Oct 22, 2012

By Brett King

Banks can’t compete with digital for advice

There’s a long held premise that branches are great channels for advice, that this is the one differentiation that bank branches provide that the Internets could never compete with. There are three problems with this assertion that should rightly challenge the superiority of the branch channel in bank operations today:

Customers rarely get advice in a branch

The average customer walks into a branch to get a task completed. Whether that task is cashing a cheque, wiring funds overseas, looking at refinancing on their home or applying for a credit card, that task is generally the purpose and focus of a visit to a branch. When a customer comes in focused on a task, then they are not of the mindset where they are generally willing to hear unsolicited “advice” from the teller or banker, because they want to get in, execute and get out.

Qualitatively when you research customer interactions in-branch and ask customers when the last time they received ‘advice’ in their bank branch, most can’t ever remember receiving any sort of advice in the branch space.

Check out this YouTube video with customer comments to that effect


This is counter-intuitive for branch bankers who believe that this is what customers are getting in-branch. However, the metrics for the bank officer are to try to upsell or cross-sell a customer who comes in for a basic transactional interaction, they are not to give unsolicited advice to help a customer with their money or financial health. In that respect, customers are very clear about advice that is caged or camouflaged as a cross-sell proposition – to them it’s an attempt at a sale, not advice.

What a banker might call advice – the cross-sell and upsell – is not advice from a customer perspective. True, unsolicited advice that helps the customer without expectation of revenue is very rare in the branch space because there is simply no metric in the system that allows for this.

The advisor no longer benefits from information scarcity

The concept of advice in-branch is predicated on the principle of information scarcity. The branch officer will know something about banking or financial services that a customer won’t – he’s an expert. However, even in the private banking space today, where advisory requires the ability to juggle multiple asset classes, thousands of potential products, the pendulum is swinging toward more informed customers who are challenging the advisor.

Take a scenario where you have a 2nd generation private banking client interested in the energy sector and green energy. The client comes into the bank to meet with their private banker to discuss this emerging industry and look at investment opportunities. They’ve indicated interest in this area for some time and have subsequently spent the last 3-4 weeks researching the field and options, so when they come into the review meeting with the relationship manager, they’re extremely well informed.

This is the way we used to give advice…

The private banker launches into a discussion on a selection of appropriate funds or structured product options across asset classes, which capture the bank-led approach to the field of green technologies and investments. But the client has come up with something left of field. They’ve found that investments in solar silica (the refined quartz product use in the production of solar cells) and geothermal technology is underleveraged and offer significant opportunities.

The private banker has never even heard of solar silica. So he brings in the commodities specialist – who likewise has never heard of solar silica. There is no specific geo-thermal product, but some ETFs that have a slice of geo-thermal investments.

At this stage, the client has become the advisor. While the private banker can help with execution, they are forced to now go and research the options and assist the client with their buying decision, rather than advising them on an asset class or a product.

This type of interaction is increasingly common, and it turns the head on the old advice model. With 5-Exabytes of content created every two days the likelihood that an advisor will have access to information that a client or customer doesn’t have access to today, is increasingly unrealistic.

The best advice is time sensitive

While the concept of advice is a constructive and affirmative one, the biggest question is can you get me the right advice when and where I need it? The concept that advice is best given in the branch, precludes the reality that the most acute needs often present themselves contextually whether in the form of a life goal, a problem, a hurdle, a crisis, or simply a decision.

Let’s look at the core of day-to-day financial decisions. Everyday a consumer is making decisions on what money to spend, what money not to spend, what product or not to purchase, and what money to allocate to my savings. The very concept of advice is that the “bank” should help you make wise financial decisions that contribute to your overall financial health. However, given the dynamics of the retail financial services industry, the last two decades have seen banks flock to credit offerings that offer higher margin, even if that is at the detriment of the customer’s overall financial health.

Call me cynical but bank solutions need to be aligned with and never in opposition to the financial health of our customers. Customers should not be plagued by countless fees, escalating interest and penalties. Nor should representations be made to them that banking services are ‘free’ when the hidden costs are anything but free. This is anything but ‘advice’ based banking.

The pendulum needs to swing back to helping customers and help is best given when and where I need it. Not waiting for that day once or twice a year that I come into a branch to get something done or fixed, and the teller has a sales metric to cross-sell or up-sell me a credit product I can’t really afford. That’s not advice.

This is where PFM is really going to come into its own. Real-time personal financial management is advice at scale, potentially. Help me live my financial life well, everyday. That’s real advice…

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