What keeps clients loyal? I have asked many financial advisors this question, and while individual responses vary, they can be summarized under the umbrella of “more contact.” While it’s hard to argue that “more contact” is a bad thing, in reality it is a very small part of what keeps clients loyal.

In the past several years, as part of its client audit program, Advisor Impact Inc. has gathered feedback from more than 10,000 end-clients. The data have provided a window into what is important to clients, what they expect and what they value. Combine that data with the anecdotal evidence gathered during 12 years of working with advisors, and a new picture of client loyalty emerges: it does not exclude contact — but it does not start with contact.

At its highest level, the model says simply that client loyalty starts with delivering the right offering — the package of products and services — to the right clients. You can have the highest level of client contact in the industry — streamlined, structured and automated — but if that contact is linked to services that do not resonate with your clients nor meet their specific needs, it is time wasted.

Loyalty is as much about defining your ideal client and mapping your offer to his or her needs as it is about the number of meetings and reviews you have. Further, it is not only about defining service levels but also about having the right team in place to deliver on that offer. And, finally, it is about measuring success and creating a feedback loop.

Let’s start with a quantitative basis for this model. Clients are more concerned about whether they have a plan and whether you are managing the relationship proactively than they are about the frequency of contact. Our latest Canadian publication of client data is The Client Intelligence Report, a comprehensive report that was sponsored and delivered by Manulife Investments (click on the link at the end of this article). For this report, Advisor Impact asked 6,300 clients to rate 16 dimensions of service in terms of how important those services are in a relationship with a financial advisor. A “5” was critical and a “1” was not at all important.

As the list to the right shows, clients place the greatest value on things that demonstrate trust, competence and a planning approach. Put another way, provided there are no errors, they are more interested in what you offer (a clear plan that reflects their goals and is managed proactively) than how you offer it (frequency of contact).

When we drill down on frequency of contact, we find that the majority of clients have reasonable expectations, leaving a smaller group of clients who need to have their expectations managed. The graph at the far right shows how often in a 12-month period clients want to meet to review their plans or portfolios, either face to face or by telephone. The average is 2.6 reviews a year.

If we accept that what you offer is critical, both to clients and to your business, then to whom it is offered is equally critical. If there is a disconnect between what you offer and the needs of your target audience, then those clients will not be loyal — not if you call them every week, not if you call them every day.

You can assess if your service plan is on target by asking yourself five potentially difficult questions:

> Question 1. Question What is my strategy on how I want to be positioned among clients and prospects? For example, you may want to position yourself as a “wealth manager.”

> Question 2. What are the products and services associated with delivering on that positioning? You may, for instance, want to offer comprehensive financial planning.

> Question 3. What are the characteristics of clients that need that offer? You may set a minimum asset level and use other “fit factors” — such as investment philosophy — to assess if a client is right for your business.

> Question 4. Given that target and offer, what defines success? Is it working successfully with your clients’ heirs, for example?

> Question 5. Given those success factors, how can you ensure that you are exceeding expectations of what is most important? You may want to conduct an annual survey, for instance.

@page_break@These questions should focus your attention on what you want to do. It is the equivalent of working from a clean slate.

But if you are more concerned about ensuring existing clients are loyal, there are three simple steps to follow.

> Step 1. Understand what is most important to your clients. Define a process that will allow you to gather information about what your clients consider most important in your relationship, not just how you are doing. A client survey is one way, but you can also gather this information at client meetings.

> Step 2. Create a plan to exceed expectations for those aspects of service that are most important to your clients. At this stage, industry averages become little more than interesting benchmarks; what your clients think and feel is the only important consideration for your business. For example, if your clients think your performance on frequency of contact is average but they don’t think frequency of contact is very important, it is not a big worry. If, however, your clients think having an advisor who understands their goals for the future is critical and your performance is average, you have a problem. This is what we refer to as a “satisfaction gap,” the difference between performance and importance.

There are three negative gaps at the industry level: the extent to which investment performance meets client expectations; the extent to which advisors are seen as proactive; and the extent to which clients believe they have a plan in place to meet retirement goals.

All three gaps go to the core of what advisors offer rather than how it is delivered. Note that two of these come from the list of factors that are most important to clients. On average, advisors exceed expectations on delivery of the things that are less important to clients. It may not hurt, but it won’t help.

> Step 3. Measure performance over time. Define a process to measure your success in meeting or exceeding expectations, specifically on aspects of service that are most important to your clients. Again, this might be an annual survey.

You’ll notice that both our model and the list of critical factors for clients include the team. Your offer will not only define the level of contact you will have in place but will also define the structure and skills of the team that you need to have in place. Your strategy comes first and your team, second. And, although we have always known that an effective team can increase efficiency and capacity, the data clearly show that confidence in the team is also a driver of overall satisfaction.

Ensuring client loyalty is more complex than increasing or streamlining client contact. It starts with a clear definition of what you will deliver and to whom, and finishes with a plan to exceed expectations on those aspects of service that are most important and potentially unique to target clients. If you start by increasing client contact, it’s a little like increasing your speed to reach to your destination — without checking the map. You may just get to the wrong place faster. IE

Julie Littlechild is president of Advisor Impact, which offers the client audit, a third-party client assessment survey program for financial advisors. For more information, e-mail jlittlechild@advisorimpact.com.