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To Earn Greater Loyalty, Investment Brokerages Should Think Digital

A trusted investment professional who offers sound advice and maintains great relationships with clients—full-service brokerage firms work hard to attract and retain these stars. Such advisers attract investable assets that generate reliable revenue for the firm. Yet brokerage firms are caught in a bind. The benefits of customer loyalty can easily accrue to the adviser, not the firm. If clients feel strong ties to the adviser, then an adviser who switches firms has a good chance of taking many customers with him or her.

How can brokerage firms resolve this tension? Bain & Company analysis of a new survey by J.D. Power of 6,500 investors in the US suggests that firms can capture more of the benefits from loyalty by raising their game in two areas: Alongside providing sound advice, they should offer an excellent digital experience around planning, reviewing and adjusting investments.

Heidi Deringer, a partner with Bain's Financial Services practice, outlines two levers brokerages can use to foster loyalty in their investment professionals and their customers.

Digital intensity in a customer's interactions is correlated with a higher Net Promoter Score® (a key metric of loyalty) for the firm, as opposed to the individual adviser, the survey shows (see Figure 1). Firms with the highest loyalty score—USAA, Fidelity and Charles Schwab—also lead their peers in the degree of their digital, self-serve model. 

Customers who use digital tools to manage their account gave Net Promoter Scores that are 11 to 20 percentage points higher than those who do not. The largest upward bump comes from customers' using their firm's website as part of their investment planning, such as using a planning tool, researching specific investments or reviewing plans—even if they also use their dedicated adviser (see Figure 2).



Firms with higher loyalty scores also have the ability to retain customers and their assets better, should an individual adviser leave for another firm. By contrast, firms with a low Net Promoter Score were more likely to have customers say they would follow their adviser to a new firm if he or she switched (see Figure 3).


Even when a customer has a healthy adviser relationship, that correlates with the firm's share of the customer's wallet but does not correlate with loyalty (see Figure 4). Improving both customer advocacy and share of wallet entails two streams of investment and management:

  • Hire, develop and enable great advisers who build solid relationships with clients.
  • Refine and improve digital channels that will engage customers and keep them coming back for thoughtful content, convenient tools and an attractive interface. Many brokerages, for instance, could stand to improve their account aggregation tools, which allow customers to view and analyze all of their financial holdings and debt across different institutions, in one place. This requires strong design capabilities, as well as a high level of customer trust.


Fidelity's strong loyalty position, for instance, derives in part from its long-standing mastery of the digital basics. As far back as 2010, the company's self-service website suggested next steps to customers executing certain transactions, such as ordering new checks or asking about homeowner's insurance after they changed address. Today, Fidelity's digital investment tools work equally well on mobile devices, as the company's mobile app includes advanced features that mimic a desktop trading platform. Fidelity Estate Planner provides online guidance for customers through the estate planning process. And Fidelity offers live customer support around the clock via phone, chat or email.


Andrew Edwards: To Earn Greater Loyalty, Investment Brokerages Should Think Digital

Bain Partner Andrew Edwards shares how continued improvement in the digital experience can help firms retain customers even when their advisers leave.

Schwab has also excelled in its digital experience. It offers both fully automated services, called Schwab Intelligent Portfolios, and hybrid computer and human investment services, Schwab Intelligent Advisory, which include unlimited access to financial planners via phone or video chat. Like Fidelity, its mobile trading app closely mirrors the capabilities of the web application.

Customers clearly value compelling digital tools. But they also value interactions with their adviser. In fact, the more that customers engage in both types of interaction, the higher the loyalty score given by respondents (see Figure 5). Any firm, moreover, can benchmark its performance against competitors to see where it has opportunities to migrate lower-value transactions to the website (see Figure 6).



The combination of digital tools and healthy adviser relationships will help to remove time-consuming annoyances from everyday transactions and potentially delight customers. In turn, they will be more likely to stay with the firm and raise the level of assets invested, even if their adviser leaves.

Andrew Edwards, Matthias Memminger and Gerard du Toit are partners in Bain’s Financial Services practice. They are based, respectively, in Toronto, Frankfurt and Boston.


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