Clients’ expectations, needs and desires regarding their relationship with their advisors have changed, and in order to retain clients and gain referrals, advisors must work to engage clients on a deeper level, new research shows.

The research has been released in a whitepaper by wealth management technology firm Univeris, in partnership with Advisor Impact, a company that provides research, training and tools to help financial advisors and accountants maximize productivity. Based on input from 14,000 Canadian investors over the past three years, as well as a poll of 1,000 investors in the United States last year, the research shows that simply satisfying a client is not sufficient to earn referrals.

“We wanted to listen to investment clients and hear their suggestions that will help to maximize the value of the advisor-client relationships,” said Stephen Smith, senior director of marketing at Univeris. “We found that the old notion of having satisfied clients is not enough to drive the needed organic growth through referrals or acquiring more share of wallet.”

According to the research, client satisfaction depends on three key points: the extent to which the advisor has built deep relationships with clients, is proactive in managing clients in turbulent times, and has clearly communicated their value in order to create a marked disconnect between the value of advice and that of market performance.

But the research showed that even though 95% of clients indicated that they were satisfied with their advisors, they had still thought about leaving their advisor, and they were not providing referrals. Referrals only occurred when investors were “engaged” with their advisors, meaning that they completely understood the services their advisor would provide, and their needs were being met, according to Smith.

“They’ve built up that level of the trusted advisor relationship to the point where they understand the service delivery, it’s been defined, it’s been communicated to them, and the advisor is delivering on those expectations,” he explained.

This indicates the importance for advisors to constantly define and clearly communicate what they do for their clients and how they add value to their clients’ lives, according to Julie Littlechild, president of Advisor Impact.

“In good times and in bad advisors need to both define and communicate value,” she said.

Littlechild noted that while investment performance is clearly an important driver of satisfaction, the research showed that many clients have remained satisfied during the market turmoil of the past year.

“We believe that in these cases, the advisor has done a better job of communicating the value that he or she delivers above and beyond investment performance,” she said. “When clients see their advisor as proactive in managing the relationship and when they have a clear plan in place for the future, they tend to see beyond investment performance.”

Clients who are more engaged and aware of the value of advice are less likely to blame their advisor for weak portfolio performance during market downturns, according to Smith.

“Those advisors whose approach was to build an engaged client practice appeared to emerge as finding the key to managing down risk,” he said. “These committed clients understood their advisor’s service delivery, despite investment performance, and did not blame their advisor for this performance.”

The research will be further explored in the upcoming November issue of Investment Executive.

IE