Client recommendations are often touted as a major way in which banks win clients, so results of an Asia study might trouble some industry practitioners.

Private bankers often tell us that new clients are sent by word-of-mouth recommendations from other customers. But new survey evidence might suggest that such client advocacy isn’t as potent as it could be.

A study by East and Partners, the research firm, based on interviews with 941 chief financial officers at organisations in Asia, found that most transaction banking customers do not advocate their incumbent providers across their business networks, even if they are generally pleased with their services.

The average advocacy score for primary transaction banking providers in Asia stands at 6.48 (on a 0-10 scale, with 0= not at all likely to recommend and 10= extremely likely to recommend). In other words, customer advocacy can be described as mediocre at best, the study said. 

“The link between customer satisfaction and advocacy seems to be disconnected - broken,” Sangiita Yoong, East and Partners analyst, said. “Passive customers should be a concern for the financial institutions as indifference is often tied to loyalty (or lack thereof). And, at a time when [the] propensity to change a primary transaction bank is the highest in a decade, banks cannot afford to be complacent,” Yoong continued. 

While the study is not entirely focused around areas such as wealth management, the findings suggest that confidence in word-of-mouth recommendations as a major source of new clients may be misplaced, and that banks' marketing strategies, brand-building ideas and approaches to finding clients need to be re-thought.

The study found that the large corporates in the region are more likely to recommend their secondary transaction banks to their colleagues or business associates, but less willing to do so for their primary providers. This may well be driven in part by the “freshness” of the secondary relationship and secondary providers are often seen to be “working harder” to gain additional wallet share from the customer, the research report said.

International banks dominate rankings for advocacy with Standard Chartered at the top (7.49), followed by Deutsche (7.11), Citigroup (7.02), JP Morgan (7.00) and HSBC (6.93). By contrast, regional banks including DBS, CIMB and ANZ have lower levels of advocacy in spite of having relatively high levels of customer satisfaction.

“By moving customers into deeper and more meaningful relationships at the advocacy level, financial institutions can accelerate organic growth. We know corporates in Asia prefer to rely on word of mouth and referrals as their critical source of advice, as compared with press, journal or even their incumbent bankers” said Yoong.