This is the third installment in our Banking on Humans series. You can also read about optimizing your bank branch network and why humans are key to retail banking success.

Banks used to find it easy to help people manage their money. Customers would come to the branch, have a personable conversation with the manager or their advisor, and even enjoy a nice cup of coffee during the process. Done. Different advisors may have given different answers to the same situation, but overall customers seemed happy, and banks made money. So, what has changed? Three things:

1. Regulators demand more
   The combination of better information, more competition, and proactive regulators means that banks need to ensure that the support they give customers is informed, appropriate, and consistent. That makes it more costly to deliver — and the bar is only getting higher.
2. Customers pay less
   Competition and increased transparency have driven down the average fees that customers pay. Some of this reflects lower industry costs, such as investor preference for low-cost tracker or index funds, but some is a straight squeeze on bank margins, increasing cost pressure. Recent rate increases have improved the economics of the business in most geographies, but the smart bet is that this windfall will be short-lived.
3. Customers went digital
   COVID-19 taught customers to get comfortable with digital in every reach of life, including banking. This, coupled with the plethora of new digital providers such as Robinhood, has made customers increasingly comfortable executing their own investments.

It is now much less economic for banks to provide all their customers with full, in-person access to highly trained, highly paid advisors providing a consistent service, and often banks don’t need to. Many customers are happy to manage their money themselves and for those who need guidance, artificial intelligence (AI) appears to offer the perfect solution in the form of robo-advisors, designed to help customers balance their portfolios and manage their wealth and risk, all without the need for expensive, unreliable, humans.

Should banks rush to fire their advisors and replace them with robots? We don’t think so. In all the hype over robo-advisors, ChatGPT, and other AI solutions, it is easy to lose sight of a simple truth: When it comes to important money matters, and especially when it comes to investing, many customers prefer to talk to a person. It does not matter if the computer and human are giving the same advice, powered by the same underlying algorithm, people trust people more. In fact, there is research (including How Humans Judge Machines by César Hidalgo) showing that not only do customers trust people more but, when something goes well, they value help given by people more than support from machines. Conversely, when things go wrong, customers are more forgiving and less critical of humans than machines, as long as they believe the mistake was unintentional, even where the outcome is exactly the same.

This may seem a little unfair on AI, and philosophers and psychologists can argue about why and whether perceptions will ever change. The question for banks is more immediate: how to provide customers with the human support they want to help them manage their money, while ensuring appropriate regulatory standards are met and still managing to turn a profit.

Luckily, just as COVID-19 accelerated customer adoption of digital, it also normalized the use of video for meetings, changing the way customers think about face-to-face meetings. Previously, face to face was synonymous with in-person, typically in the branch. Now, customers can engage in face-to-face interactions that are almost as effective as in-person from the comfort of their own armchairs.

Remote advisors transform the banking experience

Remote advisory has emerged as a game-changer for banks, especially for the affluent client segments. It gives customers who want it access to face-to-face support from highly trained professionals — no matter where the customers live. At the same time, it gives banks better control over the quality of customer interactions, while maintaining a human face to banking. Even better, it allows higher colleague utilization and productivity.

Leading banks have implemented such a remote advisory model at scale and are diversifying their customer engagement strategies to reflect emerging customer demand. Our experience suggests that roughly one third of customers still look for in-person advisory services through brick-and-mortar branches, up to one third are happy to engage exclusively through digital channels, and the final third will adopt a fully remote advisory model, capitalizing on the convenience and specialized expertise provided by such model.

The results can be dramatic, with some banks seeing upwards of 40% of customers choosing to switch to the remote advisory service, while Net Promotor Scores (NPS) improve by up to 20 percentage points. The service has not just delivered for customers — these same banks have seen advisor productivity jump, with both sales and assets under management (AUM) per advisor doubling and the cost-to-service plummeting, while accelerating the use of superior analytics in the network.

Navigating the challenges of remote advisory

Is this too good to be true? You bet. The key qualifier is “for banks that have got it right”. Not all banks have succeeded. Get it right and the prize is huge. Get it wrong and you have simply added another layer of cost to the frontline, while worsening customer experience.

Remote advisory is not a straight replacement for traditional relationship managers, nor does it replace digital — it complements both. Many highly valuable customers still prefer an in-person service and banks would be foolish to push them to remote channels. This means careful targeting, based on remote propensity and potential, and coordination with the traditional network. At the same time, remote advisory is not a typical call-center, created to handle large volumes of relatively mundane requests. Instead, it requires highly skilled professionals providing tailored services to customers.

Plenty of banks have struggled with the challenge, with typical problems including confused strategic intent, poor customer segmentation and targeting, weak talent management, over-focus on costs, ineffective IT/ infrastructure, and poor network coordination. Working with our clients, we apply a five-point plan to address these challenges and deliver remote advisory successfully at scale:

1. Give clarity about remote advisors’ role
   Be very clear what your remote advisors are for as part of your overall strategy. This means clear definitions on what they do and whom they serve and, just as importantly, what they do not do and who they do not serve. Once you have defined this, use that definition to drive every other element of the model. For years, branch network in many banks has stagnated due to a lack of strategic clarity. Don’t make the same mistake with your remote advisors.
2. Focus on the customer
   Whether you are focused on cost or customer experience, the service will only succeed if the target customers find it superior to branch-based alternatives for complex interactions, but less useful than (digital) self-service for simple interactions. The challenge is to develop compelling customer propositions for the different customer segments that seek quality interactions with relationship managers, are happy to engage remotely, and bring sufficient value to justify the service. Second, banks must decide whether this is an “opt-in” service — where customers trade branch access for remote — or whether to offer both.
3. Upskill and manage your talent
   Banking is struggling to attract, develop, and retain talent in customer-facing roles, particularly in Europe. Remote advisory both requires highly trained professionals and offers the opportunity to reinvent the role to make it more attractive, given the potential flexibility around location and timetables. The challenge is to define the model within the constraints of the bank’s policies and labor agreements. At the same time, remote advisors need significant upskilling. We focus on four Es: helping advisors build empathy; empowering advisors to solve customer problems at first point-of-contact; creating expertise across product offerings, services, and customer situations; and providing appropriate enablers (tools) and the training to use them. You need to recognize that many traditional relationship managers will struggle to adapt to the new model. Expect one third of your existing relationship managers to thrive, one third to adapt, and one third to fail in a remote environment.
4. Coordinate customer-facing groups
   Remote advisory relies on seamless integration with the existing physical network. This means having clear rules of engagement and a structured performance management approach that aligns incentives, performance evaluation, and revenue recognition across different customer-facing groups. To put it bluntly, the network must not see remote as a threat or competitor, particularly as the service scales up, or the service will likely fail. This is a case of cooperation, not competition.
5. Have the correct infrastructure and technology in place
   Remote advisory needs state-of-the-art technology both to deliver the service and protect and enhance the bank’s branch. Customers expect the video solution to be effortless, reliable, and secure as being in-person; advisors need professional retro-lighting, high-fidelity microphones and headphones, and appropriate green screens (or workspaces) to create the right ambience. The bank also needs an elegant e-signature solution to avoid compliance-led hassles and productivity tools such as Next Best Action and auto-dialers to drive operational efficiency. The temptation is to muddle through with sub-optimal equipment. Do not be tempted.

Remote advisory has the potential to transform the way traditional retail banks operate, unleashing the power of highly skilled, empathetic advisors to support customers in the moments that matter, wherever and whenever customers need help. Getting it right is not easy, but our five-point plan can help — and the prize is worth it for your customers, your colleagues and, ultimately, your shareholders.

Maybe in the future your customers will choose to deal with machines when it matters most. But as long as people prefer people, it is the quality of your relationship managers and advisors that will give you the competitive edge, and remote advisory makes that scalable. Forget robots — arise, remote advisors.