There are many opportunities to remind clients that you’re open to taking on new clients. And if your clients have friends who are thinking about changing advisors as a result of the recent market turbulence, they may want to mention your name.

(To view video interviews on this and other topics, go to www.investmentexecutive.com and click on the link to IE:TV.)

I’ve heard from some advisors who say they understand why having these conversations makes sense. But they also are nervous about raising the issue of referrals when they’re uncertain if clients are happy enough to recommend them. “Before raising referrals, how can I get a reading on how happy clients really are?” these advisors ask.

We need to be sure clients are reasonably content — not just when asking about referrals but as a general principle of good client communication and management.

Here’s the problem: unless we ask in the right way, clients are often uncomfortable telling us how they feel.

There are three considerations when it comes to checking in on client satisfaction: what to ask about; when to ask; how to ask.



> What To Ask About

As a general rule, advisors should get feedback on at least two things.

Start with your core service. In some cases, this will relate to the portfolios you’ve built for clients and their performance. In other instances, you would probe for satisfaction on the full range of financial advice you provide. Even if you’ve positioned yourself as a financial advisor rather than an investment advisor, bear in mind that most clients will see the performance of their portfolio as central to the job you’ve done for them — especially in choppy markets.

But you should not stop at satisfaction with your core service. Use satisfaction with performance as the sole measure of how you’re doing and you will end up being held hostage to short-term market fluctuations.

In addition, research on why investors change advisors shows that performance causes only half of the defections. The balance relates to communication, feeling valued and the relationship. So, in addition to getting a reading on your clients’ satisfaction with performance, you also need to check for clarity and frequency of communication.

The good news: unlike investment performance, communication is absolutely under your control.

Some advisors also probe for satisfaction on responsiveness and the resolution of problems. They might also get a reading on overall satisfaction. But at a minimum, to be sure where clients stand before getting into a conversation on referrals, you need to get feedback on their satisfaction with communication and investment performance, as well as the other things you provide.



> When To Ask

In the ideal world, you start meetings by taking the measure of how clients feel. In the real world, that works well only if you’ve done two things beforehand.

First, you have been in frequent contact over the past six months, via e-mails and letters, phone calls and in person, perhaps supplemented with an invitation to a conference call or a presentation on market developments. Over that period, you’ve talked to clients about what’s happening, giving a frame of reference on how their portfolio has done compared to the market as a whole, and provided some perspective on recent market volatility.

Second, before we encountered the turbulence this past fall, you had frequent conversations preparing investors for the inevitable downturns that accompany investing in equities. Alternatively, last spring or fall, you had a conversation with clients about the possible risks in the market and made some changes to protect clients against a potential downturn.

If you haven’t done these two things, you may still want to start a meeting by asking clients how they feel about the state of their finances and the level of communication they’ve received. But be prepared for a difficult conversation.

The alternative is to change the timing of when you ask clients how they feel. Rather than asking at the beginning of a meeting, ask at the end, after you’ve discussed possible modifications to their portfolios and outlined your communication plan for the period ahead.

In this scenario, you start by talking about the challenges of the past year and discuss how clients’ investments have done compared to the market as a whole. You then shift to the prognosis for the period ahead and walk clients through any suggestions on modifying their portfolio.

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> How To Ask

If your goal is to find out how clients really feel, sometimes the direct approach isn’t the best way to go.

Suppose you start a meeting by saying: “How do you feel about the performance of your investments and the communication from me in the last while?” Or perhaps you conclude a client conversation with: “Given our talk about what’s happening in the markets, do you feel comfortable with your portfolio and the communication plan we’ve talked about in the last while?”

The problem with questions such as these is that many clients have difficulty answering them honestly. Starting a meeting by saying, “In light of the recent market turbulence, how satisfied are you with the performance of your portfolio?” invites a client response of “It’s OK” or “Fine” — neither of which are particularly helpful.

Or, after spending an hour talking about your client’s portfolio and, perhaps, agreeing to changes, it’s tough for clients to say that they’re still uncomfortable.

Here are a couple of ways to get a reading on client comfort, either at the beginning or end of a meeting. First, you could ask clients to complete a simple, five- or six-question satisfaction survey. (This was the subject of my column in the December 2007 issue of Investment Executive; to read it, go to
www.in-vestmentexecu-tive.com, click on “Back issues” and select “December 2007.”)

Or you could start or end a meeting by asking for feedback in a way that encourages clients to tell you how they really feel. You might end a meeting by saying: “I’d like you to be completely honest in answering this question. In light of our conversation today, on a scale of 1 to 10, how comfortable are you on two things: first, how your investments are positioned; and, second, the kind of communication you’ll be getting from me, with one being low and 10 being high?”

This approach has three advantages. First, you are focusing the client on the near future, not what’s happened in the recent past. Second, you are talking about more than just performance. And, finally, you are making it easy for clients who are still uneasy to say so.

If the “comfort rating” you get is eight or higher (a nine or 10 would be nice but may not be realistic, given the performance dimension), you’re in reasonable shape. You can probably continue with a low-key referral conversation.

If the rating is six or lower, your client is telling you he or she is still not comfortable. And you need to spend more time understanding why that is.

A rating of seven is in the mushy middle: not great, not terrible. The decision on whether to continue with a reminder that you’re open to taking on new clients is a subjective one, depending on you and the client to whom you are talking.

However you do it, checking your clients’ comfort level is an important part of how you conclude your client meetings. By making it easy for clients to tell you how they really feel, your meetings will be a better use of both your time and your clients’. IE

Dan Richards is president of Toronto-based Strategic Imperatives Ltd. He can be reached at richards@getkeepclients.com. For other columns in this series, visit www.investmentexecutive.com.