Helpful advice, if you want it

Hey there, time traveller!
This article was published 14/08/2021 (1776 days ago), so information in it may no longer be current.

We Canadians have a love/hate relationship with our banks. Arguably our banking system — particularly our big five banks — are the envy of the world. They’re stable, profitable and generally provide pretty good customer service along with an array of innovative products.

From an investor’s perspective, the banks are typically foundational to a portfolio, generating big profits paid out in dividends that regularly increase.

On the flipside, those profits are generated from us — the customers — who pay fees for services and products like chequing accounts and investment advice.

Taken together, these are the ingredients for a somewhat favourable and yet at the same time wary impression of financial institutions.

And a recent survey by JD Power — the 2021 Canada Retail Banking Advice Satisfaction Study — illustrates this.

“This year we did dig more into the program to provide more comprehensive measurements about how consumers are feeling about their financial literacy and wellness after all the upheaval created by the pandemic,” says Paul McAdam, senior director of banking intelligence at JD Power about the survey now in its fourth year.

What it found is many customers are struggling financially and could use advice, yet they’re reluctant or have no interest in doing so. To that end, only 42 per cent of surveyed customers passed a basic financial literacy test while 12 per cent noted being over-extended; 13 per cent were stressed about money, and 36 per cent felt financially vulnerable.

“Yet only 19 per cent say they’re very interested in receiving advice and guidance from their bank.”

McAdam further notes another 55 per cent are “somewhat interested” in advice.

“And that group is really indifferent in a lot of ways, so lacklustre consumer demand was a big finding.”

Also notable is those who did receive advice — for high-demand needs like budgeting, investment, etc. — are typically satisfied with it.

A little more than half that got advice were satisfied with the information they receive while 76 per cent of those respondents acted on the advice.

“What our research found is that fewer than 10 per cent of Canadian consumers who received advice from these banks thought it was poor, so 90 per cent thought it was a good or excellent experience,” he says. “Banks do a good job of this.”

The problem, though, is that financial institutions are not reaching the majority of their clients who could use the help. These folks are referred to the mass market clients — consumers with less than $250,000 in investible assets.

“Banks have figured out how to serve their high-net-worth clients… and they do a fine job of that,” McAdam says. “What this study is trying to emphasize is there are opportunities in the mass market.”

Indeed their work is cut out for them, says Enoch Omololu, founder and editor of Savvy New Canadians, a personal finance website for newcomers.

“A lot of the financial advice provided by bank reps falls in the ‘cookie-cutter’ category with an upsell lurking not too far away,” says Omololu, a veterinarian, writing about finance on the side.

Given most of his readers are newcomers with modest financial assets, many fit snugly into the mass market category. As well, this group tends to be skeptical of free advice — much like other Canadians — only perhaps more so based on their experience with banks in their homelands, which they typically trust even less.

Here in Canada, he notes hearing from his readers about “being asked to opt in for a 30-day free trial of a credit product” they don’t need when they can track their credit score for free elsewhere. This is not fostering trust in the relationship, he says.

Neither is being offered an upgrade to a better chequing account, only to pay double the monthly fees when their everyday transactions do not warrant it.

This “is not the type of advice people want or need,” he adds.

McAdam says the study certainly does seem to imply many respondents are a bit jaded when it comes to free advice.

“There is a trust issue sometimes based on past experiences,” he says.

In turn, despite their banks (or credit unions) offering free advice — should a customer ask for it — many Canadians are more apt to turn to the internet, and family and friends for advice, the study found.

Omololu’s advice for consumers is to consider the three Cs: convenience, cost and customer service.

While convenience is no longer measured by having a branch around the corner with the growth of digital services, you still want access to a variety of products (chequing, savings, investments, loan products) in one place when needed — either online, by phone or in-person.

Then there’s cost: “Dig up the fees and ensure you are comfortable with the costs for routine debit transactions, bill payments, and e-transfers,” he says. “If there’s a monthly maintenance charge, see if it can be waived by maintaining a small to moderate balance.”

And when it comes to customer service, if you are going for rock bottom fees — or none at all — check customer reviews to ensure you can get help should you need it.

As for advice for the banks, Omololu had this to say:

“Offering targeted and customized advice that doesn’t prioritize upselling expensive products would make bank customers a lot more open to seeking advice.”