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The Council on Financial Competition just completed a survey of 1,250 US ”baby boomers” about their attitudes to saving, spending and investments.  With all that has gone on over the past two years we know one thing for sure — whatever financial institutions thought they knew about consumer attitudes and behaviors probably isn’t true now. 

So we asked. 

An early piece of uncomfortable but not surprising news.  42% of mass market baby boomers who in the last year went to the firm that managed the largest share of their savings and investments looking for guidance reduced their share of wallet with the firm.  Only 16% increased their share of wallet.  In contrast, high net worth customers (investable assets greater than $1 million) who updated or created a plan with their advisor were 47% more likely to increase their share of wallet and 43% more likely to increase their investments as a proportion of income.  Why the disparity?

We have all heard the following story.  Probably saw it in a company newsletter or on the “Sales Champions” bulletin board.  Customer comes into a branch.  They’re concerned about the markets.  They have some money with the bank but are unsure about what to do.  They sit down with a branch banker.  Before the conversation ends, the customer has not only decided to keep all their existing business with the bank but have brought over more deposits, maybe bought a mutual fund, and shifted over the IRA.  When this happens, banks glorify it, try to replicate it, and in many cases build a strategy around it.  Stop!

It may happen — occassionally — but it is no strategy.  When it comes to real sales and advisory expertise retail banks face a fundamental tradeoff between coverage and capability.  I know economic models have seen better days but this trade off is about as close to an economic law of nature as we will find.  To put bankers in all of your branches to sell lots of low margin products you simply cannot pay them very much.  We get what we pay for so it follows that if banks don’t pay much they are not going to get particularly good sales and advisory staff.

Takeaway?  In a retail environment, most “sales” are simple transactions.  So make them simple transactions, hire for simple transactions, build processes for simple transactions.  Ration high capability staff and make them available only when you need them.  Remember, Coverage or Capability.  You cannot have both.  You do real damage when you try.  Anyone disagree?