In a survey of almost 150 financial services CEOs released today by Tillinghast - Towers Perrin (TTP), distribution was named as the highest priority, ranked number one among all execs, followed closely by increasing competition, ranked number one by banking officials.

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Tillinghast-Towers Perrin

Distribution was the top concern among CEOs of investment management companies (93% ranked it among their top three strategic issues), life insurance companies (selected by 85%) and property/casualty insurance companies (selected by 76%), followed by competition.

The heads of banking institutions, however, ranked competition highest (selected by 75% as one of their top three issues). Distribution came in third (selected by 44%).

"Companies are struggling to find the most effective ways to deliver products and services to customers, and are frequently trying to manage multiple channels and resolve conflicts between them," said Sue Collins, managing principal of TTR.

"The shift away from one dominant distribution channel -- particularly for insurance companies -- is a common trend and presents a significant challenge for most sectors of the financial services industry," she added.

Citigroup was voted best positioned to successfully meet the challenges of the new financial services marketplace, according to a majority of the survey respondents, who cited its size and scale, brand image, large customer base and resources.

However, the banking sector was the only sector that did not select Citigroup as one of the top three companies poised to meet the challenges of the evolving financial services market.

Bank CEOs named Charles Schwab as best positioned, citing its scale, name recognition, low cost and "innovative distribution capabilities." Schwab was also ranked among the top three best positioned financial services companies by investment management and life insurance CEOs.

Other Key Findings

Technology is a big part of the answer to distribution challenges: CEOs in three of the four sectors (investment management, life insurance and property/casualty insurance) agree that improving their use of technology is the best response to their distribution challenges, ranking it first by a wide margin. Banking executives disagreed, noting the best way to "fix" distribution problems is to create new distribution channels and to establish new performance management systems.

Customer Information: All four sectors identified "using customer information to develop more profitable customer relationships" as critical to meeting their distribution challenges. "Past studies have shown that it is less expensive to develop an existing customer relationship than to acquire a new customer," noted Collins, who added that many more financial services companies are focusing attention on collecting pertinent customer information to determine profitability, buying behavior and purchase propensities.

Multiple financial partners: Even as the industry continues to consolidate, consumers are more likely to maintain a number of financial services relationships, than to rely on one provider for all their financial needs, say CEOs of banking, life insurance and property/casualty insurance companies. But investment management executives believe that consumers will consolidate financial services relationships and that the "one-stop financial supermarket" will be in demand.

Hybrid distribution methods to grow: CEOs across all sectors agree that "hybrid" or integrated approaches to customer acquisition and development will grow the fastest, e.g., a "point of service" approach where the consumer is offered a variety of media for connecting with a financial institution (phone, Internet, face to face, etc.).

"Increasingly, the consumer will decide how s/he will interact with financial service providers," said Richard Berry, TTP principal and a co-author of the study. "That will only increase the demand for hybrid distribution approaches. Financial services providers need to create a battle plan to pinpoint and leverage emerging customer requirements," he concluded. "Those who don't may be left in the cold." 

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