As a financial advisor you can’t always control investment performance, but you can control the client experience. These three tips may just help keep your relationships off the rocks.
Why do investors break up with financial advisors?
Advice is a relationship business. Like any relationship it’s important to understand what each partner needs. Our recent survey of individual investors offers a view into some of the key reasons why clients leave their advisor for someone else.
Control what you can control.
Our survey included 750 investors in the U.S., including 223 who have left a financial advisor. As you would expect, investment performance was their top reason for moving on. But that was the answer for only 39% of investors.1
Every advisor knows there’s only so much you can do to deliver investment performance, but six in ten investors tell us the issues that drove them away were all within the control of their advisor.
1) Remember, your client is the sensitive one in the relationship.
Beyond performance, investors told us my advisor “didn’t listen to my needs,” “didn’t understand my goals,” or “had different views on investing than I did.” What it really comes down to is communication. It’s important to remember that you may have a clear and logical approach to client portfolios, but they may have more emotional connections to their money – and this can be a big blind spot.
We were surprised to see that only one in four investors believed they could do better if they avoided emotional decisions. One strategy for meeting this challenge is to reframe investment discussions to center on client goals. Often client review meetings focus on how the portfolio performed over the past six or twelve months. Of course it’s important to have those absolute numbers in hand, but it’s equally important to present the results in terms of how clients are doing toward reaching their long-term goals.
It’s even important to use it as an opportunity to double check that those goals haven’t changed since your last meeting. In the U.S. we found that 51% of individuals say they have no clear financial goals and 63% say they have no financial plan. Life is complicated, and it’s easy for clients to lose sight of what they’re trying to accomplish.
2) Recognize that men and women are different.
We noticed a distinct difference for the reasons women gave for leaving their advisor and the reasons men gave. Among the group we surveyed, women were more likely to say “My advisor didn’t communicate with me frequently enough.” This was followed only by “My advisor couldn’t explain their fee.” On the other hand, men were more focused on a difference of opinion with their advisor, saying “We didn’t share the same investment view” or “My advisor didn’t listen to my needs.” These nuggets may provide some food for thought in how you work with male and female clients. But regardless of which clients cited which reasons, the real lesson is that every individual, man or woman, is different and it’s important to take the time to get to know what matters most to them.
This can be as simple as informing clients about your own process and communications preferences, but also letting them know that you are flexible. For example, it may be helpful to inform a prospect or new client: “I usually try to check in with my clients in person twice a year and communicate any new developments via e-mail.” Or it may make sense to inform them that you are contrarian in your investment views, so will plan on “…taking money off the table when investments are up and adding to investments when they are down.”
The next step is the important one. Simply asking “Does this work for you?” can help you identify potential conflicts and address them before they become a problem. It’s an opportunity to get real-time feedback that will allow you to adjust your style to accommodate theirs. It’s a simple, but arguably essential, touch that shows you care, and are willing to put their needs first.
3) Realize that your advice is truly valued.
At a time when clients are increasingly focused on fees, it’s important to communicate that there is a difference between a price of your service and its value to your client. More than seven in ten of the individuals in our survey told us they believe financial advice is worth the fee, and even more said they believe investors working with a professional advisor are more likely to achieve their goals. This is great news for you as an advisor.
Taking the time to get to know what really matters to clients can help you increase the value of your advice. One case in point: We found that three-quarters of investors in the U.S. say they want to invest in companies that reflect their personal values. Asking about this could lead to a discussion about their interest in various socially responsible investments or environmental, social and governance (ESG) strategies.
We find that only 57% of investors say their advisor has ever spoken to them about this (ESG) investment approach. Simple questions that help you get to know your client beyond their risk profile and retirement date can help you impress the added value clients get from the fees they pay for your services.
Pick the role you play with clients.
In our last survey of financial advisors, 95% of investment professionals told us that it’s important to be able to demonstrate value beyond asset allocation to their clients. Sometimes this means taking the role of therapist and holding hands with clients through difficult decisions. Sometimes it’s about taking the role of an investment pragmatist and finding investments that could solve the big challenges clients face.2 Sometimes it means taking on the role of marketing strategist and tailoring your service to the unique needs of individual clients. Just like any relationship it’s important to take on the role your partner needs, just when they need it most.
More information on markets and portfolio construction is available on durableportfolios.com.
1 Natixis Global Asset Management, Global Survey of Institutional Investors conducted by CoreData Research, October 2015. Survey included 660 institutional investors in 29 countries.
2 Natixis Global Asset Management, Global Survey of Financial Advisors conducted by CoreData Research, June-July 2014. Survey included 1,800 financial advisors in 10 countries. Natixis Global Asset Management, Global Survey of Individual Investors conducted by CoreData Research, May 2014. Survey included 5,950 investors in 14 countries.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
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