Banks target stay-at-home savers in push to sell investment advice

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Your bank wants to give you some advice.

As the novel coronavirus prompted sweeping lockdowns, growing anxiety about finances built up in households and businesses across the country.

A sudden spike in unemployment and tumultuous markets led to a surge of Canadians hunting for financial help in the early months of the pandemic – at one point, Google searches for financial advice were up 88 per cent.

In response, banks have moved quickly to capitalize on that thirst for guidance. They are promoting their advice services more aggressively to forge stronger ties to clients and revive growth in revenues that have been depressed by a weaker economy with low interest rates.

Within weeks of the first lockdowns last March, several of the country’s largest financial institutions launched new online tools that could help customers create a budget, prepare a financial plan and guide investment decisions during the crisis. Most have done so by launching fully digital goal-planning tools, capitalizing on a sudden rise in customers’ use of online and mobile banking.

As governments have pumped out hundreds of billions of dollars of stimulus to support struggling households and businesses, and consumers stuck at home cut back on spending, banks have an unexpected opportunity. Deposits have soared to record levels: Canadian households save between $20-billion and $35-billion in a typical year, but set aside an estimated $200-billion in 2020, according to Deloitte Economics. As a result, a new group of “stay-at-home savers” has emerged who are poised to start investing, said Teri Currie, group head of Canadian personal banking at TD.

“An outreach to somebody who now finds themselves in a different financial situation, and not knowing what to do about it, can allow us to help them to think about their investment plan not just for the next few months, but for the next number of years,” Ms. Currie said in an interview. “That allows us to build a relationship with them for the longer term.”

When a financial adviser builds plans with a new cohort of clients, it becomes easier for the bank to pitch products to help them meet those goals – a mutual fund instead of a savings account, or a new credit card.

But first, the priority in the early days of the crisis was to help clients who were facing sudden hardship. Banks scrambled to set up systems to defer payments on tens of billions of dollars of mortgages and other loans, reduce some credit-card interest rates and dole out stimulus cheques and loans from governments. The goal was to prove to customers that banks had their backs in a crisis, which breeds loyalty.

“We basically took down the marketing machine and said, now is not the time to be trying to sell things. Now is the time to help,” said Neil McLaughlin, RBC’s group of head of personal and commercial banking, in an interview. Instead, his bank spent millions of dollars on television advertising encouraging clients who needed support to call and ask for help, and reassigned staff to dig through customer data for signs of customers who might be struggling.

TD set up a dedicated group of more than 100 advisers to reach out to more than 33,000 clients who showed signs of financial distress in the bank’s data, and about one in five of those customers took some form of relief. At the same time, the bank sent out millions of e-mails and text messages, personalized by using artificial intelligence, to offer help and advice.

In May, TD also launched its Ready Advice hub, an online portal offering advice and pointers as well as a tool to book appointments to speak to an adviser, which has been visited more than 2.5 million times.

Banks’ short-term profits took a hit as customers spent less, took fewer new loans and paid down existing debt. But there was a silver lining: A broad array of customers were suddenly eager for advice – not only those in financial distress, but also younger clients and households looking to make a plan or invest spare cash for the first time. And that gives banks a chance to capture new revenues at a moment when growth is hard to come by.

Bank of Nova Scotia’s data suggests that when an adviser develops a thorough financial plan with a client, the bank’s share of that client’s borrowing and investing products can leap from between 20 to 30 per cent to 60 or 80 per cent. And those clients often buy insurance as well. Scotiabank has had 350,000 visitors to its Advice+ online portal since it launched in November, and half of those customers clicked to book an appointment.

Bank revenues from fees have dipped during the pandemic, but as clients craft plans to save and invest more, “I think you’re going to begin to see the fee income line come back in a hurry on the back of what so far have been excellent mutual-fund sales,” Dan Rees, Scotiabank’s group head of Canadian banking, said in an interview.

The push to offer more advice isn’t new. Over the past decade, banks have been tailoring their branch networks to increase their focus on wealth management as $1-trillion in personal wealth is set to be passed down into the hands of younger generations. An archaic model of financial advice that was highly segmented between everyday banking, lending and investing – as well as a client’s age and assets – is starting to break down and change.

“In general, advice has always been a service overlay for investment product distribution,” said Kendra Thompson, a partner at Deloitte Touche Tohmatsu Ltd., in an interview. “And increasingly, we’re seeing advice become the future anchor of financial services.”

Banks have responded with strategies aimed at democratizing financial planning. All major lenders developed financial-planning tools catered to clients with less-complex financial needs. Road maps that encouraged the use of digital tools had already been drafted before the pandemic, but banks were careful not to siphon off business from their financial advisers who cater to high-net-worth clients.

Now, the industry’s shift has taken on new urgency because of COVID-19, and banks have made progress once expected to take years in a matter of months. Customer expectations have changed rapidly, and robo-advisers such as Wealthsimple and Questrade have grown in popularity, though they have yet to grab a significant share of the $1.5-trillion invested with Canada’s largest asset managers.

Senior bankers have played down the prospect of a mass digital shift in wealth management, betting that digital tools will be one piece of a broader relationship with clients.

Even amid lockdowns, demand for face-to-face advice also surged. TD temporarily closed 40 per cent of its branches in mid-March, but still had 40,000 appointments booked weekly in April for in-person meetings at branches. At Scotiabank, which kept nearly all its branches open, requests for in-person appointments rose 30 per cent from a year earlier.

That’s partly because decisions about money are emotional as well as rational, Mr. Rees said.

“The emotional connection – voice to voice, or face to face, or video to video – the intensity of that, and the frequency of that, has just continued to climb from 12 months ago to now.”

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