When it comes to how consumers perceive big banks and their personal financial expectations for the next six to 12 months, two categories emerge: worried and confident.
That's the analysis from Bob O'Meara, vice president of research at Raddon Financial Group. According to the firm's study of consumers' six-month economic expectations, which has been conducted semi-annually for the past 25 years, 45% of all households are expecting the economy to be worse in the next six months. O'Meara asked respondents to indicate the events that may affect their household's personal financial situations in 2009. Twenty-eight percent anticipate reevaluating their financial plans, and 10% expect to delay retirement. With an almost daily round of company layoff news, 24% said they feel their head of household lacks job security.
“The good news from our consumer research study-finally-is that while 45% are expecting the economy to be worse in the next six months, only 21% of consumers expect their personal financial situation to be worse in 2009, and 69% expect their personal situation to be the same or even better,” O'Meara noted. “It is the confident consumer segment that will drive economic growth in 2009.”
O'Meara wanted to dive deeper to analyze the difference between confident and worried consumers. Both groups are defined by two key questions: Do you anticipate your personal financial situation in the next six months to be better or worse? Are you concerned about a job loss in 2009?
Fifty percent of the confident consumers expect that their personal situations will remain the same or improve during the next 12 months and are not concerned about a job loss during this year. Thirty-one percent anticipate the economic downturn will not last longer than 12 months. O'Meara found that the confident group was optimistic about its future in spite of the fact that 27% foresee a further 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 personal situation to be worse in the next six months, and 54% are concerned about the loss of a job for a head of household.
“And, who can blame them? With the unemployment rate [rising] and advice like 'leave the shoes in the store window' spewing from every 24-hour news network, it's surprising we're not seeing more consumers with a pessimistic outlook toward their personal financial situation,” O'Meara said.
Those in the worried segment are also much more likely to delay major purchases, and they too anticipate further deterioration on their 401(k)s and home values, the findings revealed. O'Meara said the task of instilling a sense of well-being in these consumers is not one for financial marketers to undertake. However, this data gives a clear understanding of the messages that are appropriate for both segments in this period.
For credit unions and banks, appealing to both confident and worried consumers hinges on being able to secure a position as a trusted source to help guide them through financial uncertainty, O'Meara offered. Some considerations include the transfer of risk from institutions to individuals, he added. Defined contribution retirement programs versus defined benefit retirement programs and adjustable-rate mortgages versus fixed-rate mortgages are examples.
“Most consumers are not equipped to manage these risks,” O'Meara said. “Opportunities abound for institutions that can provide tools to help consumers better manage risk. Can you assume the role of trusted financial adviser? Values are changing. How are you responding?”
O'Meara said credit unions and banks should think about the message they want to convey to the market. The 28% of consumers who want to reevaluate their financial plan this year is a good starting point. Financial institutions need to assess their capabilities to determine if they can deliver effective financial planning services. He said most consumers don't need a complicated model and are likely looking for basic assistance. By offering things like debt and retirement counseling services and business lending, the message is conveyed that a credit union or bank can be a customer's advocate.
“Don't reduce your marketing budget. Marketing resources tend to be more efficient in a recessionary environment,” O'Meara advised, adding direct marketing and point of contact marketing are strong ways to extend outreach.
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