For most financial advisors, asking for referrals is a key strategy for building their businesses and finding more of the type of clients they enjoy working with. But research by Vancouver-based Corporate Insights Inc. indicates that many clients don’t know their advisors are open to referrals.

Price Powell, vice president and co-founder of Corporate Insights, says that only 15% of the clients surveyed by his firm recall their advisor ever raising the topic of referrals. However, two-thirds of those same clients said they have actually recommended the firm or the advisor in the past; more than one-third would be willing to provide their advisor with the names of specific prospects.

Says Powell: “In spite of advi-sors’ best efforts not to ask for referrals, it seems that they are getting them anyway. Imagine what would happen if they actually asked for them.”

The results vary when the responses of top advisors are separated from the pack. The survey found that 70% of the clients of top performers, which include Chairman’s Council advisors, do recall being asked for referrals.

A similar trend shows up regarding advisors asking for introductions to family members. Two-thirds of clients surveyed were willing to introduce family members to their advisors, but less than half of them had been asked to do so. Yet, knowing the client’s family is key to retaining assets upon intergenerational transfers of wealth.

“If you don’t know the beneficiaries of your client’s estate, where will the money go if your client dies?” Powell asks. “It will go to whomever the beneficiary is already dealing with.”

Corporate Insights’ findings are based on research conducted with many of Canada’s top wealth-management firms for more than 15 years. These include full-service investment dealers, investment counsellors, discount brokers, private banks, retail banks and credit unions. During the past five years, Corporate Insights has conducted more than 100,000 surveys with the clients of these firms, with more than 10,000 of these completed by high net-worth investors having more than $1 million of investible assets.

Much of the survey work involves analysis of “share of wallet.” Wealth-management firms want to know how much money their individual clients have, how much is held with the firm and how much is elsewhere. Firms also want to know what makes that share of wallet go up. Data is collected at the branch level, so strengths and weaknesses of individual branches can be analyzed.

Powell says branch data is typically more “actionable” than data collected at the national level. Companies are able to identify which branches and firms are the best at gaining share of wallet. Best practices from within the firm can be studied to produce step-by-step action plans for implementing change across the organization.

Research has found that firms typically have a higher share of wallet with clients who have more modest portfolios and a lower share with the larger, wealthier clients. Therefore, the 20% of clients who have the largest portfolios represent almost all of the opportunity for growth, Powell says, and that is where an advisor’s attention should be focused.


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Price Powell, vice president of Corporate Insights Inc., a Vancouver-based consulting firm that conducts consumer surveys for major financial services firms, describes services that tend to generate greater “wallet share” for advisors from their clients. WATCH




@page_break@“Delivering a consistent level of service and attention across one’s entire client base is a laudable goal, but not a strategy that will produce the best bottom-line impact,” Powell says. “If you want to grow the business, you need to understand that you need to do things differently for certain people. Advisors don’t always operate this way. Often it’s the squeaky wheel that gets the attention, whether or not that’s the best place to focus.”

Powell says there are up to 10 factors that drive share of wallet at a firm, and service is only one of them. While these drivers vary, depending on the type of firm, many relate to the provision of wealth-management advice, such as providing a written financial plan, tax and estate advisory services, philanthropic services, insurance services and fee-based managed-asset programs. Service-oriented drivers include frequent client contact and regular portfolio reviews.

“‘One size fits all’ is not an appropriate strategy,” Powell says. “Advisors need to tailor their service and deliverables depending on the needs of the client, and some clients warrant more comprehensive, complex solutions. It’s a matter of segmenting and targeting your efforts.”

He says a financial plan is a good tool for both uncovering assets not held with you and finding additional areas in which you can offer services.

“A plan gets you and the client on the same page,” Powell says, “and allows you to define goals and demonstrate how you can help reach them.”

It helps to service client needs on both sides of the balance sheet, not just investments, he adds: “If you can help clients with banking, borrowing and insurance, that ties you closer to the client and allows you to get more business. If you can provide advisory services on estate planning, education savings and other areas — whether you provide them directly or act as the gatekeeper by introducing the client to other experts within the firm — you become more of a trusted source and move closer to the client.”

Advisors who employ these wallet drivers attract more assets, and their clients express a higher level of satisfaction, Powell says. And clients who are more satisfied tend to refer more.

Recent surveys by Corporate Insights confirm that 33% of clients are receiving wealth-management advice from their advisors, but another 26% say they would like to receive it. Only 28% have a written financial plan, while 42% say they are interested in financial planning with their advisor. More than half of respondents use insurance services such as life insurance, disability insurance and segregated funds, as well as advisory services such as estate planning, tax planning and philanthropic services. However, 37% are interested in advisory services and 18% are interested in insurance services.

While some advisors have become top producers by specializing in a narrow area such as stock or bond trading without offering financial planning or advisor services, Powell warns these advisors are vulnerable to their clients looking for these services elsewhere and then forming a strong relationship with another advisor.

“Almost half the client base is interested in having a financial plan,” Powell says. “If you don’t offer this, you are putting your business at risk.”

Survey results also showed that clients’ evaluation of the service they received from their advisors declined during the severe market correction that began in the autumn of 2008. The dissatisfaction was felt more strongly by clients of advice-based wealth-management providers than by those at discount brokers or firms whose product shelf includes non-investment products such as loans, mortgages and deposits.

In many cases, advisors may have actually increased their efforts significantly during the meltdown, Powell says. For example, they may have called clients every six weeks instead of once a quarter. But from the clients’ perspective, when markets were dropping at such a precipitous rate, even though advi-sors were stepping up the contact, it wasn’t enough. Surveys show 48% of clients felt they were getting regular portfolio reviews before the correction, while only 40% felt they were getting regular reviews after the market began to fall. About 21% said they were receiving insufficient contact before the crisis, while 27% complained of insufficient contact after. IE