) -- Despite widespread complaints -- and considerable outrage -- directed at the nation's "big banks," Americans increasingly turn to them for investment advice.
, a firm that analyzes retirement market trends for the financial services industry, shows that banks now serve as the primary source of retirement advice for 43% of Americans, an increase of two percentage points from a year ago, with gains across all investment product categories.
Despite anger at "big banks," more pre-retirees are turning to them for their nest egg needs.
The findings come from a survey of more than 4,500 households nationally and statistics based on 9,000 responses on specific financial firms.
Among the evidence of growing leadership by banks in the retirement advice area was
Bank of America's
jump from being the primary retirement advice source for only 27% of its customers in 2010 to 48% in 2011.
"This growth shows Bank of America's efforts to put its retirement messaging in front of so many customers, at ATMs, in branches, and on its Web site, is working," says Chris Brown, principal of Hearts & Wallets and founder of New Hampshire-based
. "The bank's relaunch of its retirement income calculator in Q4 2010 was well done, positively reflecting recent changes in consumer attitudes to retirement."
Some broad trends may explain why banks are poised to gain even more prominence in the retirement space.
Laura Varas, Hearts & Wallets principal and president of Massachusetts-based
Mast Hill Consulting
, says many younger investors have a grim view of their retirement prospects. Saving for many of them is not as much about a traditional retirement as having a "Plan B."
"It's more about being safe and protecting yourself and having enough money if you lose your job or for when you are no longer able to work," Varas says. "It is a backup plan." Survey responses also indicate that some are perhaps turning to banks because they "are thinking that their employer really isn't responsible for their retirement."
"The employer-sponsored plan, rather than being
solution, becomes one of the solutions," she adds. "People are looking for a lot of security right now, having seen so many gyrations, ups and downs and having lost so much money. That's why the banks and the products that they offer, with the security of the principal, really does have a lot of appeal. It is also something that is there all the time. With your employer, you may switch jobs a couple of times, but the bank is always there."
On the provider side, "banks have really been making a big effort to focus more on retirement" and targeting pre-retirees. "
and Bank of America are really focusing in on this, and the smaller banks are seeing that it is working for them," Varas says.
Although many respondents still have "trust" issues with banks, they can get past it because they have a better grasp of the business model.
"It's a little bit easier to understand how a bank earns money than it is to understand how a
earns money," Varas says. "They are seen as savings products, not investment products."
The increasing role of banks may have come at the expense of market leader Fidelity's traditional dominance in the retirement space. In the share of what Americans consider to be their primary firm (where the largest share of somebody's retirement money is kept), Fidelity slipped slightly, from 11% in 2010 to 8% in 2011, based on the pool of respondents.
"Fidelity has been very successful in its efforts over the past few years to court investors nearing retirement," Varas says. "It may be that focusing on the mass market, which is the segment that tends to drive these national figures, doesn't make as much sense for the firm as really performing well with older affluent investors."
Varas says Fidelity "has been very focused on trying to provide and keep the assets of people with $500,000 plus."
"To focus on that it looks like -- just by looking at the numbers -- they may have said that the mass market is a lower priority for them," she says. "When you look at the top 10 providers of retirement advice, Bank of America has 9% for people with under $100,000 in assets, Wells Fargo has 8% and Fidelity has only 7%."
"The reason that the national numbers are moving is because most people do not have a lot of money and yet are going to need to provide for their futures, and the banks are really stepping on to help them do that," she adds.
Another trend benefiting banks is the designing of products that consumers think work well together. Hearts & Wallets found that
emerged as the leader in this area, with the average customer having more than 2.5 account types.
"Banks have attracted customer investment dollars because of their ability to be a one-stop resource, offering checking, mortgage and other products," Brown says. "Banking institutions increased primary relationships with affluent/high-net-worth accumulators, jumping from 20% to 30%
2010 to 2011, while self-service brokers and full-service firms decreased share over the same time period." Those accumulators are defined as investors ages 28 to 64 who are not planning to retire within the next five years and have more than $100,000 in investable assets.
Although "most banks still have a ways to go," Varas says there is evidence some are doing a better job of fostering good will among customers.
Hearts & Wallets crafts a metric, on a scale of one to 10, that looks at whether customers would recommend an institution -- simply put, it measures "how much they like you," she says. In 2010,
scored a 6. Last year it rose to 7.2. USAA rated even higher, with an 8.
"People are definitely recommending Citibank more than last year, and they are planning to save more there," Varas says.
One challenge for banks may prove to be how they balance their somewhat contradictory efforts to broker in debt as well as encourage savings rates.
"It will be key to see if they can reduce their reliance on debt, because the lending business makes so much money for banks," Varas says. "Internally they may have really difficult conversations if they can boost quarterly earnings by selling more loans, but at the same time what Americans really need to is to save more money. Because if there have been so many defaults, maybe the banks are realizing that it is not as profitable as they thought to encourage people to get way in over their heads."
-- Written by Joe Mont in Boston.
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