Banks have traditionally put their investment products at the center of their sales strategy, based on the assumption that clients see value in proven one-size-fits-all solutions. While this strategy was effective for many decades, we are now experiencing a Copernican revolution, opening the way to more customer-centric, personalized products and services, driven by technology innovation and a generational shift.
In the third article of our Wealth Management series, based on our 2020 Market Pulse Survey (MPS) of 1000+ Belgian investors, we challenge the above-mentioned hypothesis for the Belgian market and offer insights into how Belgian banks can put their investment clients back at the heart of the equation.
Accenture’s survey identifies several drivers of change in the world of investment products and services:
- New investor solutions – An increasing number of (digital) investment products and services, often fueled by technology and/or the innovative mindset of startups, are becoming available. These allow investors to independently pick solutions they personally relate to.
- ESG is gaining ground – Consumers are increasingly guided by their moral compass when making purchase decisions. Although this trend has not yet fully translated into a boom in investor demand for Environment, Social & Governance (ESG) products in Belgium, we believe it is only a matter of time before ESG products become mainstream.
- Investors seek a (hyper) personalized offering – Today’s investors can no longer be described as homogenous. They are looking for personalized products and services that cater to their specific interests and needs. As new (digital native) generations take up the investment baton, this shift is expected to grow.
- Emergence of (Big) Data as enabler – The availability of large data sets combined with the power of previously unavailable analytics places (hyper) personalized offerings within reach.
The attraction of non-traditional assets and services
In recent years, we have seen the emergence of a new breed of (digital) investment products (e.g. fractional shares, direct lending & cryptocurrencies) and services (e.g. pocket change investing, robo-advisory or consolidated portfolio overviews). These solutions often originated from applying new(er) technologies to financial services customer journeys (FinTech) or were simply invented top-down by innovative startups that focus on a certain customer pain point. Although Belgian banks have begun offering a number of these innovative solutions, their main offering still consists of a limited range of traditional products, predominantly focused on funds. This could explain why only one in two investors we surveyed believe their advisor proposes a sufficiently broad range of investment products and services to them.
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Accenture expects innovative solutions to become increasingly popular with Belgian investors.
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Our survey shows that 66% of respondents are already willing to invest in non-traditional assets (defined as investments other than bonds, shares & funds). This number rises to 77% among the younger generations, while overall, 72% of investors are tempted by additional investment services. Considering that 45% of respondents indicate that they have multiple investment service providers, we expect innovative investor solutions to further increase customer mobility and/or impact cross-selling opportunities if properly marketed. Belgian banks are also being challenged by new entrants such as Aion, Trading 212, Bux and Revolut, who rely heavily on advertising their innovative investment solutions on social media (a significantly cheaper and more targeted marketing channel) and who actively invest in a digital customer experience tailored to digital native investors.
Grasping the full potential of ESG before others do
Today’s consumers are increasingly guided by their moral compass when making purchase decisions. Provided all other parameters remain stable (especially investor return), one would also expect to see more investors looking for Environment, Social & Governance (ESG) products over non-ESG products. Based on our survey, we are not yet seeing this trend fully translate into higher demand for ESG investment products in Belgium. Only a third of Belgian investors see themselves purchasing ESG products in the near future (up to almost half of younger investors), with a large portion of investors still undecided (some 41%).
We believe that the main cause of this delayed impact is negative perceptions of ESG products. To illustrate: some 45% of Generation Z respondents believe that ESG is predominantly marketing, whilst 21% of all respondents think that ESG products underperform the market. If properly informed, a significant portion of the undecided could be converted to ESG products over time. Hence, in addition to working out a sufficiently large portfolio of ESG products, banks should keep their clients properly and regularly informed (e.g. on performance of ESG products). Furthermore, in anticipation of a final European taxonomy for ESG products (still ongoing), banks should invest in performing credible due diligence on their ESG products to remove the perception of green washing. It is only a matter of time before ESG products become mainstream and banks should prepare for this sooner rather than later.
The art of recognizing investors as individuals
As well as being interested in a wide variety of products and services, today’s investors are looking for personalized advice and products. This trend will increase with new generations of investors. Only 46% of respondents to our survey believe their advisor offers them a sufficiently tailored offering. Sixteen percent of all respondents are even considering changing their main investment service provider in the near future, citing insufficient personalized advice and offers as one of the main reasons. When asked what additional services and products appealed most to them, their answers were very diverse, again strengthening the case for a (hyper) personalized approach by investment providers.
Banks need to reflect on which products and services they want to prioritize on their product development roadmap in the future. A willingness to pay might be a logical first criterion for services (implicitly assumed for products).
Up to 37% of the investors surveyed (50% for younger generations) who are interested in additional services are also willing to pay for some of the proposed services (excluding the undecided).
While an immediate return on investment might be preferred given the ongoing pressure on profitability, banks should also consider the long-term benefits, for example, increased brand loyalty as a second criterion. Indeed, when offered for free, some of these services might prove good levers for banks to connect more closely with investors and increase customer satisfaction levels. As a final criterion, we recommend banks to investigate the specific preferences of their target audiences, which would reveal deltas that they could address through additional services, for example, relating to their stage in life or current wealth.
Personal data in exchange for personal value
Banks will need to enter into a new and historic agreement of trust with their clients to answer their increasingly loud call for personalized services. As a first step, banks should make better use of their already large data sets by employing the right analytics tools. Customer segmentation based on traditional filters would already provide a first basis for increased personalization. However, to achieve true hyper-personalization, customers must be willing to provide additional personal data.
Only 19% is willing to share the information necessary to tailor offerings with their service provider (the so-called “personal data paradox”), although insufficiently tailored offerings is one the main drivers for investors to leave their bank.
However, our survey reveals that 73% are willing to provide additional data in exchange for something deemed valuable to them (i.e. including other benefits on top of a tailored offering). We therefore believe that banks need to make the sharing of additional data easy (e.g. in-app choices) and clearly explain the tangible benefits to the customer.
Customer centricity is a reality in Belgium
Our survey upholds the hypothesis that customer-centric, personalized investment products and services will continue to grow on the Belgian market. Investment providers that continue their traditional product-based approach are steering blind and risk losing their clients to (new) competitors. In the future, a bank’s revenue generation will be closely linked to its ability to tailor offerings to the individual. To avoid losing costumers or miss cross-selling opportunities, Belgian banks should offer investors fewer but more personalized products and services. This data-driven sales strategy could also re-energize the bank’s sales team, enabling them to pro-actively offer products and services that are truly a great fit for the investor’s interests, needs and moral compass.
In our next article, we will explore why and how wealth managers should use an omni-channel approach to effectively service the needs of investors.
This article has been co-written by Jamel Hachmi, Michaël Versyck and Sarah Ryelandt.