On different pages?

The study, entitled Closing the Gap: Aligning Client and Advisor Needs to Grow the Wealth Management Firm, found numerous discrepancies between the perceptions of advisors and those of clients about what is important when choosing a firm and financial services professional with whom to work. While these gaps are not always glaring, the survey offers insight into areas in which advisors can focus their attention.

For example, the survey found that the overwhelming majority of advisors – 94% – believe that a perceived personal connection between themselves and prospects plays a major part in those prospects choosing them.

Yet, when asked the same question, only 66% of clients agreed.

“Clients are just looking for more evidence of tangible value,” says Amelia Young, principal with Upside Consulting. “And having a personal connection is sort of necessary but not sufficient.”

The study was conducted in conjunction with San Francisco-based Atherton Consulting Group LLC through online surveys completed between September and October 2012. The survey’s 250 respondents consisted of Canadian and American financial advisors and clients who had chosen or had actively looked for an advisor within the past five years.

Although more than 80% of surveyed advisors believe that demonstrating empathy and sharing personal stories with prospects helps to build that personal connection, most prospects are looking for more solid proof about an advisor’s trustworthiness and ability.

For example, both advisors and clients agreed that referrals from friends are the most common way new clients connect with a financial services professional. However, a gap emerges between advisors and clients regarding other sources of referrals, such as family members and networking. The study found that advisors were twice as likely as clients to say that family members referred new clients to them.

On the other hand, 30% of clients surveyed said they found their advisor through other referrals, such as a networking activity – through a community group or a charity – or through a profile-raising exercise, such as a media interview.

According to Young, building that rapport and finding those prospects is a matter of advisors putting in the time and establishing themselves as being reliable and expert in their field. That could mean, for example, spending hours sitting in the stands with other parents in the early morning if your child plays in a hockey league, Young says, or volunteering on committees or charitable events.

“Those are the kinds of things that develop that personal connection,” she says, “which is necessary before the advisor would have the right to approach people about business.”

However, while building a book of business through community connections can be effective, says April-Lynn Levitt, a coach with the Personal Coach in Calgary, she warns that you should attempt that type of networking only if you enjoy it.

“Some people are never going to be good at a networking event,” Levitt says. “I wouldn’t advise those types of people to start doing that as a [marketing] tactic.”

So, if you are not the networking type, Levitt suggests you try building a referral network of centres of influence or host small, educational events.

Regardless of whether prospects are referred to advisors through a family member or through a charity group, 60% of clients surveyed said they like to see tangible evidence of the advisor’s ability, such as strong client references and documentation of the advisor’s performance history.

One of the ways in which advisors and their firms can provide that tangible evidence is through web portals that break down important components, Young says, such as fees. Clients are looking for and appreciate tools that can outline these issues clearly. For example, clients would appreciate a web portal that shows how much they would pay in dollars for investing a given amount using a specific investment strategy.

In fact, 77% of clients surveyed said feeling comfortable with the proposed fee structure is an important reason for choosing an advisor. The vast majority of prospects are looking for a clear, documented explanation of all the fees that could be incurred and what services they will receive in exchange for those costs.

Yet, only 64% of advisors believe fee transparency is important to prospects, according to the study. In addition to advisors having to be clear about their fees, the survey suggests, they also need to do a better job of educating clients and prospects about the services they offer.

The researchers found that while 70% of advisors believe the breadth of services they offer is what really clinches the deal with prospects, roughly 50% of clients cited that as a reason to work with an advisor. Perhaps that is why most advisors like to talk very generally about their services, Young says, when, instead, they should be providing prospects with very clear and detailed explanations of the benefits the advisors and their teams offer.

Says Young: “This is really a very high form of financial literacy.”

Levitt agrees, adding that advisors need to spend time educating their clients about their products and services and where they fit into the overall financial services sector, as well as providing documentation about the services they provide.

For example, Levitt says, advisors often will say that they create “holistic” financial plans for their clients. But clients often claim that they don’t receive any such service.

The anomaly, Levitt says, has to do with “packaging.” If you create financial plans, for example, you should be presenting those plans to clients in a binder or some other tangible form.

Similarly, advisors need to spend more time explaining the value of their teams. While roughly 80% of advisors surveyed said they thought clients value the range of services they offer through their team members, fewer than 60% of the clients surveyed agreed.

In addition to explaining the services you offer generally, Young says, you need to spend more time talking with prospects about your specialized advice and the benefits of having a variety of professionals on your team.

These specialists can help your clients, Young says, by offering advice on the tax treatment of stock options, for example, or the tax advantages in choosing to move closer to a place of work.

“[Prospects and clients] can miss opportunities,” Young says, “because they haven’t appreciated the need for specialized advice.”

© 2013 Investment Executive. All rights reserved.