Hearts & Wallets 2012 Prediction #1: Elevation of the Value Proposition Will Drive Market Share Gains:

Urgency to articulate what you do and how much it costs is cresting and will force changes.

Everyone wants to know what to expect out of a service or product, and how much it costs, before they buy it. And once they’ve bought it, they evaluate how well it performed to their expectations. But our industry makes these normal activities devilishly hard for customers. Regular readers are familiar with the Screaming Unmet Needs of “tell me what you do,” “tell me how you get paid,” and “tell me how to evaluate you.” In 2011, we took this to the next level with Explore focus groups that researched the attitudes and experiences of investors who are actively making choices about where they want to be on this spectrum: Upshifters (seeking more help and willing to pay for it), Downshifters (seeking lower fees or more control) and Engaged & Staying Put (happy with their current providers.)

Many of you asked, what’s the size of these trends? What are the pricing models that may rule the future? Our newest reports, released to clients on January 8, quantify these questions and more. Early feedback from clients is that these reports are well worth the investment because they present a compelling case for why and how to get clearer about your firm’s advice-pricing value proposition.

Here are some highlights from the reports that prove why Prediction #1 should be important to your firm. Click here for more information on the reports.

From Upshifting & Downshifting: Successful Positioning in the Changing Advice Landscape (Insight Module 10)

• About 60M households and $16 T are ripe for some sort of money movement, such as trial of a new firm, consolidation with a favorite, or rollover. About 40M households, holding $6 T, are stable. The remaining 20M have made a recent move that can teach us a lot about what motivated them.
• Most (68%) of recent and upcoming consolidation and trial is driven by choices among advice-pricing value propositions. How this breaks out for trial and consolidation, as well as by wealth group, has important strategy implications.
• Upshifting is bigger, but Downshifting represents almost $3 T, while an even bigger group of investors seeks both-the quintessential “better deal” of more service and lower costs.

From Best Practices in Defining and Pricing Advice (Insight Module 11)

• The status quo approach of bundling investment and personal finance advice for an asset-based fee is liked by only about 1/4^th of investors-in line with traditional load funds. That both of the most common pricing mechanisms are disliked by 3/4^ths of Americans suggests there is opportunity for disruptive change in pricing.
• Having a choice in how to receive personal finance advice appeals to 38% of Americans, and has even more appeal for certain desirable groups.
• The fiduciary concept appeals to a broader swath of Americans than the other concepts tested, but not to everyone, with potential implications for public policy.
• Reactions to the advice-pricing concepts tested and their attributes depend on whether you’re targeting an age group, a wealth group, or an attitudinal group, such as Upshifters or Downshifter.

From the soon-to-be-released Explore report on Generations X & Y

• Savings habits and wealth generation are driven by attitudes and behaviors-it’s not about age and lifestage. Investors who practice Hearts & Wallets six Peak Accumulator behaviors (see our prior blogs on this subject for details) are confident, self-reliant, and resourceful, and as our annual Quantitative Panel shows, they are wealthier than their generational peers as a result. These investors are attractive targets at any age.
• By applying segmentation based on specific financial behaviors, such as keeping debt to a minimum, across a client or prospect base, financial services marketers can achieve far more successful campaigns and even uncover attractive, yet underserved and seldom marketed to, investor segments.