In the client’s mind, it’s all retail

The next time you’re in the local mall, you might want to pay closer attention to the strategies employed by retailers, which may also be the next big trend in financial services.

Take Wal-Mart for example. The world’s most successful retailer has spun off at least two trends that have entered the investment industry, according to Keith Sjögren, leader of Taddingstone Consulting’s wealth management practice.

Sjögren — speaking on Thursday at the second annual IDA regional dealers conference in Toronto — says the financial services sector needs to recognize that in the consumer’s mind, there is little difference between buying investment services and buying a snow blower. They are willing to pay more, but only for an actual luxury experience.

It is therefore no surprise that discount chain Winners is opening an outlet just down the street from Holt Renfrew in Toronto, as the affluent are shopping at discount stores so they can afford luxury items. Why pay a luxury price on ordinary items?

“We have a group of people who are hunting for extreme value. These are investors who are seeking deep discounts to support their luxury purchases,” “People in the retail business, selling ordinary products for ordinary prices are in for a shock and that translates into the financial services sector as well.”

Discount retailers — such as Wal-Mart and Winners — have enjoyed huge success, which has been mirrored in the banking industry’s higher interest savings account, from firms such as ING and President’s Choice Financial.

“This is taking a retailing concept and applying it to financial services,” says Sjögren. “A lot of investors are using ING Direct instead of cash accounts at brokerage firms.”

This trend was identified by Altamira, which has made a successful move from being a mutual fund manufacturer to a deposit-taker, by developing its own popular high-interest savings account.

“If I save money by going to Winners, or I make more money by going to ING Direct, I can invest or purchase other luxury items,” he says. “I’m saving on one hand and I’m using that to buy luxury items on the other.”

While discount prices remain popular, quality advice is another trend Sjögren has identified. Shoppers and investors alike are seeking expertise in exchange for their money, and are finding it at stores like the Home Depot and Whole Foods, where the staff is trained to answer questions, rather than just stocking the shelves.

Sjögren finds this trend adopted in the investment industry in firms like Phillips, Hager and North, which he says offers “luxury advice” at an ordinary price; and CIBC’s Imperial Service which provides “quality advice at a relatively low price.”

Another trend in the broader retail industry that is being followed by financial firms is the move to big box stores. Shoppers have shown a preference for “destination” outlets, such as Wal-Mart and Home Depot, which are typically located in the suburbs.

Already the industry has witnessed the closure of smaller local bank branches, followed by the opening of suburban “investment super centres,” Sjögren says, offering banking and investment services in a single “destination” outlet.

So it may not be long before TD Waterhouse “superstores” pop up between Home Depot and Old Navy outlets at your nearest big box cluster.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com