“Toward transparency and sustainability: Building a new financial order,” a newly released study by the IBM Institute for Business Value raises some provocative questions about the relationship between financial services firms and their clients. 

Two big questions
1. Do financial services firms really put their clients’ best interests first?
2.  Do financial services firms understand what their clients want?

Clients’ best interests lose to financial services providers’ 
“…providers offer products that serve their own best interests, rather than those of their clients,” according to more than 60% of the institutional and retail investors and intermediaries surveyed by IBM.  

Almost half of the American industry executives surveyed–and about 40% of executives worldwide–agreed that providers’ best interests get top priority. You can view graphs of the survey results on p. 10.

What do clients want? Financial services firms don’t get it. 
Financial services firms think they know what clients want. Clients’ top priorities are “best-in-class offerings” and “one-stop-shop,” according to their survey results. They reckon that most clients would pay a 5%-15% premium for these characteristics.

But neither of these items cracks the top two in client survey results. In fact, in the IBM survey, clients rate “Unbiased quality advice/client service excellence” and “convenience” as their top priorities. Best-in-class offerings rank third and one-stop shopping comes in eighth. I do wonder if some survey participants may confuse “convenience” and “one-stop shop.” I’m also curious about the make-up of the clients whom IBM surveyed.

You can view the providers’ and clients’ top 10 answers at the top of page 10. 

The survey results also lead IBM to suggest that financial services providers must segment their products accordng to how clients behave. “The ability to serve specific client clusters represents a major–and largely ignored–opportunity for the industry to make money,” says the report.

“We have lost sight of the client in our own striving for outsized returns. We must get back to basics and focus to a far greater extent on our clients.”–Global Head of Prime Brokerage, large U.S. bank

Related post: Research study: How financial services firms will make money in the future