IN THESE TIMES OF VOLATILE AND uncertain markets and unsettled investors, how does an investment advisor build the kind of relationship that will foster client trust, confidence and loyalty?
Frequent discussions with clients are crucial. But it is not enough to engage in conventional talks, such as the current state of market conditions, the status of recent investment decisions, portfolio asset allocation and risk, and the client’s financial objectives. These topics are unquestionably important. However, they often are not sufficiently comprehensive enough to establish the desired level of trust and confidence.
Advisors and their firms sometimes fail to understand that a seismic shift has occurred in clients’ service expectations – in the financial services sector and elsewhere. Clients are demanding a higher level of service and engagement. They have less patience with bad service, and insist on unique service. Consumers also are putting a premium on trusted relationships.
In a recent speech at the University of Toronto’s Rotman School of Management, Howard Grosfield, president of Amex Canada Inc., said the attitude of today’s consumer – read: investor – has changed. Consumers have become “more price-conscious, even more value-conscious. They prize quality, trust and long-term relationships.”
Advisors and their firms must respond strategically, engaging their clients to build deeper relationships. Stronger client engagement makes good sense for investors confronted with unprecedented, difficult conditions in capital markets, repetitive portfolio losses and an uncertain economic and financial outlook.
Moreover, client engagement is critical in the context of sweeping demographic changes. A higher proportion of professional women in the workforce, women living longer than men and marital breakdown have resulted in women accumulating significant financial assets. Further, Gen Xers and Yers are beginning to make important portfolio decisions, reflecting growing earnings and assets, as well as intergenerational transfers of wealth. Surveys show that women and younger people place a premium on quality products and advice and on trusted relationships.
At the same time, a virtual social revolution has accompanied increased client demands. According to Grosfield, social media and technology have intersected “to enable every customer, brother, friend and even grandmother to be a journalist, critic, publisher, trip advisor, blogger.”
Everyone has a potential megaphone. Both engaged and dissatisfied clients now have the means to convey praise and condemnation to a wide circle of relatives, friends and acquaintances. The good news: effective engagement makes it possible to get more thumbs-up, thereby obtaining client referrals to build your book (which is especially important now that you can’t rely on asset appreciation to boost client assets and earnings). But surveys make it clear that simply satisfying clients is not enough to generate referrals. A “just good enough” strategy isn’t good enough; relying on it runs the risk of losing clients.
The question for you, as an advisor, is: what tactics and techniques build a deep and trusting client relationship? Client engagement has become the key strategic focus in the U. S. wealth-management business, and advisors and firms take a multi-faceted approach. AccretiveAdvisor. com has done a lot of work in this area, and some of its recommendations include:
You need to interact more frequently with your clients, conducting more formal portfolio or suitability reviews (say, within a year); communicate often to help your clients manage the ups and downs of the market; and define and monitor your clients’ financial goals.
You need to improve your clients’ knowledge of the fundamentals of the investing process to convey a better understanding of recommended investment decisions. The education process should be customized for each client, using the firm’s website, inhouse seminars and written materials.
You should develop a clear financial plan to help each of your clients understand portfolio decisions and acquire a sense of control over the process. Plans may range from an informal arrangement to a comprehensive financial and estate strategy touching on all aspects of a client’s life.
You need to change the nature of the conversation. It not only should embrace your client’s financial health, but also relate the investment process to the client’s lifestyle objectives.
Your clients should be asked for advice and input to improve the existing client/advisor relationship.
Protracted difficult market conditions and dramatic demographic change have raised clients’ expectations.
Successful advisors, supported by their firms, will respond to these demands through intensified client engagement to build trusted and lasting relationships. Success also will encourage increased client participation in the financial markets.
Ian Russell is president and CEO of the Investment Industry Association of Canada.
© 2012 Investment Executive. All rights reserved.