Why Is My Focus on New Levels of Client Service?

​It’s about differentiation!

There are a number of ways Financial Advisors can attempt to differentiate themselves.

• Portfolio performance
• Products
• Pricing
• Service

Portfolio Performance

Suggesting that investment management is a unique skill or offers differentiation makes relatively little sense. Daniel Kahneman, behavioral economist, 2002 Nobel Memorial Prize in Economic Sciences reports:

• The evidence for more than fifty years of research is conclusive[1]
  • For a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker
  • Typically, at least two out of every three mutual funds do not achieve their own benchmark in any given year
• Over the last 15 years, 92.2% of large-cap funds lagged a simple S&P 500 index fund[2]
  • Mid-cap funds lagged their benchmarks by 95.4%
  • Small-cap funds lagged their benchmarks by 93.2%
• The odds you’ll do better than an index fund are close to 1 out of 20 when picking an actively managed domestic equity mutual fund... Market Watch, May 2017[3]
• A study of thousands of mutual-fund managers has found that the key to success isn't beating the market -- only a tiny minority can do that over multiple years.[4]

Products

Virtually all investment products are commonly available. Differentiation based on unique investment product offerings cannot not a winning strategy.

Pricing

As a differentiating strategy, pricing is usually a very questionable approach that may work at best as a tactic for a short amount of time. There is always someone willing to accept a lower price. Lower and lower pricing will create an unprofitable business.

Conclusion

• If you can’t be unique in delivering better performance, and you can’t be unique in delivering unique products and lower prices are a questionable strategy, you must be unique somewhere else.
• Uniqueness must be created by the processes by which you operate your business and the services you deliver to your clients. Our focus is creating a “signature client experience” based on:
  • The Six Core Client Facing Processes that shows how you go about “ensuring” you address the comprehensive needs of your clients and provide consistency in how you work with them.
  • A written “Client Service Promise” that conveys the deliverables you commit to delivering to your clients and validating their value to them.

[1] Thinking Fast and Slow’ by Daniel Kahneman

[2] https://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24

[3] Ibid.

[4] https://www.forbes.com/sites/danielfisher/2014/08/07/winning-mutual-fund-managers-beat-the-competition-not-the-market/#e3fbca16fafd

David I. Leo
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.
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 @ [email protected]. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com