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The ‘tipping point’ for digital advisory services

Jun 24, 2020 / Digital Banking
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Financial advisory services have long been seen as one banking service that would primarily take place in the branch for a long time to come. But recent developments are prompting many banks to enhance customer experience by fast-tracking digital alternatives for delivering investment advice to retail and small-business customers.

Social distancing measures that started in March because of the coronavirus pandemic have caused a powerful domino effect, resulting in economic contraction, a sharp spike in layoffs and stock market volatility. The result: Many bank customers find themselves under pressure to rethink their short- and long-term financial plans, and in doing so, they’re relying on mobile and online technology.

“Financial institutions have been interested in offering digital advice and guidance for the last decade,” says Tiffani Montez, senior analyst for the Aite Group.

Existing personal financial management tools already allow customers to analyze spending, saving and their progress toward long-term goals like buying a house or retirement. But even before COVID-19, banks were augmenting their CX by using predictive analytics, machine learning and videoconferencing to offer a better picture of “financial wellness.”

Personalized self-service

Since the advent of robo-advisors a decade ago, “we’ve seen the rise of several hybrid approaches that augment ‘personalized’ self-service with true personal engagement at the limits of that self-service,” says Lee Wetherington, director of strategic insight at Jack Henry & Associates. In 2018, he points out, “a new category of personal digital banking emerged – one that enables financial institutions to translate their live, local, personal service meaningfully and on demand inside digital channels… (where) personal digital banking bridges the branch with digital channels.”

The best of these newer services not only integrate with digital banking – as opposed to a bolt-on chat option from an outside vendor – but they are also “authenticated all the way back to the core, which means the conversations they enable can be both candid and actionable, i.e., customers can move money, complete forms, choose drop-down options and submit new product applications within the context of the conversational thread,” Wetherington adds.

This digital leap can appeal to more tech-willing Generation Xers and Millennials, who are quickly taking over a larger share of banks’ accounts. (A recent Aite survey found that more than two-thirds of these 50-and-younger customers were moderately to extremely interested in using a digital “financial coach.”) Many banks have amped up their online financial planning and advisory services, including Huntington Bank’s Heads Up and Bank of America’s Erica.

While the electronic evolution of financial advice was already well underway, experts like Alex Kwiatkowski, principal industry consultant in the global banking practice at SAS, agree that “the pandemic…accelerated the transition from the offline world to online, with digital channels taking the strain.”

Indeed, customer satisfaction with advice and guidance received through digital channels has been increasing significantly, according to the J.D. Power 2020 U.S. Retail Banking Advice Satisfaction Study. Based on the results of the firm’s survey, now in its third year, 36 percent of all retail bank customers get their financial advice online or via mobile, with 51 percent of emerging Generation Z customers doing so. Perhaps most strikingly, overall customer approval of digital advice is up 21 points, while satisfaction with in-person advice is up just two points.

Digital financial advice has reached its “tipping point” and should surpass the branch as the most commonly used advisory channel within the next year, according to Paul McAdam, senior director of banking intelligence at J.D. Power.

Banks are beginning to “get their digital formulas right” by personalizing interactive tools, helping customers proactively reduce debt, create budgets and better manage spending and investing. The J.D. Power survey found that customer satisfaction specifically with interactive financial tools leapt 112 points since last year.

The ability to view various accounts and customer data, and integrate account-opening, as well as customers’ growing comfort level with using videoconferencing, have all played a role. Leslie Carter-Prall, head of private wealth management for Regions Bank, points out that their advisors use the WebEx videoconferencing platform to share documents safely and securely, while also providing a virtual face-to-face experience.

“The use of videoconferencing has also allowed us to reintroduce clients to a variety of interactive reports, advice and guidance available to them online,” says Carter-Prall, adding that while the technology “has been available for some time, it has certainly become more ubiquitous given the pandemic.”

With the spread of COVID-19, subsequent mandated closures and job losses have created a tidal wave of economic impact that will likely affect banks in other ways.

“It’s been said the pandemic has driven two years of digital transformation in two months. I think that’s a fair assessment,” Kwiatkowski says. “While the next two months aren’t likely to be as hectic, there’s no going back from here. None of us wanted the pandemic, but it’s changed the industry and the wider world around us.”


Karen Epper Hoffman has been writing about banking and technology issues for nearly a quarter of a century for publications including American Banker, Bloomberg Businessweek and Financial Times’ The Banker. She has also spoken and moderated panels at industry conferences.