Get clients engaged

“The couple did what I said, and within five days they had their papers,” Chinniah says. “When you can add that type of value, you go from being the hired help to being a confidant.”

Client satisfaction is no longer enough when it comes to building your business. The clients who are most likely to provide referrals and offer a larger share of wallet are more than satisfied; they are “engaged,” says a new research report commissioned by Toronto-based Univeris Corp.

The research report, entitled Whitepaper: Driving High Levels of Investor Engagement with Financial Advisors in Canada, uses data gathered by Advisor Impact Inc. of Toronto. The report was published this past September.

“Most people indicate they are satisfied with their advisors,” says Stephen Smith, director of marketing with Univeris. “But that doesn’t mean there will be a positive action, in terms of referrals or other profitable consumer behavior.”

Says Julie Littlechild, president of Advisor Impact: “Advisors have so much data thrown at them, they often ask, ‘What now?’ The goal here is to answer that.”

While some advisors might think the words “satisfied” and “engaged” are synonymous, the report makes a critical distinction between them.

“Many advisors would think: ‘If I provide great service, then surely that will lead directly to referrals’,” Littlechild says. But while great service usually leads to satisfaction, it doesn’t necessarily lead to positive action, such as providing referrals.

“We see a great difference between clients who are ‘satisfied’ and clients who are ‘engaged’,” Littlechild continues. “It was the ‘engaged’ clients who were the ones generating referrals, responding to cross-selling and bringing their families into the relationship.”

So, how do you know when a client is engaged? As Littlechild says: “It’s not a point in time at which fireworks go off.”

So, to help answer that question, Advisor Impact has devised a 16-point client index to determine a client’s level of engagement. It is a questionnaire that asks clients to rate 16 “service dimensions” — such as perceived trustworthiness of the advisor, frequency of contact and clarity of statements — in terms of both satisfaction and importance to the client. The gap between the satisfaction level and importance score helps determine that client’s level of engagement.

> Creating Engagement

It is one thing to identify engaged clients, but quite another to create them.

Trust is the most significant prerequisite for client engagement. Of the 16 service factors listed in the Advisor Impact client index, clients surveyed ranked “trust” as the most important — giving it, on average, a score of 4.96 out of 5.

More than the practical component of trust, such as following through on what you promise (“I’ll call you tomorrow”), the kind of trust these clients are looking for is a demonstration of genuine caring for them.

“If an advisor has shown that he or she cares about the client and his or her family beyond their investments, understands their goals and has incorporated that into their plans,” Littlechild says, “that leads to trust.”

Chinniah, who specializes in providing a high level of service to high net-worth clients, says listening is the key to gaining client trust.

Wealthy clients sometimes have difficulty opening up about their lives because they believe most people may be interested in them only for their money. Listening is an important strategy toward overcoming that reticence, Chinniah says. It shows that he has an interest in the client’s life beyond money.

“My first meeting always takes two to three hours,” Chinniah says. In that meeting, he focuses on learning about the client as a person instead of a portfolio.

If a client appears particularly reluctant to open up, Chinniah uses a simple interview technique called DOS (Dangers, Opportunities and Strengths). Using this system, Chinniah asks clients to name their top three fears, the top three market opportunities they would like to pursue and their top three personal strengths.

“The DOS system gets them to articulate their fears and personality,” Chinniah says, “in such a way that they cannot fake responses.”

@page_break@Mark Parlee and Richard Hein-rich, investment advisors with Beaches Financial Team in Toronto, a branch of Mississauga, Ont.-based IPC Securities Corp., also use client meetings as a chance to build trust by getting to the heart of what their clients really care about.

At an initial prospect meeting, Parlee asks the potential client to name the top three burning issues in his or her life. “Communication isn’t a one-way street,” says Parlee. “It’s about discovering what the burning issues on their side of the table are.”

Next, the firm sends a “discovery letter” to the prospect, which summarizes the key goals the client discussed during the meeting. “It reinforces to the prospective client,” Parlee says, “that we were listening.”

If, after receiving the letter, the prospect is interested in working with the Beaches Financial Team, he or she completes what the team calls a “dream journal,” a 20-page questionnaire each client fills out with the guidance of a team member. Going beyond the “know your client” guidelines, the questionnaire asks the client for the details on his or her current financial accounts and portfolio holdings, as well as personal issues such as retirement goals, children and legacies.

From there, the advisor prepares an investment policy statement, which outlines the client’s values toward investing and how the advisor will manage the client’s funds in a way that reflects those values. “If their values are aligned with their money,” Parlee says, “then clients stay invested longer.”

Once clients have told you what’s important to them, adds Chinniah, you have more opportunities to demonstrate your value.

It’s hitting those “value marks” in the eyes of the client that is critical to creating engagement and future profitability, says Littlechild. But the advisor has to ask the right questions. For example, when clients who completed the Advisor Impact index were asked if they wanted to learn more about areas such as tax planning, retirement planning and estate planning from their financial advisors, more than 50% responded “yes” in each category. But if advisors don’t broach these subjects, Littlechild adds, they are missing out on opportunities.

> Talk About Goals, Not Numbers

To keep meetings relevant to clients, Parlee doesn’t make numbers the focus. “In an average, hour-long portfolio-review meeting,” Parlee says, “we talk about portfolio performance for two minutes.” The rest of the time is spent discussing the client’s goals and any aspect of financial planning the client would like to learn about.

The Univeris study confirms that meetings are good opportunities to gather important client information. Clients who responded to the Advisor Impact index scored “plan review meetings” and “performance reporting” as the most important communication activities, scoring them a 3.6 out of 4 on average. While clients prefer 2.6 meetings a year on average, Littlechild says, the quality of meetings is more important than their frequency.

> Communicating Value

It’s not even enough to deliver valuable services, according to Littlechild. Clients become engaged only if you communicate what you are delivering to them.

“There is an important connection between what you deliver and having a clear process in place to communicate,” Littlechild says. Without that communication, clients may not be fully engaged because they don’t understand the value of services they are receiving.

That issue has become particularly important during the recent economic downturn, Littlechild adds; the research found no correlation between client satisfaction and market performance.

Despite a plummeting market, 77% of the clients who completed the index rated their relationship with their advisor a 4.7 out of 5, putting them in the “very satisfied” category. Only 1.1% of those respondents indicated they were “very dissatisfied.”

“That doesn’t happen by accident,” Littlechild says. “It means the advisor has done a good job of communicating his or her value” — which has nothing to do with the markets.

(The client sample shows a higher than usual level of client satisfaction because responses are from clients of the most proactive advisors, who are active in collecting feedback from clients.)

> Service Agreement

Gillian Rivers, a financial advi-sor with Assante Financial Man-agement Ltd. in Mississauga, uses a service agreement to keep clients aware of the services they are receiving and the value she is providing. Such a document outlines the services the client can expect from the advisor. It also specifies what is expected of the client, such as providing up-to-date financial information. Both the advisor and the client sign the agreement.

Using a template provided by Advocis, Rivers created a four-page service agreement she calls the “client/advisor relationship agreement.”

“We altered the terms of the language in the Advocis template to reflect our business,” Rivers says. For example, the document informs clients that they will receive a binder called a “family legacy centre,” which will hold all insurance, income tax and power-of-attorney information. The agreement also specifies that the client and the advisor will have four meetings every year: an annual general meeting, a pre-AGM and two “action” meetings to discuss the plan.

Parlee’s and Heinrich’s service agreement usually suggest a schedule of two meetings and two service calls a year. Their firm also provides four conference calls a year to update clients on market conditions.

Whatever your service and meeting schedule, the point is to outline it clearly in the agreement so your clients know what to expect.

“Servicing agreements provide a good way to look back at what we delivered,” Littlechild says. “One thing lawyers do really well is define the services clients receive. When you get an invoice from a lawyer, it defines every moment that you are in touch. Then you say: ‘That’s why the bill is so high’.”

While financial services dealers will have their own rules regarding the content of service agreements, the Univeris report recommends including the following: the number of meetings a client can expect; the areas of service you provide; your response time to telephone messages and other service policies; the roles and responsibilities of team members; the ways you stay abreast of market information; and expectations you have of your clients, such as keeping you informed of their financial and other situations.

> Maintaining Engagement

Although some advisors believe they get referrals because of their personal connection with a client, Rivers believes her referrals come as a result of the consistent process she uses in dealing with her clients.

“Some people think clients refer them because they simply like them,” Rivers says, “but that would put a lot of pressure on one person. You can stimulate referrals and build a business through a consistent set of processes that a team can run.”

Five years ago, Rivers joined the branch office her father opened in 1956. She has focused on creating a prescribed formula for all of its processes, including a consistent annual calendar of events.

In the spring or fall, Rivers and her team hold an educational event. Following that, clients schedule their pre-AGMs. These meetings give clients a chance to discuss any changes in their “client synopsis,” a snapshot of their financial situation.

“From a plan perspective and compliance perspective,” Rivers says, “we use this meeting to review any changes in their personal or financial life that could affect their plan.”

Next comes the client’s AGM, an hour-long meeting during which advisor and client walk through the nine points of the financial plan. The meeting follows a consistent format: it begins with net worth, so people can see how they are progressing in their long-term plans; from there, the presentation goes through different areas of wealth management, such as retirement savings and cash management, depending on their importance to the client.

Sticking to a consistent process can also spark engagement in clients in financial planning areas they didn’t expect, says Heinrich. For example, a client who walks into the Beaches Financial Team office and asks for only estate planning is still taken through all aspects of the firm’s service, such as tax planning, cash management and risk management.

“Every client goes through our process on every single aspect of financial planning,” Heinrich says. “If it’s not service they were looking for, it’s a shorter conversation.”

Often a client is not aware that he or she needs a particular service until a team member explains the process. “By walking through every aspect of financial planning,” says Parlee, “we [ensure] they are making a choice whether to pursue a service based on sound information.

For example, many clients are unsure about the extent of their workplace health-care coverage.

“We know that this process is helpful to our clients,” Heinrich says, “because they now consult us before making changes to their work health plan.”

So, if a client isn’t asking for risk-management products such as life insurance, at least the firm has covered its bases from an information and compliance perspective by educating the client on what products are out there. Says Parlee: “We are trying to ensure we never have an uncomfortable conversation with a client, in which they say, ‘You could have protected us against a risk with a specific product’.”

> Identifying The Engaged

Advisors often miss out on opportunities with their most engaged clients, says Littlechild, because those clients may not have the largest accounts.

For example, you may have a client with a $1-million account who provides no referrals and shows no interest in increasing his or her level of business with you. You may also have a client with $10,000 in assets who has brought in $50,000 worth of business through referrals or by purchasing additional products such as insurance.

Ken Nolin, a senior executive financial consultant with Investors Group Inc. in Winnipeg, segments his clients using a 10-point weighting system. Categories include revenue, past business invested and referrals generated. This system enables Nolin to identify his engaged clients.

“I provide a higher level of service to the engaged clients,” he says.

His system shows that many clients are interconnected. For example, a $10,000 client may be the grandson of a $10-million client.

“Segmentation is one of the core activities to ensure quality service,” Littlechild says. “The alternative is to deliver the same service to everyone.”

A simple segmentation process looks only at revenue. At the highest level, segmentation considers the real value of the client. The Univeris study recommends a segmentation process that considers: the number of referrals the client has provided in the past 12 months; the potential of growth via cross-selling on products or to multiple generations; and the time required to serve a client vs the value they bring in.

It comes down to spending more time with the most engaged — and profitable — clients.

“The message in the research,” Littlechild says, “is that we have to get back to basics.” IE