Investors Prefer the Path of Least Resistance

A new analysis from Cerulli Associates suggests “strategic top-down branding” and careful control of the client experience are well worth the effort (and expense) for financial services firms.

Scott Smith, director at Cerulli, explains that firms involved in investment management, advice and recordkeeping place very different values on strategic branding activities. Many firms are understandably hesitant to push resources into branding/marketing initiatives designed more with long-term benefits in mind than short-term balance sheet performance. But in a highly competitive investment services marketplace, such efforts will be increasingly important to attracting and maintaining customers, Cerulli asserts.  

According to the analysis, investors are often unclear about the relative objective merits of one firm versus another, “which makes it important for providers to offer easy-to-understand overviews of their various engagement levels to make it easier for prospective investors to seek out options that are of greatest relevance to them.”

Important to consider, clients are much more likely to stay with a firm than to switch, even when they are not highly satisfied with the service, says Smith. “Firms seeking to increase market-share should focus on marketing and service campaigns that make new transitions as pleasant as possible,” he says.

And of course, creating and maintaining a trustworthy brand experience is tantamount to long-term success.

“Consumers do not have the time to spend comparing various investment options,” Smith adds. “Instead, people are far more likely to take a path of less resistance by seeking out recommendations from trusted sources or choosing firms whose brand they have become comfortable with over time.”

NEXT: Details from the analysis 

According to Cerulli Associate’s analysis, when it comes to “overall brand awareness,” there has been strong consistency in the top-performing names. In fact, the same handful of firms topped the leaderboard both this year and in a previous version of the survey fielded in 2012.

“The persistence of each of these brands among leading responses is a clear indicator that consumer branding, especially within the investment services category, is a process rather than an event,” Smith suggests. “We believe firms that are focused on increasing their visibility, and in turn, market-share, will need to reconsider their priorities and not simply assume that increasing technology and efficiency will elevate their results.”

The Cerulli analysis shows investors rank “trust,” “transparency,” and “high ethical standards” as their top factors when choosing a new firm to work with. Rather than conducting their own rigorous due diligence, however, an investor will often use their anecdotal experiences, referrals, or other inputs to determine which new investment services provider will put the investor's best interest first.

“Once investors have identified a provider that satisfies these requirements, investors are more likely to outsource oversight of their investment portfolios,” Smith concludes.

These findings are sampled form Cerulli's report, “U.S. Financial Brands 2016: Navigating the Brand Engagement Process,” created in partnership with Phoenix Marketing International and its Investor Services Study. More information is available here.