Financial advisors work hard to ensure their clients are satisfied with the wealth-management services they receive. However, new research suggests that this measurement may no longer be enough for clients to remain loyal to their advisors. Rather, engagement has become the best measure with which to assess the success of a client relationship.
According to the Investments & Wealth Institute’s (IWI) Canadian High-Net-Worth Investor Research 2019 report, based on a survey of 425 high-net-worth Canadians with more than $500,000 in investible assets, 86 per cent of clients who say they’re “engaged” in the client-advisor relationship are extremely likely to continue working with their advisor compared with only 45 per cent of those who say they’re not engaged.
Yet, the research reveals that while 80 per cent of survey participants said they were “satisfied” with their advisors, only 20 per cent could be considered to be “engaged,” says Julie Littlechild, founder and chief executive of Toronto-based consulting firm Absolute Engagement, which conducted the research on behalf of the IWI.
Although “satisfaction” is the standard measurement in the investment industry to gauge clients’ views on their relationships with their advisors, “engagement” goes further. Ms. Littlechild says “engagement [demonstrates] a deeper relationship [that clients] feel so good [about] that they’re advocating on behalf of their advisors” – and recommend them to family and friends.
Specifically, the clients in the survey who are considered to be “engaged” gave their advisors a perfect rating in terms of satisfaction and referred their advisors at least once in the past 12 months.
What’s more, 67 per cent of survey participants who were “engaged” say they feel they receive high value relative to the fees they pay compared with 29 per cent of clients who don’t feel “engaged.”
To Ms. Littlechild, the survey’s results demonstrate the need for advisors to strive for more than just client satisfaction.
“As an industry … we need to set a very high bar, or a different bar – a more aspirational goal – for client relationships,” she says. “Quite frankly, the vast majority of clients feel pretty good about their [advisor] relationships. They’re satisfied, they’re loyal and they trust their advisor. [But] if [the majority] of clients are ‘satisfied,’ then that doesn’t set you apart. It’s not a high enough standard.”
Although the results of the survey reveal a need for advisors to work harder to engage their clients, knowing how to do so in day-to-day interactions is another thing altogether.
Ms. Littlechild says there are several concrete ways to engage clients, including making a concerted effort to understand their personal lives and goals. By discussing financial milestones within the context of their specific needs, advisors can go beyond the “one-size-fits-all” approach to financial advice, cultivating an authentic relationship and helping their clients see their financial decisions as truly consequential.
John De Goey, portfolio manager at Wellington-Altus Private Wealth Inc. in Toronto, takes this approach toward engaging his clients. He says he begins the client-advisor relationship by asking a series of open-ended questions about the client’s personal life.
“Anyone can crunch numbers. What you really need to do is make [the relationship] personal,” Mr. De Goey says. “You get engagement by asking engaging questions that invite the client to give you personal information based not only on their circumstances, but also on their personal goals and aspirations.”
For example, he notes, planning to pay for a child’s university education is a common major life event for which most clients seek advice. But no two clients are the same. Some have plans to send their kids to a private institution abroad, while other clients plan to send their children to a post-secondary institution in their province of residence. Thus, planning for university requires distinct approaches for each situation, which makes knowing these details as early on as possible critical to helping clients plan properly.
For Rob McLelland, founder of the McClelland Financial Group and a senior financial planner and co-branch manager at Assante Capital Management Ltd. in Thornhill, Ont., ensuring that clients are engaged requires establishing strong personal relationships with the goal of serving clients’ various needs not only today, but with the longer term in mind.
“I always view client relationships as a long-term journey,” he says. “When you’re taking on a new client, you have to think of the relationship as, ‘This could go on for 25 [years], 30 years or longer,’ and you want that relationship to be enjoyable and make it successful for them.”
Also central to engaging clients is speaking to them about their finances in comprehensible ways, Ms. Littlechild says.
“Are you speaking in terms that are meaningful to your client? Are you free of jargon, are you consistent in that communication, putting money in the context of their broader goals?”
In fact, clients surveyed who were classified as “engaged” displayed a stronger ability to articulate everything they had learned from their advisor – a result of clear communication, Ms. Littlechild says.
Mr. De Goey also stresses the importance of checking in with clients frequently, reminding them of their to-do list items, assessing their progress and holding them accountable to meeting their financial goals.
“The clearest example of a demonstration of engagement is changed behaviour,” he says. “It’s all fine and well to give good advice. But if you give good advice and the client doesn’t follow it, you may as well have given them poor advice.”