What the Financial Industry should keep in mind for 2023
The year 2022 was one of transition for financial institutions (FIs)—fintech companies, banks and wealth management firms alike. The year kicked off with continued momentum and exuberance around digital transformation, but as interest rates climbed and the economy slowed, FIs had to quickly respond to the changing needs of customers, and in some cases, adapt their digital transformation projects as well.
One of the most notable trends across the end of 2021 and 2022 was the increase in demand for financial advisory services among retail investors. Many individual investors jumped into the market during the meme stock frenzy that began in early 2021 when shares of GameStop increased over 90 times in one day based on a coordinated social media effort to raise the stock price.
While many were happy to dip their toe into a robust stock market, by 2022 many suddenly found themselves needing more focused financial advice in a slowing economy. It’s not news to anyone that inflation is top of mind for consumers, mortgage rates have dropped but remain high and have slowed the housing market, the crypto market has been shaken with the fallout from FTX, and a recession may be looming.
One study conducted in July of 2022 found 62% of people saying their financial planning needed improvement, with almost 1 in 5 adults saying they either have started working with a financial advisor or plan to going forward.
The competition to meet the growing demand for financial support will continue to be fierce, with banks, wealth management firms and fintech companies all looking to fill the gap. Here are three things companies may need to do to become a consumer’s financial partner of choice in 2023.
Offer more than investment advice.
The economic shake-up has consumers looking for more than just investment advice—they are increasingly looking for trusted partners to provide comprehensive financial advice. A PYMNTS study earlier this year illustrates this trend with 45% of consumers reporting a preference for product bundles.
The challenge for financial institutions is not just the ability to bundle products. Consumers are looking for peace of mind and a place to ask questions. To compete, companies will need to create a culture of advice across the institution to guide consumers into the best set of options for them. To be successful, a growing number of customer-facing employees within FIs will be tasked with having advisory interactions of increasing complexity and sophistication.
Put the customer at the center.
The business of financial advice is being disrupted. The challenge for many financial institutions is that they remain largely organized by products and are set up to compete based on product attributes or rates. Because we have seen significant democratization of information in financial services over the past few years, consumers are now able to compare commoditized products on their own.
What consumers are looking for now is for financial institutions to put their needs at the center and find ways to deliver personalized solutions. For example, beyond helping a customer balance their investment portfolio, FIs should be able to advise them on the best way for them to pay for their upcoming family reunion or if they should consolidate their credit cards, for example.
Take screen-based interactions to the next level.
Depending on the context, screens can be a source of great controversy, but in the world of financial services, the screen is at the heart of an entirely new level of service and interactivity. Customers have gone from an analog world of in-person meetings with bankers to digitally transformative experiences with increasing self-service and video communication.
Financial institutions are on the hook to serve a diverse set of needs in 2023—from busy consumers looking for flexibility to multigenerational wealth transfers. The companies that pull ahead will reimagine themselves as partners—delivering the best customer-centric financial advice to win over customers and launch them into a better future.
- Mike Sha, Forbes