Earning professional designations is one of the most effective ways for financial advisors to hone their craft. But how advisors inform their existing and prospective clients they’ve obtained those credentials – and what they actually mean – is a crucial next step. And it’s one that many advisors are getting wrong, recent research suggests.
According to the Investments & Wealth Institute’s (IWI) 2019 High-Net-Worth Investor Study, 70 per cent of high-net-worth (HNW) investors say it’s important that their advisor achieve advanced certifications or voluntary education. Furthermore, 75 per cent of HNW investors say designations and certifications would be an important factor in their decision-making were they choosing an advisor today – and 67 per cent feel it’s important that they understand what the credentials their advisors hold mean.
But according to Julie Littlechild, founder and chief executive of Toronto-based consulting firm Absolute Engagement, which conducted the research on behalf of the IWI, the way many advisors go about explaining these credentials to clients often misses the mark.
Although most advisors have a tendency to let their clients know the effort that went into earning their credentials, the results of the study show that clients’ top concern is how these designations affect them personally. Namely, clients are concerned about whether their advisor is held to a standard of ethics and receives ongoing education to maintain the designations.
“Here’s how hard it was to get,” is not a factor that resonates with most investors, Ms. Littlechild says. Most clients take comfort in knowing that earning and keeping a new credential is not a “one and done” event, but rather, an ongoing process.
Designations function primarily as ways for advisors to reinforce their credibility and demonstrate their technical expertise to prospective clients, the study asserts. Indeed, Sean Walters, CEO of the IWI, says many clients view “ethics and expertise” as “differentiating characteristics” that set an advisor apart from the rest. Knowing that an advisor is holding themselves accountable voluntarily to a set of standards offers investors a sense of additional security that their wealth is in good hands.
But Ms. Littlechild says failing to break down these credentials in terms investors appreciate is “a missed opportunity.” She stresses the importance of advisors being proactive in informing clients about their designations because many investors may fear losing face by asking what an acronym means.
Ms. Littlechild says that being proactive in explaining what designations mean in a clear, jargon-free manner is a key step in keeping clients “engaged” – another metric the High-Net-Worth study measures.
“Advisors are investing all of this time and effort to genuinely get better at what they do. But their clients don’t understand what it means; in particular, what it means to them,” she says.
Anecdotally, Ms. Littlechild says many clients report seeking additional information about their advisors’ designations beyond what they’re told.
“That just speaks to the fact that people are hearing the acronym, nodding their head and then [searching for] it [online],” she says. “We’ve got this chasm between what [advisors are] doing and what clients actually understand.”
To Mr. Walters, breaking down the definitions of the acronym that follows an advisor’s title is just part of an advisor’s larger duty to “make complex topics simple,” he says. “In the old days of the brokerage world, [an advisor’s job] was to make simple topics complex, and then you could justify your fee. That doesn’t fly anymore today.”
For Vaughn Hoskins, financial planner at Freedom 55 Financial in St. John’s, Nfld., informing prospective clients of the certified financial planner (CFP) designation he earned this year is just part of a larger effort to establish rapport. In particular, he’s learned in a short time the value of being concise and jargon-free with his explanations.
“Less is normally more,” he says. “Accreditation, designations or certifications are more of an icebreaker or barrier to entry – and once you have that it’s all about establishing trust.”
Mr. Hoskins compared this duty to that of a doctor explaining symptoms to a patient: All it takes is one term that’s communicated poorly to send a patient out the door, seeking another opinion or taking the wrong steps to address the issue. He suggests advisors tailor their “elevator pitch” about credentials to clients and their individual needs.
“It’s important to stick to the basics,” he says. “Take time to think about how credential could benefit a client in its simplest way. Get the appropriate message across … [ask yourself], ‘What’s this person looking for?’”
Ms. Littlechild suggests “trying to think a little outside the box” in terms of communicating designations to clients, through blog posts, videos or websites.
“If we want to connect with people, then maybe we need to think beyond one-on-one conversations,” she says. “There are different ways we could do that to make it a bit more engaging.”
There are various benefits to doing taking this approach. Not only do advisors earn prospects’ trust, but long-term clients also value when their advisors step up their skills and acquire new credentials voluntarily, Ms. Littlechild says.
“This isn’t just about, ‘How do I get new business?’” she says. “There’s clearly a need and an opportunity to think about going back to existing clients and explaining [what the new designation you obtained means].”