Survey: What clients want

These clients are in the “switch zone,” which means there is a strong likelihood they will move their assets to another advisor.

The survey – Your True Value Proposition: The “Must-Know” Financial Advisor Literacy Survey – was produced to help advisors understand their clients and, in turn, help advisors grow their businesses, says Ozy Camacho, publisher with TC Media’s investment group.

The report’s results come from the first of an ongoing series of surveys that is designed to measure changes in Canadians’ attitudes toward advisors amid the implementation of the second phase of the client relationship model (CRM2) and increasing consumer awareness of financial services technology.

The “switch zone” statistic is one that you should note, says Hugh Murphy, managing director of Credo Consulting: “You can say that any given financial advisor probably has between 20% and 25% of his or her clients that are in this switch zone and might turn from [that advisor] and go to another advisor.”

The survey also offers important news to advisors who are planning to sell their practices to fund their impending retirement. Although 36% of clients would stick with their advisor’s firm following the advisor’s retirement and 23% would work with the advisor’s successor, that means approximately two-thirds of clients might move their accounts in such a scenario.

Survey participants who said they would not stay in their current situation upon their advisor’s retirement then were asked what they would do instead. The most popular responses were: “Ask friends whom they go to” (20%); “I’m not sure what I’ll do” (18%); and “I would seek another advisor” (15%). (Survey participants could choose more than one response to this question.)

One problem, according to Sara Gilbert, business coach and founder of Strategist Business Development in Montreal, is that senior advisors are not spending enough time helping junior advisors develop new relationships with the team’s clients in preparation for the succession.

This issue is important to retiring advisors because if the successor advisor ends up managing a shrinking pool of assets because clients have left, the retired advisor, whose payout depends on a successful continuing business, will see his or her retirement income drop below projected levels.

Clients looking for an alternative source of financial advice may turn to digital means. Although 64% of survey participants said they have a male advisor and 35% have a female advisor, 1% stated their advisor is a “non-person” – a robo-advisor.

Although the percentage of Canadians working with robo-advisors is small, “advice models are evolving rapidly,” Camacho says. “For now, that number is 1%. But will it increase?”

Another survey finding that may cause concern among advisors, especially in light of the increased fee-disclosure requirements coming in 2016 with CRM2, is the proportion of survey participants who were unaware that their advisor charges fees: fully 42% of participants said they do not pay anything or were unsure.

“Some clients are going to feel jaded and upset about the fact that they have one set of beliefs and now that’s changing,” Murphy says.

In the face of more fee disclosure, Gilbert says, many advisors are wondering how to show their value to their clients.

“I try to explain to [advisors] that the investment management of clients is a given,” she adds. “You are supposed to do it well. That is not a unique value proposition.”

However, the management of investments is what clients think of first when asked to rank the services their advisors provide in order of importance: 26% placed investment management at the top of the list. The second-most popular answer was retirement planning (20%). The least popular responses included estate planning (5%), insurance (4%) and charitable giving (1%).

Advisors who prefer to focus on investments should consider incorporating lesser-known services into their business to differentiate themselves from that of other advisors, Gilbert says. Developing relationships with specialists who work in the less popular fields selected in the survey can help your client base and will pay off for you in the long term, she adds.

The research suggests that advisors also could use a few tips on working with women clients. Women are less comfortable than men when speaking with a financial professional about their finances, the survey found.

Advisors – especially males – tend to focus on the technical side when explaining financial concepts, Gilbert says, but women clients require a different approach: “Women understand more and relate more when you link [the discussion] to ‘What’s in it for me?’ ‘How is this going to change my life?’ and ‘What is the ultimate outcome?’.”

But both men and women with advisors were more likely than those without an advisor to find jargon confusing. So, you should be more clear in explaining financial concepts to your clients.

Survey participants also were asked to describe their advisor’s personality traits. More than two-thirds (67%) said their advisor acts professionally. However, smaller percentages said they consider their advisor trustworthy (58%) and honest (55%). A few survey participants (5%) went so far as to describe their advisors as “intimidating, overbearing, controlling and aggressive.”

Survey research began in October and included the responses of 2,002 Canadians. The margin of error is 2.15%, with 95% confidence.

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