Supplementary pension insurance and building savings continue to be attractive to bank clients. Some 43% of respondents have pension savings. Half seek the advice of someone close about where to place their savings. Only 35% of clients have all their financial products with one bank – this according to the EY Consumer Banking Survey 2018.
Czech bank clients allocate far more of their disposable income to pension funds (43%) than clients in other countries in the region (22%) in which the survey was conducted (Czech Republic, Slovakia, Austria, Hungary, Slovenia, Croatia and Serbia). Moreover, the number of building society clients is higher. “This is mainly due to the annual contribution from the state and, for pension funds, the possibility of a tax deduction in the income tax return, similarly to life insurance. In the long run, these financial products seems to be more promising for long-term regular savings,” says Pavel Riegger, EY Head of Financial Services in Central Europe.
Supplementary pension insurance is most widely used by respondents aged 35 to 44 (53%), as is the case with building savings (43%), while the regional average is 25% and 23%, respectively. This trend goes hand in hand with the fact that thirty-five-year-olds have established their careers and are starting to settle down and start families.
Accounts at two banks is no exception
Some 39% of respondents use two banking institutions to manage their personal finances and do not work exclusively with their primary bank. Only 35% of those surveyed rely on one bank. “Clients make extensive use of free-of-charge account management at multiple banks and are no longer dependent on only one financial institution. The easier migration process from one banking service provider to another is another reason for opening multiple accounts. As a rule, the secondary bank is used to take out a loan, deposit savings or take out an insurance policy,” says Riegger, adding: “The bank with which the client has the largest account turnover should be able to offer the best products. With information on payment history and account movements, the bank has the opportunity to work to keep clients and maintain their loyalty.”
Every second person seeks advice on the choice of a financial product
When choosing financial products, 52% of clients seek advice on the best solution for them, whereas only 44% of those surveyed abroad seek advice on where to put their money. A more noticeable difference exists in personal finance decisions among clients aged 25 to 34. While 51% of clients abroad make the decision on their own, in the Czech Republic only 38% do, with the rest seeking advice from someone else about where to put their money.
“It’s understandable that the younger generation consults with parents, friends, a personal banker or financial advisor about the choice of an account. At a time when their student accounts are closed, they’re starting to generate regular income from their first job and they’re becoming independent from their parents, they need to decide what banking products are relevant for them and have potential for the future,” explains Riegger, adding: “Banks have a golden opportunity to work with the data they already have about their clients and to predict their future behaviour. Banking products should now take into account not only technological progress, but also the development of banking applications in line with banking regulations just coming into force.”
Robots are already helping with investment
Financial institutions are paying increasing attention to the younger population in an effort to attract them not only to routine financial products like an account or a loan, but also to wealth and investment management products. An example of one such product is Robo-advisory, which while not yet widespread in the Czech Republic is very popular elsewhere. Over 60% of people aged 18 to 34 are considering investing money with this product. Robo-advisory is an online platform providing advisory in the area of passive investment based on automated asset allocation algorithms and real-time portfolio rebalancing.
“It is precisely the replacement of human personnel by “robotic” labour that brings with it a number of advantages that are already beginning to be enjoyed by the biggest players on the Czech market. Most importantly, it reduces the operational costs of portfolio management, as well as significantly simplifying the process of registering clients for a platform that they can manage online from the comfort of their home in a matter of minutes,” says Riegger. Global statistics confirm the growing popularity of passive investment – between 2011 and 2016, the market share of passive investment grew by 50%, and it is expected to more than double (compared to 2011) by 2020.
16th October 2023
8th November 2023
30th January 2024