Mastering Affluent-Client Loyalty

20 Pages·2012·1.63 MB·English

Mastering Affluent-Client Loyalty
Introduction
In today’s world, loyal affluent clients are a financial advisor’s acre of diamonds. With the typical
affluent client having multiple spheres of influence, a loyal client’s word of mouth has the potential
to provide an ongoing stream of personal introductions and referrals for financial advisors. However,
one of the more serious lingering consequences of the financial crisis is the damage done to the
extremely fragile loyalty of affluent clients.
Today’s affluent investor has a higher level of skepticism and is more cynical than at any time in re-
cent history. And trust—or lack thereof—is at the heart of their loyalty issue. It’s from this perspective
that the financial advisor/affluent client relationship has evolved: today’s affluent investor wants to
know their financial advisor on a personal level.
It’s a simple matter of human nature. When we get to know someone personally, we feel we have a
greater sense of whether or not we can trust them. It’s this personal connection that enables us to
determine whether or not we are guided by the same set of values. In our recent study of affluent
investors, the following criteria were ranked highest, highlighting the critical role of trust in the advi-
sor/client relationship:
„„Listening and truly understanding your family’s needs
„„Being trustworthy and having your best interests at heart
With all other things being equal, an affluent client’s expectations are more likely to be met once
they have developed a strong level of trust with their financial advisor. It’s only natural that this will
also strengthen loyalty.
So, what’s the secret to achieving such client loyalty? It’s a cocktail of consummate professionalism,
personalized Ritz-Carlton quality service, a FedEx level of efficiency, surprise and delight touches,
and well-planned social interaction. The reality is that advisors need to spend more time strength-
ening the loyalty of their affluent clients. In effect, they need to raise the bar.
Elite advisors demonstrate the ability to service their affluent clients at a very high level, develop
both business and personal relationships, and enjoy a high degree of loyalty. While many advisors
occasionally engage in much of the same relationship management and marketing activities, they
do not do so consistently. Nearly every advisor does nice things for clients from time to time, and
plenty of advisors have some form of personal contact with a few clients. Top-performing advisors
have an affluent-client loyalty system that is part of their service model and has the necessary
structure to be applied consistently.
The depth and breadth of this trust issue goes far beyond communication and service issues. Loyal
affluent clients, those with a business and social relationship with their advisor, rank them higher in
important areas such as “creating and executing an up-to-date formal financial plan” and “possess-
ing a comprehensive breadth and depth of industry knowledge.”
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Loyal affluent clients rate their advisor’s performance more favorably, trust them at a much high-
er level, and assist their marketing by providing personal introductions and referrals within their
spheres of influence. Loyal affluent clients should be at the core of every financial advisor’s market-
ing plan in the relationship management – relationship marketing nexus.
This white paper discusses findings on affluent client loyalty while offering suggestions for manag-
ing client relationships at this higher level, with the goal of helping you raise the bar for client service
within your practice.
Methodology
The data presented in this paper was collected through online surveys. Basic univariate results have
been presented directly. When statements of significance are reported, they are based on the re-
sults of common statistical methods for the type of survey data and reflect a 5 percent level of
significance. Any group comparisons presented reflect significant difference in group responses.
Prior to analysis, data was examined through IBM SPSS analytics software for accuracy of data entry,
missing values, skewness, kurtosis, and outliers. After analysis, some participants were excluded
from the results.
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Communication
It is important that financial advisors learn to get personal in their communication with affluent
clients. Many advisors have succumbed to the trap of thinking that mechanical communications
(newsletters, brochures, websites, emails, etc.) are an effective method for communicating with
their affluent clients. Personal communication has a positive correlation to client loyalty: in-person
meetings and personal conversations are rated most effective by today’s affluent.
Figure 1 | Intimate Client Events
Source: The Oechsli Institute
Client Would Attend
Client Would Bring a Guest
Small social event
Large social event
Small informational event
Large informational event
None of these
0% 10% 20% 30% 40% 50% 60%
One of the primary methods used by successful advisors to build loyalty is the intimate client event.
These events enable affluent clients to get to know their financial advisor in a social setting and on a
more personal level, which builds the trust essential to client loyalty.
What constitutes a small social event? First of all, there must be no business involved. This al-
lows everyone to relax and to interact without the underlying tension that can accompany business
meetings. It creates a more natural environment for attendees to get to know one another on a per-
sonal level, allowing advisors to uncover personal information about their clients and their families
(child winning an award, spouse starting a new career, family going on vacation, etc.). Used properly,
a well-timed small gift or card in honor of these events serves to strengthen the relationship, and the
stronger the relationship, the more loyal the client.
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The following are three tips for successful events:
1. Involve no more than three or four client couples per financial advisor.
2. Stress the concept of all fun, no business. It will help everyone to loosen up.
3. Build the events for mingling to make certain each guest is engaged. A wine tasting is a bet-
ter setup than a formal dinner.
Typical small social events that financial advisors have found successful are:
„„Wine tasting „„Theatre evening
„„Dinner party „„Cooking class
„„Golf outing or clinic „„Spa afternoon
„„Sporting event
While Figure 1 shows that affluent clients find small informational events a close second to small
social events, informational events are typically harder to hold with the same frequency as small
social events, which many advisors hold monthly. More important, however, is that only the social
events provide the same personal, business-free environment that can be so critical to engendering
trust and free-flowing conversation. And of course, since small social events are the preferred event
to which an affluent client would bring a guest, such outings can be a potent marketing tool.
| How Affluent Clients Classify their
Figure 2
Relationships with Their Financial Professionals
Source: The Oechsli Institute
Purely business
Business and social
Other
0% 20% 40% 60% 80%
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Business and Social Relationship
As Figure 2 shows, only 28 percent of respondents claim to have both a business and a social rela-
tionship with their financial advisor. That same group has more overall satisfaction with the service
they are receiving from their advisor than those who have only a business relationship with their
advisor. Financial advisors should take an honest assessment of the type of relationship they have
developed with their affluent clients. In every instance where there is any doubt regarding the social
aspect of an affluent client’s relationship, plans should be made to spend non-business personal
time with that particular client. This could be a dinner out to honor a special occasion in the client’s
life (anniversary, first child off to college, retirement) or even as simple as a lunch to “catch up.”
Face-to-Face Interaction
Average number of daily face-to-face encounters with clients: 1.5
This number should serve as a wake-up call to financial advisors, especially when we consider that it
includes business and social interaction! Financial advisors can no longer manage the relationships
of their affluent clients by staying in their office and talking to them on the phone.
Including Both Spouses in Business Meetings
| Frequency Conducting Business Meetings
Figure 3
with Both Spouses
Source: The Oechsli Institute
Never
Rarely
Occasionally
Sometimes
Frequently
0% 10% 20% 30% 40% 50% 60%
When financial advisors conduct business meetings with their affluent clients, just over half (55.6
percent) do so with both the husband and wife present. These advisors are on the right track.
Financial advisors must make it a priority to address the concerns of both members of the house-
hold, keeping in mind that women are becoming more involved in their family’s finances, have
higher expectations than men, and are often more inquisitive. Advisors who have yet to include
both spouses in meetings or reviews must understand that failing to meet the expectations of both
partners can seriously undermine household loyalty.
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Including Both Spouses in Social Outings
| Frequency Conducting Social Meetings
Figure 4
with Both Spouses
Source: The Oechsli Institute
Never
Rarely
Occasionally
Sometimes
Frequently
0% 10% 20% 30% 40%
While a slight majority of advisors are involving both spouses in their business meetings, only 35.3
percent spend time with both husband and wife in a social setting. Advisors need to devote more
time to allowing their affluent clients to get to know them within the context of a social relationship.
The personal bonds formed through these interactions help cement client loyalty, especially with
the affluent who expect you to get to know their situation intimately.
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Important Communication Areas
|
Figure 5 Important Communication Areas
Source: The Oechsli Institute
Extremely important to affluent
Performed extremely well by elite advisors
Listening and truly understanding
their family's needs
Being trustworthy and having their best
interests at heart
Possessing a breadth and depth of
industry knowledge
Being a problem solver
Providing timely, not mechanical
communication
Focus on overseeing finances,
not marketing
Delivering high-level personal service
0% 10% 20% 30% 40% 50% 60% 70%
As shown in Figure 5, the expectations of affluent clients are not being met across the board in
critical service areas. All of the performance gaps are significant except Delivering a high-level of
personal service, which begs an interesting question: If our affluent respondents are telling us that
advisors aren’t meeting expectations in all these areas of communication, yet they still feel that
they are receiving adequate personal service, what do they consider “personal service”?
The results in Figure 5 should serve as a warning to financial advisors. The gap between the impor-
tance of Listening and truly understanding their family’s needs and the affluent respondents’ evaluation
of their advisor’s performance in this area is vast, indicating the potential for strained loyalty. The
same can be said for Being trustworthy and having their best interests at heart. In financial services,
loyalty is nearly always predicated on trust. When confidence for success is low, alternative options
seem more attractive.
However, the results provide us with a good indication of how advisors can correct many of these
performance gaps. First and foremost, they should review how they are communicating with their
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affluent clients, the frequency of that communication, and its clarity. They should also ensure their
affluent clients actually understand what is being communicated—asking the clients questions and
giving them plenty of time to talk during meetings can help. Additionally, advisors need to make
spending more social time with their clients and getting to know them on a personal level a priority.
Whenever this occurs, perceived advisor performance increases.
Ongoing problems are one of the major factors that will cause an affluent client to begin looking
for a new financial advisor, making the results for Being a problem solver particularly concerning.
Meeting expectations in this area often requires advisors to become more effective delegators,
spend more time communicating and developing their support personnel, and develop problem
resolution policies and procedures that are followed by every member of their team.
Effective Communication Media
|
Figure 6 Communication Media Rated “Highly Effective”
Source: The Oechsli Institute
Advisor’s personal website
Brochure/collateral material
Newsletters
Firm's website
Seminars/informational events
Emails
Financial plan
Account statement
Phone calls
In-person meetings
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Figure 6 clearly outlines the source of communication that affluent investors value most. The ability
to effectively connect with clients and prospects plays a major role in a financial advisor’s effective-
ness in developing affluent loyalty.
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One walk through the supermarket shows how much communication styles vary by age group.
Younger generations are sending a constant stream of texts, tweets, and Facebook posts. Nobody
knew these technologies ten years ago, but now they’re part of mainstream communication. While
the majority of affluent clients, prospects and centers of influence are a few years removed from
the texting and tweeting crowd, some are adopting this technology faster than others. Still, having
grown up in an age where letters, phone calls and in-person visits were the norm, most affluent
investors still have an affinity for these more personal methods of communication.
The result is that no matter the age skew of your clients, effective communication doesn’t follow
a one-size-fits-all approach. While it’s important to know the overall preferences of your target
market, your communication must be personalized. Open a dialogue with clients around their pre-
ferred contact methods and frequency. Emailing a client that doesn’t really email is a slow way to
do business. Calling a client who never turns on her cell phone isn’t very effective, either. Asking
clients how they like to communicate with you isn’t just a great way to make sure you’re meeting
their needs—it’s an effective and simple way to display your commitment to personalized service.
Social Media in Client Connections
|
Figure 7 Uses Social Media to Interact with Clients
Source: The Oechsli Institute
Yes
No
Missing information
0% 20% 40% 60% 80%
Each year, more and more advisors adopt social media as part of a multifaceted communications
strategy. Contact with clients through social media websites like Facebook and LinkedIn does add a
personal, less formal dimension to the relationships. This, in turn, can help build loyalty, awareness,
and a stronger sense of connection. That said, broker-dealer compliance regulations and guidelines
surrounding social media protocol will dictate—and in some cases limit the effectiveness of—its use.
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