Customer intention to adopt a fee‐based advisory model

Abstract

Purpose-The paper aims to identify which factors determine (German) retail banking customers' intention to adopt a new remuneration system for financial advice. The new system is a pay-per-use advisory model that supersedes existing commission-based advisory approaches. Design/methodology/approach-The paper develops and tests a comprehensive conceptual framework that includes perceived innovation characteristics, relationship quality, and socio-demographic and psychographic variables to explain adoption intentions of the new remuneration system. The data come from a survey among clients of a large German retail bank. Findings-Perceived innovation characteristics (i.e. relative advantage) largely determine the intention to adopt the fee-based advisory model. Consumer and relationship quality variables do not directly impact adoption intentions, but have an indirect effect through influencing perceived innovation characteristics and moderating their relative importance. Relationship quality indicators, such as satisfaction with the current service and trust in the bank or its employees, do not impact customers' intentions to switch to the new remuneration system. Research limitations/implications-The paper describes a (case) study using data from a large German retail bank. Future research may investigate the findings' (international) generalizability using different datasets and also assess additional drivers of customers' intentions to adopt a fee-based advisory model. Practical implications-The results suggest that banks should always explain the relative advantage of financial service innovations to their clients, as existing satisfaction and trust levels are not sufficient to ensure adoption. Originality/value-This is the first paper examining the adoption of a new remuneration system for financial advice in the retail banking industry. By assessing a variety of variables the authors increase understanding of why customers adopt or reject such complex and difficult to evaluate service innovations.

Borrower attitudes, lender attitudes and agricultural lending in rural China

“…Dimitriadis et al (2011) have shown that trust factors are also a major segmenting consideration when customers consider alternative banking channels (internet vs phone banking). The application of psychographics has been applied in numerous recent studies of the lender-borrower relationship including Machauer and Morgner (2001) who use the segmentation approach to cluster around specific needs of bank customers; Kaynak and Harcar (2005) who use attitudinal approaches to show preferences by bank customers for local banks vs national banks; Milner and Rosenstreich (2013) who use psychographics to investigate use of financial services by baby-boomers; Foscht et al (2010) who use demographics and psychographics to investigate drivers of satisfaction for credit vs debit card use; and Hoffmann et al (2012)…”

Relationships between advisor characteristics and consumer perceptions

“…Of course, there might be reasons other than portfolio diversification that explain why advised customers obtain lower returns. The impact of advisors on customers’ investments has also been discussed from the perspective of price models (Hoffmann et al , 2012). As mentioned in “Introduction”, the practice of financial advisory services also implies a meeting between a buyer and a seller.…”

“…The service is marketed as “advice”, and the seller is called an “advisor”[2]. Hoffmann et al (2012) explored consumer willingness to adapt to a new remuneration system that is fee based instead of the commission‐based system used in Germany. They found no evidence that relational factors directly impact adaptation intentions.…”

Research on financial services innovations

“…Seven studies examined the effect of adoption and use of various forms of smart cards such as credit cards and debit cards (e.g. Plouffe et al , 2000; Worthington et al , 2007), new payment technologies such as debit and credit cards, fee-based advisory systems (Hoffmann et al , 2012), mobile payment systems (Arvidsson, 2014), and Islamic home financing (Amin et al , 2013). From the remaining studies ( n =61), four studies examined adoption of ATMs and the other 57 studies focussed on various forms of banking – phone, electronic, internet, or mobile banking.…”