Every financial advisor has dealt with mistakes on client accounts, such as incorrect tax slips or changes of address that fell through the cracks. Those mistakes can be incredibly disruptive and can potentially undermine clients’ confidence.
For clients, it’s one thing when the pizza place gets their toppings wrong, but something else entirely when there is a screw-up by the firm managing their money.
Regarding mistakes, there’s good news and bad news. The bad news is that no matter how hard you try, if you run a large practice, a certain number of mistakes is inevitable. The good news: provided that problems are relatively minor and are one-off in nature, the right process to handle mistakes actually will strengthen client loyalty and improve client satisfaction.
– THE ART OF SERVICE RECOVERY
Among the first to study the subject of service recovery were three professors at Harvard Business School. In 1990, they published “The Profitable Art of Service Recovery” in the Harvard Business Review (HBR). This article talks about how applying the “zero defect” philosophy (derived from manufacturing) to service interactions can dramatically reduce the number of problems.
The HBR article also makes the case that applying this philosophy can go only so far for service experiences. In services, the article states, no matter how rigorous the procedures and employee training or how advanced the technology, zero defects is an unattainable goal.
As an example of service failure, the HBR article presents a case about a wealthy client who used a different bank branch from his usual one to cash a cheque. Because this was not a “qualifying transaction,” his parking slip wasn’t validated and he was charged for parking in the bank’s lot. He was so steamed that he drove 40 blocks to his home branch to describe to his usual banker what had happened and to demand an apology by the end of the day. When this client got no response, he withdrew $1 million from the bank, an event that made national headlines.
Sometimes, a poor response to a problem is almost as bad as no response. The HBR article points to research that shows that more than half of the efforts to respond to customer complaints actually reinforces the initial negative reactions to a problem. That finding can be good news to you as an advisor: consumer expectations now are so low regarding the responses they receive following a complaint to a service provider that you will stand out just by dealing with problems promptly and effectively.
– TURN PROBLEMS AROUND
Turning around service problems starts by creating a corporate culture in which front-line employees who interact with customers are empowered to act. The HBR article explains that Club Med Sales Inc., FedEx Corp. and Marriott International Inc. have built service recovery into their corporate culture. And organizations such as Four Seasons Hotels Ltd. use stories of employees helping to turn unhappy customers around as part of their training for new staff to set expectations that front-line staff have the authority to deal with issues.
The next step is to identify a clear set of steps to take when a problem arises. Recently, I delivered a luncheon workshop to a large branch of a bank-owned brokerage firm. I was asked if I would spend 45 minutes beforehand with sales co-ordinators, who typically are neglected in training efforts. In that session, we focused on how to respond when a client calls with a problem. Here are the steps that came out of our conversation:
1. Listen: Put everything aside to give the customer’s complaint 100% of your attention, and take notes along the way.
2. Apologize: Right off the top, make an unqualified apology using simple words such as “I’m terribly sorry about this.”
3. Clarify: Ensure you have all the details by asking the client to elaborate and by asking “Is there anything else I should know?”
4. Confirm: Check that you have a full understanding of the situation, restating the problem that the client ran into and using the words “Just to be sure I have this right.”
5. Empathize: Apologize a second time and empathize with words such as “I can imagine how frustrating this is.”
6. Propose a solution: Lay out what will be done to deal with this, starting with “Here’s what I suggest” and include a specific time frame when the client can expect to get a response to his or her problem. Then get the client’s agreement by asking, “Would that be acceptable?” Depending on the client and the nature of the problem, a short email laying out next steps might be appropriate. Begin your email with another apology for the fact that the client was inconvenienced.
7. Implement a solution: Even if clients are satisfied when they hang up the phone, that won’t last long if the problem isn’t resolved. The person dealing with the problem needs to follow up to ensure that the issue is rectified quickly and accurately.
8. Follow up. The final step is to follow up with the client after the issue has been addressed, either by phone or by email, to ensure that he or she is 100% satisfied with the way the problem was handled. This is where you get the biggest payoff from all of the previous steps – reinforcing to the client the fact that their problem has been taken seriously.
One final comment: be vigilant about future problems. One of the sales assistants mentioned that sometimes the same clients run into the same problems and what was a trivial matter the first time becomes incredibly annoying when repeated. That’s why, when clients encounter problems, this sales assistant takes special care in all the interactions with those clients in the following time period to minimize the chances of issues recurring.
This level of attention to detail in resolving problems may seem excessive. But when a client runs into a problem and calls to complain, your relationship is at risk. How you and your team respond can reinforce your client’s perception that, administrative issues aside, you are 100% committed to meeting his or her needs.
– IMPLEMENT SERVICE RECOVERY
There are a few key steps to implement a culture of service recovery in your practice.
First, sit down with your assistant and other team members to talk about this issue. Discuss how you deal with problems and talk about whether you need to build in a clear, written process similar to what is outlined above. In your weekly meetings, discuss any problems that arose in the previous week and how they were dealt with. Talk about lessons from those experiences that might be used to improve your process in future.
Give your assistant the authority to act. The HBR article describes how one Marriott hotel gave every employee authority to spend up to $10 to deal with an issue when a guest complained. Consider whether you should give your assistant the authority to send clients a small token of apology when they run into a problem.
Everything so far has talked about relatively minor issues. For serious complaints, the expectation should be that they are immediately escalated to the advisor responsible for the client or, if that advisor is unavailable, to another advisor on the team.
There’s one last step that needs to happen, and that is to do a diagnostic of how the problem happened. While an effective process to rectify problems is important, even better is avoiding that problem in the first place. Once the immediate issue has been dealt with, the next step is to sit down with your team to determine why the problem occurred and how to avoid this issue in future. As part of that process, avoiding the pointing of fingers is critical. (Charles Duhigg’s book, Smarter Faster Better, outlines research pointing to the importance of “psychological safety” within teams: everyone feels that they can be open and honest without fear of being shut down or punished.)
Finally, I’ve talked about the cases in which clients complain. What about the silent majority of clients who are not vocal and put up with minor annoyances without saying anything? For those clients, consider finishing your reviews by saying: “What single thing could I do in the next 12 months to improve your experience in working with us?”
The conclusion from the research on service recovery is very clear. While mistakes are never a good thing, by putting in place the right culture and process, you can manage the downside and turn mistakes into opportunities to solidify relationships.
Dan Richards is CEO of Clientinsights (www.clientinsights.ca) in Toronto. For more of Dan’s columns and informative videos, visit www.investmentexecutive.com.
© 2016 Investment Executive. All rights reserved.