Financial advisors say their clients have more confidence in them now than when the financial crisis hit, according to the 2009 Advisor Survey, sponsored by Lévis, Que.-based Desjardins Financial Security in partnership with Investment Executive.
Of the 927 advisors who were asked in the survey whether their clients were more or less confident in them in December 2009 compared with a year earlier, 96% responded that client confidence was higher or the same. The terms “confidence” and “trust” were interchangeable throughout the survey.
Forty-one per cent of advisors said the trust clients had in them increased. Advisors said clients cited: the service or advice they received (29% of respondents); the transparency or open communication advisors used (22%); the fact that advi-sor had gotten the client through the crisis without losing too much money, or made money (18%); and the support they received (12%).
Although these results seem positive for advisors, experts suggest that unless objective measures are employed to gather client feedback, advisors risk misjudging the level of client confidence.
“Unless you have objective feedback from clients, it’s just the advisor’s perception at play,” says Julie Littlechild, president of Toronto-based Advisor Impact Inc. “Assuming client confidence is based on service is a slippery slope.”
One big concern, she says, is that advisors focus only on good service and communication because they think these are the things that build trust. However, Littlechild has found that this isn’t always the case.
According to an August 2009 study Littlechild conducted on behalf of Toronto-based Univeris Corp. , good service and communication are the bare bones for creating satisfied client relationships, but they do not facilitate the trust needed for creating engaged client relationships.
“Engagement” refers to the depth of the relationship between advisor and client and the attachment the client feels toward the advisor. A satisfied client is like a marriage partner who committed on paper, but is not really loyal; an engaged client is truly loyal.
When looking at a list of 21 service dimensions that create engagement, trust came out on top in the study, being ranked 4.96 out of five. When clients ranked the importance of attributes of good service — such as returning calls promptly and dealing with problems quickly — the scores were lower, at 4.5 and 4.67 respectively.
“Strong service is important to clients, but it only gets you a seat at the table; it doesn’t drive engagement,” says Littlechild. “That’s why advisors need to deconstruct the term ‘confidence’ and have that conversation with clients about what builds their trust.”
By breaking confidence down into attributes of service — from the creation of a financial plan to showing up on time, Littlechild says, an advisor can focus on the activities that foster engaged relationships.
But, she adds, like kids who hate going to the dentist, soliciting objective feedback from clients is an experience most advisors would rather avoid. Most advisors would prefer to remain in the dark about what clients are really thinking and simply assume things are just dandy, Littlechild points out: “There’s a fear factor of [clients] being critical.”
With trust being an essential factor in getting a client to cross the bridge from satisfaction to engagement, Littlechild says, advi-sors need to address their fears about soliciting feedback head-on. Advisors should consider conducting client surveys or interviews to obtain direct client feedback.
“Recognizing client opinions and facing this fear is what leads to deeper relationships,” she says. “Those who could have done this in the past year probably have clients for life.”
However, George Hartman, president and CEO of Toronto-based Market Logics Inc., suggests that advisors who maintained high degrees of communication during the crisis are justified in their report in the IE/Desjardins survey of increased client confidence because those advisors proved to clients they could be counted on in good times and bad.
Advisors who also got their clients through the crisis without losing money or with making money were also justified in their response, says Joanne Ferguson, a partner with Toronto-based Advisor Pathways Inc. : “If [clients] did OK through the downturn, then there was this sense of ‘my advisor knows what he or she is doing’.”
However, respondents to the IE/Desjardins survey said many clients did not feel the same about financial institutions: 51% reported client confidence in financial institutions is lower today, with financial scandals (cited by 29% of respondents), media coverage of the markets excluding financial matters and the financial crisis (17%) as the main reasons for their distrust.
@page_break@Although the loss of confidence in financial services firms hasn’t been specifically directed at advi-sors, it casts a shadow over the way clients perceive the plans and advice they are getting.
“Advisors have clients that are coming in with pages of questions regarding their investments,” says Dan Richards, president of Toronto-based Clientinsights.
But advisors should view this skepticism as an opportunity to educate their clients and build their business, says Ferguson.
According to the IE/Desjardins survey, advisors who brought in new business of $500,000 or more in 2009 felt clients trusted them more, with 52% claiming trust had increased. However, only 36% of advisors who brought in $100,000 or less in new business volume during the same period said the same.
Only 4% of advisors said clients were less confident in them today than a year ago. Of that group, 31% said the loss of their clients’ trust was the result of weak overall confidence in financial markets, 26% thought poor performance of investment portfolios was the reason, and 12% said fallen confidence had to do with clients expecting too much from their advisors.
• Littlechild: Profitable client feedback in 20 questions
Julie Littlechild, president of Advisor Impact Inc., describes how advisors can gather feedback from clients that improves service and increases profitability. She spoke with Gavin Adamson, IE:TV producer, at the TMX Broadcast Centre in Toronto. WATCH