I had the opportunity to participate in two events recently, one a high-profile conference that brings together many of the world’s most creative digital innovators, and an event at Schwab where we gather to share inspiration for how we can continue to innovate and deliver on our mission as a firm. At both events, I focused on the topic of trust. Specifically, I discussed the recent digital acceleration that the financial services industry is experiencing today, including:
- The acceleration of digital adoption in the past year as people have had to adapt the way they engage with a world forever changed by the pandemic
- The decline of public trust that has occurred broadly across institutions at a time when the spread of misinformation is so prevalent
- Our responsibility to earn and maintain trust during this period of transformational change, so we can be their trusted partner on their financial journey
- The critical role that the digital experience plays in earning trust, and the recognition that it is not technology alone that gets us there but the powerful combination of technology and people
Trust is being tested
Misinformation spreads quickly in today’s digital world, leading to widespread mistrust in some of the most personal areas of our lives. As a result, people often turn to their peers and social communities as their most trusted sources of information.
Among institutions, consumers are turning to businesses to fill the information void. According to Edelman’s 2021 Trust Barometer, 61 percent of Americans say they feel business is the most trusted institution, greater than government and the media. With trust comes great responsibility.
But the ecosystem of trust among businesses has changed. Brand recognition alone isn’t enough to earn it. It is critical that a firm’s actions be consistent with the values they promote. This prompted innovation from startups and established brands alike, and it has spurred our industry to strive to lower costs, increase value, and deliver the types of robust, personalized experiences that help investors reach their goals.
Trends everywhere influence financial services
Against this backdrop, we’ve seen an acceleration and collision of a few distinct trends among our clients:
- Digital adoption and client engagement: When COVID-19 hit, things suddenly couldn’t be done face-to-face in the same way, and people turned to online solutions for everything from getting groceries to managing their money. We had 2.3 billion interactions on Schwab platforms last year; mobile usage was up over 50 percent; and we welcomed more than 800,000 new households to our retail business last year; basically, the population of San Francisco.
- Health and wellness: The pandemic fueled concerns not only about physical health, but financial wellness too. While attention was focused on activities like the surge in day trading, we’re also seeing a steady interest in financial planning. In just six months, more than 25,000 free digital financial plans were completed with our recently launched Schwab Plan.
- Demographic shifts: While there’s been a lot of news about younger, first-time investors entering the markets, there are many other significant shifts underway too. For example, women control $10 trillion in assets today. In the next 10 years, that is expected to triple. This increasingly diverse community of investors will shape our services and capabilities in meaningful ways.
- Rising expectations: People expect fast, easy experiences in every part of life, including their financial services provider. How well a provider personalizes their experience, offers transparency and delivers value are just a few of the expectations today’s clients have from their financial services partner.
The trust imperative is complicated
Trust in the financial services industry is up eight percent over the past decade and hit an all-time high in 2020, according to the Edelman study. But trust is fragile, and retaining it takes as much work as building it. In the face of this challenge, one of the key opportunities is the thoughtful integration of technology and people.
Harvard Business Review did a fascinating piece about situations in which we trust artificial intelligence (AI) versus those when we trust people. The study revealed that when it’s something of utilitarian value – (the functional, practical aspects of a product or service) we trust AI. When it’s something of hedonic value – (experiential, sensory) we trust people. Financial services might feel practical and utilitarian, but our relationship with money is as much about the heart as it is about the head.
We see this play out during times of market volatility when we receive more calls from clients. In 2020, appointments with our team of Certified Financial Planners increased 50 percent among our hybrid robo advice (Schwab Intelligent Portfolios Premium) clients. During market volatility, people understandably want to talk to somebody and ask, ‘Should I do anything?’ Typically, they’re in a diversified portfolio and our advice is to hang tight and focus on the long-term. But human validation is so important. Intuitive, transparent, reliable digital experiences can certainly build trust. Sometimes, nothing can replace the power of a human interaction to maintain it.
At Schwab, our mission has always been to serve investors, empower them, and help them reach their goals through all kinds of environments including the difficult and complicated times we’re in now. Seeing through our clients’ eyes is how we’ve built trust over the years. Technology has always been critical to how we serve investors, but today’s rapid innovation and increased demand for experiences combining digital engagement with traditional human-based interaction gives businesses like ours a unique opportunity to innovate how we serve customers and continue to build trust.