Mercatus research reveals that only 20% of mass affluent consumers make their own financial decisions and never rely on professional financial advisors for advice (see chart, “The Human Touch”). Hoping to attract that other 80%, some banks are recruiting talent from the investment firms. BofA’s Piken, for example, had previously worked for Fidelity, as had Jeffrey Carney, who runs the bank’s retirement services business. “You’ve got to go rob the investment community of their best people,” Yarborough says.
Most of the top-20 U.S. banks have now established their own retirement-oriented units within their investment businesses. And training frontline employees to proactively promote a bank’s retirement offerings is also key. “It’s about letting clients know you can help and letting them know you have an option,” Yarborough says. “There are a certain number of people who like telephone contact and the Web, but eventually these customers want a face-to-face meeting.”
For most banks, developing a deeper and broader talent pool means training and hiring more people with Series 6 or Series 7 licensing, as well as Certified Financial Planners (CFPs) to work the branches and the call centers. Among its 650 branches, M&T Bank has 1,600 Series 6-licensed employees and each branch has at least one investment consultant with a Series 7 license, according to Thompson. Sixty CFPs circulate among the bank’s branches too. Thompson says M&T reinvests in its sales force by paying for platform employees to get their Series 6 license and paying for qualified employees to get their CFP degree.
SunTrust sends select employees through programs at the College for Financial Planning, Yarborough says. In one program, students can earn a “Chartered Retirement Planning Counselor” designation, which basically means they have retirement-specific investment expertise. About 400 SunTrust personnel have that designation, he adds.
BB&T Corp., Winston-Salem, N.C., promotes investment training opportunities for its employees through its own “Wealth Academy,” where it trains CFPs for the bank, according to David Fisher, executive vice president and wealth division manager. “The tenure of the associates who go through the training is amazingly long,” he says. “It’s a huge morale issue to be trained like we train them.”
In addition to investment consultants at the branches, many banks have created centralized retirement hubs where consumers can access experts via phone or email or even Web-based chat. SunTrust built such a “retirement solution center” where customers, prospects and even employees can consult with retirement experts, Yarborough says.
Bank of America has stationed 50 retirement experts among three of its major call centers, Piken says, as part of its strategy to scale its retirement expertise quickly across the bank’s wide-reaching national footprint (more than 6,200 branches). Meanwhile, Bank of America is training many of its 40,000 branch associates in various retirement-related programs, Piken says. The efforts are already paying off as the bank now receives five times the number of calls about retirement than it did just a few months ago. “Training is not an event; it’s a process,” Piken says. “If we don’t have a consistent commitment to training, we will just be throwing money out the window.”
Simple, But Not Simplistic
In an effort to engage customers, banks also need to be conscientious about how they position their offerings. While bankers say they want to provide a wide range of products to win over prospective customers, they also want to keep the retirement planning process manageable and not overwhelming, especially for the many consumers who by all accounts are not saving enough for retirement. Among the mass affluent, confidence about both saving and investing for retirement is not strong. According to the BAI/Mercatus research, only a third is confident the actions they’re taking will position them to have enough money to retire in an enjoyable manner (see chart, “Confidence Gap”).
“We have to make it simple, but not simplistic,” Piken says. “There are things in retirement planning that are very complex and customers pay us to know all that.”
In an effort to streamline its offerings, Union Bank of California consolidated many of the retirement-related products it offered through various units of the bank, Kizor says. For example, he says, the bank previously offered four or five different sets of IRAs through many of its various units, including deposits, brokerage and trust. Now all the IRA activity is centralized under the retirement solutions area. “We needed to look at the business holistically,” Kizor says. “The customer certainly does.”
BB&T has tried to tackle the complexities of retirement by dividing its wealth division into two sections. It created a new unit called Private Financial Services to work with customers who have between $250,000 and $1 million in assets. Customers with $1 million or more are handled by the more traditional wealth management department. Many of the customers of Private Financial Services are not just concerned with investments but also with income replacement, Fisher says, noting that many of these clients have less sophisticated needs in terms of investment vehicles. “The upper end requires a whole different set of options,” he says.
Thompson of M&T points out that as research shows that many people are not saving enough for retirement, banks like his will serve an important role in helping would-be retirees figure out the “de-accumulation phase” by offering and developing products that are designed to add to the retirement income stream. “Banks have so much else to offer, like credit facilities and reverse mortgages,” Thompson says.
Last April, in fact, Bank of America announced it would acquire Reverse Mortgage of America, a division of Seattle Mortgage Co. The deal makes BofA one of the country’s largest players in reverse mortgages, which allow homeowners to draw on the equity they own in their homes to live on.
SunTrust, which itself started out as a trust company, has long had “a strong retirement bias,” according to Yarborough. But only recently has the bank started “moving down the asset ladder” to reach out to the mass affluent audience. On the product side, he says, this means offering more basic annuities and index funds that customers can “set and forget” for longer periods of time, as well as providing more self-service access to account information.
The Retirement Payoff
Our research and discussions with numerous banking executives over the past year clearly reveal that banks intend to make the investments required to develop more relevant and credible brands in the retirement marketplace. And our research also suggests that these investments can yield strong financial rewards. Without a retirement relationship, banks hold 18% of mass affluent consumers’ investable assets. With the retirement relationship, banks’ share of investable assets is nearly on par with investment firms (see chart, “A Stickier Relationship”).
But a brand promise will quickly falter if consumers do not receive consistent sales and service experiences supported by relevant online information and tools, staff expertise and appropriate product offerings. Now that saving and planning for retirement is the top financial priority of today’s mass affluent consumers, they will not casually entrust their retirement nest eggs to outsiders. While much work remains to be done, the capabilities that are required to gain the trust of consumers and win in the retirement marketplace are clear.
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