When it comes to how consumers perceive big banks and theirpersonal financial expectations for the next six to 12 months, twocategories emerge: worried and confident.
That's the analysis from Bob O'Meara, vice president of research atRaddon Financial Group. According to the firm's study of consumers'six-month economic expectations, which has been conductedsemi-annually for the past 25 years, 45% of all households areexpecting the economy to be worse in the next six months. O'Mearaasked respondents to indicate the events that may affect theirhousehold's personal financial situations in 2009. Twenty-eightpercent anticipate reevaluating their financial plans, and 10%expect to delay retirement. With an almost daily round of companylayoff news, 24% said they feel their head of household lacks jobsecurity.
“The good news from our consumer research study-finally-is thatwhile 45% are expecting the economy to be worse in the next sixmonths, only 21% of consumers expect their personal financialsituation to be worse in 2009, and 69% expect their personalsituation to be the same or even better,” O'Meara noted. “It is theconfident consumer segment that will drive economic growth in2009.”
O'Meara wanted to dive deeper to analyze the difference betweenconfident and worried consumers. Both groups are defined by two keyquestions: Do you anticipate your personal financial situation inthe next six months to be better or worse? Are you concerned abouta job loss in 2009?
Fifty percent of the confident consumers expect that their personalsituations will remain the same or improve during the next 12months and are not concerned about a job loss during this year.Thirty-one percent anticipate the economic downturn will not lastlonger than 12 months. O'Meara found that the confident group wasoptimistic about its future in spite of the fact that 27% foresee afurther deterioration in the value of their 401(k) plans and 21%expect a further decline of home values.
The 45% that fall into the worried category expect their personalsituation to be worse in the next six months, and 54% are concernedabout the loss of a job for a head of household.
“And, who can blame them? With the unemployment rate [rising] andadvice like 'leave the shoes in the store window' spewing fromevery 24-hour news network, it's surprising we're not seeing moreconsumers with a pessimistic outlook toward their personalfinancial situation,” O'Meara said.
Those in the worried segment are also much more likely to delaymajor purchases, and they too anticipate further deterioration ontheir 401(k)s and home values, the findings revealed. O'Meara saidthe task of instilling a sense of well-being in these consumers isnot one for financial marketers to undertake. However, this datagives a clear understanding of the messages that are appropriatefor both segments in this period.
For credit unions and banks, appealing to both confident andworried consumers hinges on being able to secure a position as atrusted source to help guide them through financial uncertainty,O'Meara offered. Some considerations include the transfer of riskfrom institutions to individuals, he added. Defined contributionretirement programs versus defined benefit retirement programs andadjustable-rate mortgages versus fixed-rate mortgages areexamples.
“Most consumers are not equipped to manage these risks,” O'Mearasaid. “Opportunities abound for institutions that can provide toolsto help consumers better manage risk. Can you assume the role oftrusted financial adviser? Values are changing. How are youresponding?”
O'Meara said credit unions and banks should think about the messagethey want to convey to the market. The 28% of consumers who want toreevaluate their financial plan this year is a good starting point.Financial institutions need to assess their capabilities todetermine if they can deliver effective financial planningservices. He said most consumers don't need a complicated model andare likely looking for basic assistance. By offering things likedebt and retirement counseling services and business lending, themessage is conveyed that a credit union or bank can be a customer'sadvocate.
“Don't reduce your marketing budget. Marketing resources tend to bemore efficient in a recessionary environment,” O'Meara advised,adding direct marketing and point of contact marketing are strongways to extend outreach.
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