The slow and inadequate response to market changes. Read part one inside our four-part series discovering the continuing future of financial services. This is part one in a four-part series. Read Chapter 2 – Eight Strategic Forces That Are Transforming The Industry and Chapter 3 – 3-Core Principles to Unlock Growth. How can the slow, bloated business of today to meet up with the fast-changing objectives of tomorrow’s customer?
The success of Target Date Funds (TDFs) can help us think about this problem. Launched in the middle-90s, TDFs have grown to be the quickest-growing retirement product category because they address what customers actually want-a simple way to a complicated asset allocation problem they don’t understand, and don’t want to understand.
Accelerating that craze, nimble competitors have subsequently launched robo-advisors and hybrid services that are highly transparent, easy to understand, and very easy to use. Those firms have quickly won market share, including a big percentage of the new retail money entering the investment management market. This innovation cycle is far from over. What do customers want?
Customers across generations, across the wealth spectrum, and across genders want to trust their financial partners. They would like to know that their bank or investment company or advisor has only their best interests at heart. They want clear, goals-oriented solutions, not sales tactics. They want their financial experience to be as intuitive, helpful, and satisfying as their public media experiences.
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They do not want to be worried about “being taken advantage of.” Most importantly, customers do not want to be “snowed in” by jargon, financial esoteric, and needless complexity. Many customers simply do not believe that large traditional companies can actually offer what they want-highly transparent, individualized solutions that are aligned to their interests.
They believe they are being force to match the industry’s model, which acts as the industry’s passions. They must either self-direct their own decisions and face the results of their lack of experience, or pay a premium with an expert guide them through a thicket. Few traditional companies offer customers a highly curated way to serve their own needs clearly, simply, and transparently.
These dynamics are well known by the industry, but only a few traditional companies have been prepared to solve for customer value over inner conflict. The prevailing distance between what the customer needs and the existing industry model is growing, not shrinking. But of responding to that gap instead, large banking institutions are getting caught by skilled complexity more and more, reducing the timeliness and effectiveness of their efforts. Is there a different lens to frame these challenges so banks will get new ways to drive revenues, grow profits, and ensure longevity? Most companies on the market simply do not need to pressure their set-up business model and large distribution route investments.