Do You Really Know Your Clients? Do Your Clients Really Know You?

Perception Gaps Between FAs and Their Clients

A business coach’s research recently reported there are potentially major issues facing many financial advisors today because there is a perception gap between what affluent clients think and what their financial advisors think. Gaps between clients and FAs can create serious problems if left unaddressed.

Gap: Service Deliverables

As the report stated, “there is a strong probability that your clients aren’t aware of the totality of the services you offer -- they still view you as you were when you first started working with them. The result is they don’t know your true capabilities.” This is likely true in general and specifically with regard to critical services such as financial planning. The problem is clients may look elsewhere for services they do not know you provide.
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Let’s first look at the general and discuss how to address this disconnect. It is important to share the breadth of your PROCESS and your Client Service PROMISES, your deliverables. An example of process is:

This is what I call “The Six Core Client Facing Processes.” It’s about creating best of breed financial solutions to illustrate your commitment to providing high client satisfaction by focusing on an end-to-end set of processes that ensures consistent quality service delivery and the highest possible client experience.
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In addition, discuss the specifics of your deliverables, your services, a subset of which is illustrated below:

• Have a discussion with your client (or prospect or COI) to ensure they understand your deliverables, agree they want and need those deliverables, and discuss the value those deliverables from their perspective.  The point here is to show the value you provide for the fees you charge and have the client understand you provide much more than investment management.
  

Gap:  Core Deliverables, Financial Planning

There are certain deliverables that are core to why a client may be doing business with you. We believe financial planning is one of those deliverables and that modern advisory practices steeped in wealth management must be based on high value financial planning services.

In some cases, clients have left advisory practices to hire financial planners because while some practices tout financial planning, planning is not really their focus and more critically, their “financial plan” is not an active roadmap for the whole of the family’s financial affairs. To counter this perception gap:

1. Make sure your financial plan is a real financial plan based on the full breadth and depth of your client’s wants and needs. This is a much deeper discussion but the extent of potential deliverables can be seen below:

• It is also important to stress that the advisor’s value is not really in the financial plan itself. The plan has perhaps a half-life of a year. The new financial plan is like a new car; it’s value drops immediately after it’s driven out of the showroom and declines in value with every ding, a change based on life’s realities, and fairly soon becomes virtually worthless.
• Your value is in helping clients and prospects with the process because too many Americans do not have their financial lives in order because they don’t have their life plans in order. Financial planning is not only about knowing where you are today and where you want to be in an ever changing tomorrow but critically, how you have to behave to get there. Your job is also to describe the behaviors for “success” as your client and you define it and holding the client accountable for their behaviors.
  
• Stress that your approach to financial planning is that it is not a one-time event. Your clients are most likely exposed to many life changes over the months and years you are planning for so your process includes annual “Strategic Alignment Review Sessions” (or Annual Reviews) to realign their plan (and portfolio, if appropriate) with their family’s life changes.
  

The client may technically have a financial plan, but the client’s perception may be that the advisor only knows about investing. This is why we stress that you have a “financial planning based practice, a formal process and on-going reviews to incorporate life’s on-going realities.”

The research done for the aforementioned firm stated, “74% of today’s affluent started their search (for a financial planner) because they didn’t think their current advisor was capable of handling their family’s wealth. This is the #1 reason affluent clients initiate a search for a new advisor. Only 9% began looking for a new advisor because they were unhappy with their current advisor.”

In addition, “previous research asked affluent investors if they had a comprehensive financial plan they were following. In a parallel research project with financial advisors, they also asked if comprehensive financial planning was a core aspect of their practice. Three-quarters of advisors claimed to provide financial planning services, while (only) approximately 1/3 of affluent respondents said they had an actual financial plan they were following.” That is a potentially fatal disconnect. What do your clients think of your financial planning offerings?

Gap:  Relationship

The research identified another serious perception gap regarding the affluent client-financial advisor relationship; another disconnect.

Recent findings on this issue highlights the problem; “28% of affluent clients perceive to have a personal relationship beyond the professional level, compared to 68% of advisors reporting a personal relationship with their affluent clients.  This huge gap regarding the perception of the relationship remains a challenge.”

Interestingly, the affluent say “they want to know their advisor on a personal level.  It’s a fundamental concern of trust.  When clients have a personal relationship with their advisor, they are more likely to follow their advisor’s advice, appreciate the services provided, stimulate positive word-of-mouth-influence, are loyal, and introduce the advisor to business opportunities (prospects).”

In asking advisors if they know nine things about their top clients such as their work, their education, their hobbies, if they know those client’s COIs, I have found advisors anecdotally know perhaps 50% to 60% of that information. This is another sign of a disconnect.

We should also note that clients want to know their advisor on a personal level. Can they answer those same nine things about you? Do they know why you do what you do? Hopefully with the above they do know more about how you do what you do and what you do.

Other Gaps: Disconnects

Additional supportive research[1] also reveals differences in perspectives between advisors and their HNW clients. Some examples include:

• “Oppenheimer Funds’ third annual high-net-worth study, titled The Generations Project[2], revealed some serious disconnects between advisors and their clients. The study found that:
  • 41% of advisors reported that transparency was the most important quality for advisors, while only 23% of millennials clients agreed.
  • 94% of advisors said high-net-worth family clients argue over money, while 64% of clients agreed
  • 58% of advisors cited inheritance and estate planning as flash points for their clients, while only 12% of investors agreed
  • 48% of advisors said clients have conflicts over discretionary spending, but only 20% of clients said the same.”
• “If financial advisors want to act in the best interest of their clients, they first need to know what those interests are, but that’s not necessarily what happens. A new survey from Investing Media Solutions reveals several disconnects between what advisors think are the primary concerns and goals of their clients and what their clients actually believe.”[3] For example,
  • The number one investment priority for 74% of asset managers surveyed — roughly three-quarters are financial advisors; the rest work in insurance, institutional investing or commercial banking — is wealth preservation and risk management, but for their clients it’s growth (a priority for 54% of the affluent investors surveyed).
  • Only 51% of affluent investors said wealth preservation and risk management was their main investing objective.
  • 62% of advisors were most concerned about interest rates while only 29% of investors were, and 46% of advisors were concerned about U.S. economic growth, almost double the percentage of investors.
• Another article[4] reports, “there was almost a total disconnect between what the two groups said. The results imply that most financial advisors have a long way to go before they are able to position themselves as attractive to affluent individuals.”
• The biggest gaps between investor expectations and what they receive relate to fees and performance[5]
  • Clients want fees that are structured to align their interests, are well disclosed and fairly reflect the value they are getting from their investment firms.
  • Responses from clients reveal a 30% gap between importance and execution.
    • Charging fees must reflect the value a customer gets from the relationship
    • Advisors must forthrightly disclose and managing conflicts of interests.
• “while 89% of the financial advisors surveyed said they discuss philanthropy with some of their clients and 71% said they regularly ask clients about their interest in charitable giving, only 55% of high-net-worth individuals say they discuss philanthropy with a professional advisor.”[6]

The point of this paper is to suggest that advisors do not likely know as much as they think they know about their clients and it may be of value to be more open to sharing information about yourself to fully implement the know, like and trust aspects of relationships.

Though there are a number of other disconnects between what clients and their advisors think, “According to The FPA Financial Planning Association in the United States[7], 85% of advisors do not have a formal feedback process. Similar research by Business Health Australia[8] 85% of advisors do not have a formal feedback process.

The reason why not is likely that, up until now it has not been an important process for advisors. The top 15% who do feedback typically earn more than $200,000 more (up to 52% more) than advisors who do not have a formal feedback process.”[9]

Start by learning more about your client’s want and needs as well as their values and interests. Let them know more about you. Begin your feedback process today even if it is an informal process.
 
 
 
David I. Leo
Practice Optimization Coach for Financial Advisors

David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients.
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If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com
 
 


[1] http://www.wealthmanagement.com/high-net-worth/disconnect-between-advisors-hnw-clients

[2] https://www.oppenheimerfunds.com/private-client-groups/interactive/generations-project

[3] https://www.thinkadvisor.com/2017/04/07/what-clients-want-and-what-advisors-think-they-wan/?slreturn=20180601220713

[4] https://www.iris.xyz/marketing/disconnect-between-what-rich-clients-want-vs-what-financial-advisors-say

[5] https://www.cnbc.com/2016/04/04/facing-disconnect-between-investor-wants-advisor-deeds.html

[6] https://philanthropynewsdigest.org/news/advisors-underestimate-wealthy-clients-philanthropic-goals-survey-finds

[7] Source USA FPA Research and Practice Institute study - Future of Practice Management -December 2013

[8] Source Business Health Pty Ltd. 2013 US Advisors Key Value Drivers USA

[9] https://www.advisorpracticemanagement.com/blog/post/feedback-is-critical-to-a-financial-advisor-practice-by-grant-hicks-cim