The COVID-19 pandemic has initiated a wave of transformation within the financial services sector.
Most notably, there has been new technology rolled out across the industry to onboard clients digitally, which is making the lives of investors and advisors easier. At the same time, it’s also making it easier than ever for investors to move their business to another financial advisor if they’re not satisfied with your services. That’s a good thing for investors as it serves notice to advisors who fail to improve their value proposition continuously.
Here are 10 specific behaviours advisors should watch for – and change without haste:
1. Be unclear about your fees
Clients should never have to wonder how much they’re paying for your services. With new regulations and increasing transparency on the subject, there’s no reason not to communicate this clearly to clients at beginning and throughout the relationship. There’s nothing worse than investors being surprised about how much they pay for your services. Advisors who fail to be proactive on this matter will likely end up losing their clients’ trust.
2. Say “yes” to your clients all the time
Let’s be clear: saying “yes” to your clients is not a bad thing, but good advisors also have the courage to say “no” to their clients when they’re being irrational. For example, you could simply take instructions from your clients because it’s easier or because you don’t want to lose them. Although that may help you keep clients in the short term, it will likely drive them away eventually because you’re not offering them much perspective or value. If saying “no” makes you uncomfortable, prepare a series of cases in advance that you could present to your clients so they understand the reasons for your response.
3. Use technical jargon
Some financial professionals believe investors are looking for proof they’re knowledgeable and sophisticated, so many advisors use a lot of technical jargon to show their clients just how smart they are. Rather, what investors really need is someone to explain concepts to them in a way that’s easy to understand. A good test is to explain your value proposition to a teenager. If he or she doesn’t get it, you still have work to do.
4. Blame underperformance on someone else
Good advisors will take responsibility for the performance of their clients’ portfolios and will understand that any type of investment process is bound to have periods of underperformance. Bad advisors will put the blame on investment fund managers, central banks, the government, or stock markets and will eventually end up losing their credibility with clients, many of whom will choose to look elsewhere for advice.
5. Tell clients you know exactly where the markets are going
There’s really no explanation needed here. No investor, advisor, economist or financial expert knows precisely what will happen with the markets. If you tell your clients that you are, you will eventually miss and your clients will lose their trust in you and seek out an advisor who is more humble. Good advisors will focus on preparation more than on predictions.
6. Keep using old technology
No matter how great you are as an advisor, more and more clients will compare their experience with you to going on Amazon or using Apple’s products. If you feel that learning how to use new technology and working on making your clients’ experience more digital friendly are painful and not worth your time, take note because your clients will eventually leave you for an experience that makes their lives easier. It’s essential to challenge yourself and book in some time to learn new technologies that will help you improve your clients’ experience.
7. Make finding that “home-run stock” your priority
Providing thoughtful advice and perspective are key when comparing the value investors receive from their advisors. Spending your days trying the find the stock that could result in a huge return is often not a good use of your time because that’s rarely the main service investors want from their advisors.
8. Believe financial planning is beneath you
When investors were surveyed for Dimensional Fund Advisor’s 2017 Global Investor Insights report, they were asked how they measured the value they received from their advisors. Thirty-five per cent of investors said it was the sense of security/peace of mind their advisors provided, 23 per cent said it was knowledge of their personal financial situation, 20 per cent said it was help in making progress toward their life goals and only in 14 per cent cited investment returns. Advisors who still believe financial planning is a fad are missing the mark and will end up losing their clients to those who understand how truly important it is.
9. Take too long to call your clients back
Making sure your clients never feel you’re too busy for them and that they can talk to you or someone on your team whenever they need to is extremely important. That’s especially the case in an increasing digital world because when clients need you the most, the human touch cannot be commoditized. Great advisors will ensure they prioritize this simple concept. A good exercise is to measure how much time it takes, on average, for you to call back your clients and then work on improving it. People are always amazed when you call them back quickly – especially these days.
10. Talk down to your clients because they don’t understand investing
Advisors are matter experts in wealth management, just like other professionals are in their respective fields. When the pharmacist explains how to use a medication, she won’t answer your questions with a condescending tone because she understands that it’s not your area of expertise. The same goes for our industry. Compound interest, asset allocation and financial planning are complex subjects that most people generally know little about. Great advisors will take pride in educating their clients. The bad ones will roll their eyes and talk down to their clients, likely leading to the end of those relationships.
Jonathan Durocher is president of National Bank Financial Wealth Management.