We will present the results on the quality of Swiss investment advisory processes along the constructs and metrics introduced in Section 6.3.4. First, we will discuss our findings regarding the perceived quality of advisory service processes and the clients’ satisfaction with overall service provision.
We will then turn to our results regarding the importance of particular dimensions of service quality, especially in respect of service personalization and assurance.
Quality of investment advisory processes. The majority of the 37 surveyed FSPs reported to have introduced standardized advisory processes (26 FSPs) in the past three years or that such processes were under development (2 FSPs). These processes mirror the generic advisory processes discussed in
18 Data underlying this section has in parts been previously published in Mogicato et al.
[2009] and Nussbaumer et al. [2009], whereas the results reported in this essay have been entirely reanalyzed.
the literature (see Section 6.2.1); their implementation, however, showed to be quite diverse. While some FSPs provide their advisors with checklists and non-binding guidelines, others have engineered process phases with strict standards of information gathering and processing.
According to our mystery shopping episodes, compliance with either of these processes seems to be rather low. Client needs and expectations were gathered and analyzed only in 9 of 21 episodes; only in 6 cases the advisor’s analysis of the client’s personal financial situation and risk profiling followed a structured process. Most of the mystery shoppers’ negative remarks were related to this lack of incorporating and analyzing the client’s situation and needs. Consequently, only in seven episodes the advisors evaluated whether the client’s advisory goal had been reached.
These findings were confirmed in interviews with advisors and managers, who found various reasons for the lack of process acceptance. Advisors, for example, found the processes to be too rigid and restraining advisory practice – for some of them, the processes were impractical because their conception lacked inclusion of advisor input. Also, some advisors found the established processes to be insufficiently supported by IT (see also findings on RQ2.2 below). Managers, however, found that the main issue of current advisory processes was their lack of monitoring and enforcement.
In our mystery shopping episodes, we could also confirm the critique of potential interest conflicts discussed in the literature. Only in seven advisor encounters, the test clients found the advisor to perform a comprehensive check of their financial situation, whereas in seven episodes the emphasis was on product sale – in seven cases, the mystery shoppers were even indecisive of the advisor’s strategy. Advisor competence, however, was found to be “very good” in the majority of cases (11 episodes), “good” in two episodes, “moderate” in four and “poor” in only two episodes (answers for two episodes missing).
In general, the mystery shoppers found that advisors put much emphasis on small talk, making up to 40% of the encounter’s total duration, whereas less time was dedicated to needs gathering and analysis or solution recommendation. Also, all advisors provided their advice based on pen and paper, supported by brochures and fact sheets. IT was used by the advisor in only 6 cases – to look up exchange rates and print out further fact sheets.
Dedicated advisory software was not used in any of the encounters.
Figure 6-3: Client experience of advisory process quality (with estimations of advisors and sales managers)
Based on the observations regarding the established advisory processes, we were interested in how clients and FSP stakeholders would rate the status quo of advisory processes regarding their quality. Aggregated responses of clients, advisors and managers are presented in Figure 6-3. Note that advisors and managers assessed how they thought that their clients would respond to the specific scales.
The groups’ assessments of advisory process quality showed significant differences (Kruskal-Wallis test, χ2(2) = 37.800, p < .001) and post-hoc Mann-Whitney tests found differences to be highly significant with medium to large effect sizes between clients and advisors (U = 477.000, p < .001, r = -.49) as well as clients and sales managers (U = 747.500, p < .001, r = -.38).
Assessments of sales managers and advisors, however, revealed no significant differences.
Client satisfaction. Besides their assessment of the advisory process quality, we were also interested in the clients’ overall satisfaction with investment advisory services as well as the FSP stakeholders’ assessment thereof. As depicted in Figure 6-4, the clients showed low satisfaction with the FSPs’
services. Quite to the contrary, FSP stakeholders believed that their clients were very satisfied – we found significant differences between the clients’
and FSP stakeholders’ assessments (Kruskal-Wallis test, χ2(2) = 52.532, p <
.001). Post-hoc Mann-Whitney tests revealed that both the differences between clients and advisors (U = 344.500, p < .001, r = -.44) as well as
clients and sales managers (U = 566.000, p < .001, r = -.45) were significant with large effect sizes. The assessments of sales managers and advisors revealed no significant differences.
Regarding their satisfaction with advisory services, also the participants of our focus groups expressed mixed feelings – few positive aspects were raised, with one participant highlighting his advisor’s kindness and concern with his own financial requirements, and another being impressed by his advisor’s initiative, providing regular updates via e-mail. Yet other participants appreciated the advisor’s feedback on the client’s own investment ideas.
Figure 6-4: Overall client satisfaction with advisory services (with estimations of advisors and sales managers)
However, the majority of participants criticized their advisors as being very passive, inexperienced and lacking an in-depth understanding of the FSP’s products. One participant even doubted that advisory services are meaningful at all, stating that “if the advisor knew how to make money, he would not be working as an advisor”.
Some discussions also circled around the advisors’ tendency to take advantage of uninformed clients, i.e., focusing on their own or the FSP’s interests. While the focus group participants generally acknowledged that FSPs cross-subsidize advisory services with different fees and voiced their willingness to pay these in return for good advice, they criticized that the services lacked transparency regarding the exact costs; thus, they found it difficult to assess the cost-benefit ratios of advisory services.
The open discussion results were mirrored in the quantitative focus group surveys, in which only 35% of the focus group participants indicated that they would “highly recommend” their latest consultation.
In interviews with FSP stakeholders, we found that their systematic overestimation of client satisfaction was largely based on personal impressions of their own advisory practice or anecdotal evidence from others – almost two-thirds of the surveyed FSPs indicated that they did not measure client satisfaction; other FSPs declared to measure client satisfaction only irregularly and using informal modalities, e.g., by advisors inquiring the client’s satisfaction at the end of the service encounter.
Dimensions of advisory quality. We asked clients, advisors and sales managers to weight the relative importance of the different SERVQUAL dimensions (reliability, assurance, responsiveness, empathy, tangibles; a total of 100 points could be allocated). The different groups’ assessments are presented in Figure 6-5. Advisors and sales managers assessed the dimensions from their clients’ perspective.
Clients found reliability to be the most important dimension, followed by trust and responsiveness. FSP stakeholders, however, expected significantly different client preferences for all but one dimension – responsiveness was evaluated similarly by all stakeholders. For all dimensions, FSP stakeholders showed very similar estimations of the clients’ evaluation with no statistically significant differences.
Differences in the weighting of reliability (Kruskal-Wallis, χ2(2) = 32.096, p
< .001), however, were significant with medium effect sizes between clients and managers (U = 805.00, p < .001, r = -.38) as well as clients and advisors (U = 789.000, p < .001, r = -.29). Weighting of assurance also showed significant differences between the groups (χ2(2) = 13.294, p = .001); both advisors (U = 996.500, p = .014, r = -.20) and managers (U = 1240.500, p = .006, r = -.23) evaluated the relative importance higher than the client respondents; effect sizes, however, were small.
The stakeholders’ weighting of empathy (individual attention of the FSPs employees towards the clients) shows similar differences (χ2(2) = 13.858, p = .001), with advisors (U = 944.000, p = .008, r = -.23) and managers (U = 1275.000, p = .008, r = -.22) overemphasizing the importance of empathy as compared to their clients (small effect sizes). Finally, also the tangibles of advisory services are differently valued by the stakeholders (χ2(2) = 10.393, p = .006). Clients attach significantly less importance to this dimension than
advisors (U = 1004.000, p = .015, r = -.20) and managers (U = 1390.000, p = .025, r = -.18) – the effect sizes of these differences, however, were small.
Figure 6-5: Weighting of relative importance of quality dimensions (with estimations of advisors and sales managers)
Personalization. In addition to the general weighting of service quality dimensions, many discussions in focus groups and interviews circled around the personalization and assurance of advisory services. As depicted in Figure 6-6, the client’s expectation regarding personalized and client-oriented services is very high, approximately matching the FSP stakeholders’
estimation. While the differences between the groups were statistically significant (Kruskal-Wallis, χ2(2) = 12.654, p = .002) with advisors (U = 810.000, p = .008, r = -.23) and managers (U = 1295.000, p = .015, r = -.20) estimating the client’s responses lower, the effect sizes were small. Again, Mann-Whitney tests found no significant differences between the advisors’
and managers’ assessments. Concerning the significant differences between
client expectation and experience (Figure 6-7), effects were very large (Z = 8.539, p < .001, r = -.81).
In the focus groups, we discussed whether clients deemed advisory services to be personalized, i.e., tailorable to incorporate information of their individual requirements and preferences. Though some participants expressed strong interest in having such information incorporated, the majority of participants did not find that existing advisory services were individualized or personalized to their preferences or learning progress.
Some participants even felt that advisors tended to shelve their clients and advise them according to some particular “category”. Thus, they did not find that the advisor responded to their specific financial situation and needs but rather advised standard recommendations, leading to a perception of low influence on the process and its results.
As noted above, this perception was mirrored in the mystery shopping episodes: in only 9 of 21 episodes did the advisor attempt to obtain specific information on the client’s needs, preferences and expectations. The obtained personal information, however, was focused on individualizing the outcome, i.e., investment strategies or products fitting the client’s personal situation, and not on individualizing the information mediation according to the client’s information need.
Figure 6-6: Expected personalization of clients (with estimations of advisors and sales managers)
Figure 6-7: Client expectation and experience of advisory service personalization Assurance. As already indicated in the general weighting of quality dimensions, the clients’ expectation of assurance is high. Advisors and managers show very similar estimations (Figure 6-8).
Figure 6-8: Expected assurance of clients
Even though we found statistically significant differences between the respondent groups (Kruskal-Wallis, χ2(2) = 9.633, p = .008), post-hoc Mann-Whitney tests revealed that only the ratings of clients and advisors were significantly different (U = 864.500, p = .009, r = -.22) with a small effect
size. To the contrary, the clients’ expectation did not match their experience (Figure 6-9) – the Wilcoxon test revealed a significant difference (Z = 8.523, p < .001, r = -.77) with a large effect size.
Figure 6-9: Client expectation and experience of advisory service assurance Focus group participants found assurance and trustworthiness of advisory services low for several reasons; first, they criticized that clients could not discern their counterpart’s real interests, i.e., whether the advisor acts on the client’s behalf or pursue his own or the FSPs’ interest. Indeed, in the interviews almost all FSPs indicated to provide their advisors with lists of recommended products. Being offered such recommended products, the client has to trust both the FSP (i.e., that recommended products do not only serve FSP self-interests) and the advisor (i.e., that he is actually recommending adequate products).
The client participants found the issue of trustworthiness to be aggravated by the advisory services’ lack of transparency regarding the advisor’s actions and activities. Clients tend to perceive the advisor as a “black box”, not being able to comprehend how or on what basis advisors derive their recommendations.
In line with their high expectation of advisors recommending “adequate solutions”, client participants also expected advisor to warn them against high-risk or imprudent investments, i.e., to sufficiently analyze the client’s situation and risk profile prior to conducting transactions. Furthermore, they were disappointed with most advisors’ inadequate information policy regarding negative developments of their portfolio.