Reason #27 To Get Client Feedback – Your Clients Don't Like "Fee-Based”

Advisors who don't seek client feedback don't know what their clients want, they know what the advisor thinks they should want.

We all know that fiduciary is better than broker, and so naturally our clients would give us referrals because we are fee-based and not commission-based, right? Of course. And that's why it's a great idea to attract clients by talking about how we charge fees.

Well, that makes a lot of sense to most of us because we tend to talk about our marketing with other people in the industry and not with our clients and prospective clients. As it turns out, clients don't like fees and they don't like to be reminded of those fees. So, when Sullivan and Northstar surveyed investors on their reactions to different words we use in our marketing, for the 2012 update in their "Rebuilding Investor Trust" series, they found that 64% of respondents had a negative reaction to the phrase "fee-based."

Since fiduciary is clearly better for clients, you might also be surprised to learn that in a survey done last year by Cerulli Associates, about 47% of 7800 households surveyed preferred paying commissions compared with 27% that would rather pay a fee based on assets.

Of course, if you had asked your client advisory board to evaluate your marketing you probably would have heard about this already. Who better than your best clients to help you understand the most important messages to communicate in your marketing? This is the group with the clearest idea of what is most valuable about what you do, and their language for describing it probably differs from yours. It is possible that your clients consider the fact that you are "fee-based" to be one of the more important things that distinguish you from other advisors, but I suspect they will talk more about what you do for them rather than how they pay you.

One of the biggest mistakes we make in marketing our practices is to dream up what we will promote and what we will emphasize without input of the people we are hoping to attract. Engage your clients in an ongoing conversation about your value, and you will find you have a much clearer idea of what to say to attract more clients like them. And you can work together to develop what they can say to other people to get you referrals.

Morningstar Gets Most Of It Wrong – An Illustration Of The Hazards Of Writing Your Own Survey

Last week, Morningstar Advisor ran an article reviewing a survey they recently did with 980 investors and discussing some of the conclusions. The article provides a great illustration of the mistakes you can make surveying clients, with examples of the two most common errors advisors make when writing their own.

The article reviews respondents’ answers to the question of what is most important to them about a financial plan. The sample size was relevant, the selection of survey participants seems reasonable, and the numbers are clear. These facts, in conjunction with the fact that it was Morningstar sponsoring the survey, make the first obvious mistake surprising. The author disregards the data and presents the conclusions he wants to be true. One example is the first comment about the relative ranking of Quality of the Systems/Reporting: “Although this is not a highly ranked item, it is important nonetheless.”  Let me reword that: The clients did not think this was so important, but they should have. Even more dramatic is the discussion of the response to Stability and Quality of the Firm: “That could be interpreted to mean that clients value advice they get regardless of the stability and quality of the firm. However, I believe that clients want to do business with stable, high-quality firms…” My own inclination is to believe that clients place some importance on the stability and quality of the firm that provides them advice; but it is amateurish to argue against your own data when presenting survey results.

Most advisors I see are not so shortsighted as to argue against their clients’ responses. The second mistake of this survey is the one I see most commonly – poorly worded questions. The survey purports to find out what clients value most about a financial plan. However, there are essentially no questions about a plan. All the questions relate to investment management or the firm that provides it. Many advisors, when drafting their own surveys, word their questions in a way that reflects what they believe the answers should be. They inadvertently reflect their assumptions and biases in the questions themselves, skewing the outcomes and providing misleading conclusions. The creator of the survey clearly has an investment management orientation. If he does any actual financial planning for clients, he does not take it very seriously. Consequently, the results of the survey are of no real value to a practitioner who is interested in what clients consider important about financial planning. Beyond the choices that the clients can make to answer this question, there is the issue of the nature of the question: Should this be a multiple choice question without an “other” category, or should there be an additional short answer question to pick up responses not anticipated by the author? It is the unexpected answers that actually provide the most value.

Obtaining client feedback is the foundation of improving your service, increasing client loyalty, and generating referrals. Surveying is a science and there is a lot of value that comes from retaining a professional’s guidance. Firms like Advisor Impact can deliver this expertise at a very reasonable cost. If you are sincerely interested in finding out what's important to your clients and using it to improve the experience they have of your firm, an investment in an experts help will pay itself back many times over.

The Client Feedback Loop

Asking is good. Telling people about it is better.

Gathering client feedback increases loyalty. So when you gather feedback, make sure your clients know you are asking for it. You can even get some benefits from letting your prospects know.

When you do a client survey, all your clients will know about that. If you assemble a client advisory board, you can benefit from promoting that fact. Many advisors have told me that their clients and prospects are impressed when they hear about the advisory board.

Acting on feedback will push your clients closer to being engaged. The first step is to publish the results of the feedback you received. I am not recommending you actually distribute the full report of the survey – for many financial professionals that's probably against compliance regulations anyway. You can however, promote selected results. "When surveyed, our clients tell us that we consistently respond to their questions faster than they expect."

You might consider publishing a surprising result as well. "On our recent survey, you collectively gave our company newsletter a three on a scale of five. We will be looking into how we can improve it."

Include some of the results in your marketing. "We provide excellent customer service" will not differentiate you from any other advisor. Saying "when surveyed, our clients indicate that 85% of phone calls are returned within one business day" can.

Similarly, promote feedback from your client advisory board. Since only a few select clients can participate in the board at any one time, you may wish to have a communication plan in place to publicize the feedback. You can include a description of the issues discussed at the board in your company newsletters, e-mails, or posts to your website.

Indicate what you plan to do in response to the board's recommendations. Even more important, publicize the changes you make once they are in place. Changes to your office procedures, how you interact with clients, your marketing, or client events organized based on the request of the advisory board are all powerful ways to communicate that you are listening and willing to make changes to improve your clients’ experience.

The study Anatomy Of A Referral revealed that 74% of engaged clients report that they were asked for feedback, and 72% believed their feedback was important to the advisor. Communicate the feedback you received, what actions you took in response to them, and you can help get more of your clients to that coveted engaged status.



the conversation is the relationship

The number of referrals financial advisors receive from clients is directly related to how often they meet with clients and what they discuss besides their portfolio when they do.

David Whyte, in works like his book The Three Marriages, makes a point about successful relationships. Two people talking about what they hope for, expect, and accomplish together are not having a conversation about their relationship, the conversation is the relationship.

So it is with financial advisors, according to the article "Secrets of Referrals" in Financial Planning magazine this month by Julie Littlechild. The article describes the conclusions of her soon to be released study Anatomy of a Referral.

Her research shows that the kind of communication an advisor has with clients has a significant influence on whether those clients become "engaged.” In her prior research, she established that engaged clients provide practically all an advisor’s referrals.

"Engaged clients have a deep relationship with their advisor" she writes. That relationship grows out of keeping clients focused and on track toward their goals, providing leadership, and soliciting client feedback on the kind of experience they want.  So, it is enormously important to discuss a broad range of clients concerns during meetings taking a long view.  And an objective process of obtaining systematic feedback, including surveys and client advisory boards, is a critical component of your client service plan.

Communication of the right type and frequency is, in large part, the relationship. And maintaining that relationship is the most direct path to engaged clients and more referrals.



Marketing inbreeding

Last week I attended FPA Denver 2010. I attended as many practice management workshops as I could that covered topics of financial advisor marketing, value propositions, and client communications. I reviewed the presentation notes of the ones I could not attend. These were all workshops presented by people recognized as national experts in marketing and client relations for financial advisors. And there was a lot of good solid advice in those programs.

Most of them pointed out the importance of defining your value proposition and understanding your strategic differentiation. What I found alarming was the most also made a fundamental and classic mistake. They recommended developing all these on your own!

The biggest single problem with financial advisor marketing is the inbreeding of ideas. We come up with our marketing plans and campaigns on our own, based on anecdotal and subjective information gathered casually from clients in meetings over the years, we rarely test them with clients and prospects, have no system for objectively gathering client perceptions. The people we want most to communicate with, the people we are counting on to have an emotional reaction to what we have to say, are generally left totally out of the process.

Our marketing messages need to be compelling, and must resonate with our target clients and prospects. That requires the guidance and feedback from members of that tribe. Only they can educate you on what is really important to them and how they describe it. In the advisor marketing that I see, anything that may be important to clients is almost always described in our terms. It is no surprise that so many prospects fail to connect with it.

If you do your own marketing, engage your clients. Ask them, in a systematic and objective way, what they value most about their relationship with you and about the services you provide – in their words. If you hire marketing consultants, challenge any strategy that is not based on client feedback. Give your clients a leadership role in marketing your practice, and you will find that it is much more effective.