Finding a personal connection is far less important in the decision-making process for prospective clients than advisors tend to think, according to a recent study by Toronto-based Upside Consulting Group Inc.
The study, titled Closing the Gap: Aligning Client and Advisor Needs to Grow the Wealth Management Firm, found that while 94% of surveyed advisors believe a personal connection is a key reason as to why clients chose to work with them only 66% of clients agreed.
“That’s the big sort of wake-up call for advisors,” says Amelia Young, principle with Upside Consulting. “Clients, particularly post-financial crisis, are just that much more skeptical and getting warm and fuzzy with a person is not enough.”
Upside Consulting conducted the study along with Atherton Consulting Group LLC, headquartered in San Francisco. The study’s results were collected through online surveys completed between September and October 2012 by Canadian and American advisors and clients who had chosen an advisor within the last five years. The study had a total of 250 respondents.
Advisors and clients can’t even agree on what makes a personal connection work, according to the study. For example, over 85% of advisors ranked things such as demonstrating empathy and sharing personal stories as important aspects of forming a personal connection with a prospective client. Yet individuals evaluating potential advisors placed far less importance on those attributes (52% and seven per cent, respectively). Instead, 87% of surveyed clients said an advisor’s listening skills were far more important to developing a personal connection.
Rather than a personal connection, the study found that when it comes to making the final decision about whether to work with an advisor or not clients look for more tangible evidence. For instance, clients were more impressed with advisors who were able to demonstrate their ability to manage the clients’ financial affairs, such as through performance records and client records. Clients also appreciated advisors who could communicate investment advice in a way that was easy for clients to understand.
As one respondent put it, “I don’t want therapy from my advisor. I do want attentive, interested and tailored advice.”
The study did find, however, that a personal connection and things such as sharing of stories became more important as the client-advisor relationship develops. Young says: “The personal connection needs to be earned.”