TWO YEARS AGO, JENNIFER BLACK, a financial advisor in Mississauga, Ont., made an important decision. She concluded that it would be best for her practice to do more business with a smaller book: in other words, to build deeper relationships with fewer clients.

Black, an advisor with Dedicated Financial Solutions, a financial planning practice that works under the Manulife Securities Inc. banner, was looking for better ways to build loyalty with her top clients. To accomplish her goal, she and her business partner developed a bold game plan: sell off almost one-third of their clients to another up-and-coming advisor, then focus on the remaining top clients.

Reducing the number of clients might seem like a counterproductive plan. But the strategy has proved successful.

“We’ve already gained back all the assets we spun off,” Black says, “and added more from engaging our new, top clients. We are swamped and very busy, but in a very different way than we were two years ago.”

Black changed not only the size of her book but her approach to dealing with her clients.

Now, instead of focusing on offering her clients a handful of mutual funds, Black has focused her business on “holistic” elements. She has made the transition to a fee-based platform, which is more conducive to her emphasis on financial planning. Black holds quarterly client meetings and in-depth discussions of each client’s “vision document” to help them express their life goals.

Black has noticed an increase in client satisfaction since making the change, and an external audit confirms her observation. Over the past two years, Black has taken part in Toronto-based Advisor Impact Inc.‘s client audit program, which helps advisors better understand their relationships with clients.

In the first year, 88% of Black’s clients said they were “satisfied” or “extremely satisfied” with the support they received. This year, however, that number had jumped to 95%.

Black has moved beyond client satisfaction, developing “engaged” clients – clients who feel that they are part of the financial planning process, have a deep sense of loyalty and trust toward their advisor and would readily provide referrals.

Black is part of a small but successful group of advisors who have taken steps to create a book of engaged clients. It is a transition any advisor can make, but it takes time, commitment and patience.

How can you make the transition to having an engaged client practice?

“First, there’s no quick fix because every client is different,” Black says. “But advisors need to get past worrying about the rate of return because engaging clients is about getting to the heart of helping them accomplish what they want in life.”

This notion of working with your clients beyond their investments, says Julie Littlechild, president of Advisor Impact, is central to the concept of client engagement: “There are strong correlations between having a holistic view of client relationships and having engaged clients. This means advisors help their clients focus on the long term, provide strong guidance and are proactive in engaging clients in difficult conversations.”

Advisor Impact, in conjunction with the Investment Industry Association of Canada, recently released Economics of Loyalty, a report based on a study of Canadian investors conducted by Advisor Impact. (Littlechild’s firm conducts similar studies in the U.S. and the U.K.)

The study examined advisors’ relationships with their clients in order to define and measure levels of client engagement.

The Economics of Loyalty surveys revealed a firm link between client engagement and referrals.

This year’s report (the second in Canada) confirms that more than one-third of clients who are “very satisfied” with their advisor have provided a referral.

“It’s an effective way to drive growth,” Littlechild says. “Advisors who build deeper relationships with their clients are able to leverage those relationships to drive referrals.”

The report also notes, however, that only about one in four clients are fully engaged.

Littlechild has concluded that an advisor has developed a deeper and more engaged relationship with his or her client when three basic conditions are met:

– First, the advisor seeks input from the client – for example, through a client-feedback survey – and incorporates that input into his or her financial advice.

– Second, the advisor, whenever possible, works with the client’s entire family unit to encourage multi-generational planning.

– Third, the advisor emphasizes financial planning and estate planning in his or her practice.

The Economics of Loyalty report notes that 70% of engaged clients think it is important to be asked for their input regarding the services provided by their advisors.

Do your detective work

Unfortunately, many advisors fall short of developing engaged clients because those advisors have a “transactional mindset,” says Alan Middleton, executive director of the Schulich Executive Education Centre at York University in Toronto, in which they jump too quickly into trying to make a sale. Says Middleton: “Advisors should practise how to observe, listen carefully and ask questions.”

Middleton suggests that advisors could learn from Sir Arthur Conan Doyle, the famous Scottish author and creator of fictional detective Sherlock Holmes. Trained as an ophthalmologist, Doyle built into the Holmes character the keen ability to solve mysteries by observing and noting subtle clues that others often would miss.

So, instead of launching immediately into a discussion of a product you would like to sell, Middleton suggests, you should pose specific questions to your client to help you get to know him or her on a much deeper level.

“Engaging a client is about adopting the client’s mindset and knowing where they are coming from,” Middleton says. “Without knowing how the client views the world, advisors will be lost without a compass.”

Your role is to gather as much information about each client as possible. That means asking clients probing, open-ended questions, such as:

– “What was the trigger that made you decide to get financial advice?”

– “What is the problem you hope an advisor will help you solve?”

The quality of the data you gather, Middleton adds, will depend on the kind of questions you ask.

A formal client-feedback survey can also be effective in providing this information.

Act on client feedback

Careful listening is an important part of your approach to developing engaged clients. It is also crucially important that you turn client feedback into concrete action.

“If you give clients the tools to express themselves and they know what they are saying is being taken seriously,” says Loni MacDonald, program manager with Toronto-based Accretive Advisor Inc., “they will feel grateful. I see big differences in advisors’ businesses [among advisors] who do this.”

The way in which you proceed in analyzing that client feedback also is important. Whether you choose to analyze the data yourself or ask for help from an outside consultant, MacDonald says, the statistics and comments you gather from your clients will give you a revealing look into what is working and what is not working in your practice.

It is at this point that hard numbers and soft-skill relationship-building begin to converge to help you enhance your client experience and foster loyalty among your clients.

Typically, what makes your clients “satisfied” is contained in your basic day-to-day service offering. For example, you are always quick to return a client’s phone call about his or her portfolio and are open to meeting if the client has any issues he or she wants to address. But, while employing those basic courtesies is part of serving your clients, says Littlechild: “It is not going to transform them into engaged clients.

“Advisors need to take a more foundational and holistic approach to planning,” she continues. “That goes beyond investments to other personalized areas, such as estate planning and tax planning.”

Sara Gilbert, founder of Strategist ( in Montreal, agrees that the days of offering clients a “one size fits all” approach are over. The advisory business has experienced significant changes over the past two decades, she says, in particular, since the bursting of the “tech bubble” in the late 1990s. That significant drop in the capital markets shifted the emphasis among advisors and clients to long-term financial planning from short-term investment returns.

And the resulting reticence toward the market has been exacerbated in the wake of the financial crisis in 2008-09.

So, many veteran advisors have been forced to redraw their game plans, which, thus far, still has resulted in only lukewarm success.

Multi-generational planning

One area in which you might be able to make significant improvement is in multi-generational wealth planning.

“The connection between engagement and multi-generational planning is simply two sides of the same coin,” says Littlechild. “We know that client engagement is highly personal and expands beyond investments.”

Littlechild’s research shows, unequivocally, that engaged clients are more likely to work with advisors who take a broad-based and long-term approach to planning. As well, she notes, clients are likely to work with an advisor who offers a “family-based” approach that is open to discussing financial planning with the entire family unit.

“Clients are blown away by that offering,” Littlechild says, “because they will see that they won’t get that kind of service anywhere else.”

MacDonald agrees that focusing on the family is critical for advisors looking to build long-term, engaged clients. She sees the model of client/advisor relationships and interactions becoming deeper and more comprehensive.

“Advisors should be looking to bring the financial and personal [issues] all together into one group,” MacDonald says, “because each component affects the other. To be able to co-ordinate all these areas helps the advisor show the client a vision for the future – where the client is heading. [Doing so] engages [clients] and makes them feel like family.”

MacDonald’s assertion is confirmed by Littlechild’s research. For example, the Economics of Loyalty reports that engaged clients are more likely than other clients to have a written financial plan and consider it to be an important document in helping them achieve their financial goals.

From a strategic point of view, the ability to “quarterback” your clients’ entire portfolios is a good way for you to express your value to your clients.

In fact, clients who are engaged are more likely to see the services provided by their advisors as being valuable, extending beyond market performance. Littlechild’s research shows that engaged clients use a much broader definition of “value,” particularly during periods of market volatility.

“In an environment in which advisors are competing for new business,” Littlechild says, “client engagement is so important.”

The good news is that client engagement, according to Black, is still an emerging trend. So, it is not too late to set yourself apart by seeking to create engaged clients of your own.

Which brings us back to the central tenet of Black’s engagement thesis: engaging your current clients will help you maximize the business you currently have with them and help you get new business through referrals – because you are trusted and can see the “big picture” for your clients.

It’s a game plan that Black has followed closely: “Anyone can sell you products. It is all the stuff in between that matters now. [Our clients] are engaged in a long-term process instead of just [in] the returns.”IE

In sync with your clients

Engaging your clients is not a simple task nor is it rocket science. It is a broad strategy that requires a sustained effort on your part to bring your clients into the financial decision-making process.

Some key elements of a client-engagement strategy:

Know your clients

Beyond the “know your client” document, it is important to understand clients’ goals and attitudes toward finances fully in order to form deep relationships with clients.

Get feedback

Schedule time in your meetings for clients to ask questions about the way their plan will help them achieve their goals, and to comment on the services you provide. Formal surveys also can be effective. Asking for feedback shows your clients that you are committed to addressing their clients’ specific needs

Focus on planning

An emphasis on long-term planning rather than on returns helps to build trust and loyalty among your clients. Those clients are, in turn, more likely to provide referrals.

Customize your services

Clients want to know how you are going to address their unique needs. Avoid the “one size fits all” approach.

Take a family approach

Widen your focus beyond the individual client. Family issues can open the door to the all-important multi-generational wealth transfer.

Show leadership

Clients will value your role if you continually offer good guidance that directly addresses and alleviates their fears or concerns.

© 2013 Investment Executive. All rights reserved.