From the January 2008 issue of Investment Advisor • Subscribe!

Referrals Revisited: Part II

Matching clients' perceptions of your value with the reality

In last month's article, you'll remember that JPMorgan conducted a qualitative study of both affluent clients and their advisors. The goal of this research was to thoroughly examine the referral process and determine what was preventing advisors from maximizing their referral success. We found that there is no single thing that will maximize your success. Rather, it will be as unique as are you and your clients. The research revealed that maximizing your referrals will depend on four elements:
  1. Your referral attitude
  2. Your clients' referral readiness
  3. Quality of your relationships with your clients
  4. Perceived value of services you deliver to your clients

This month, we will focus on the last element--the perceived value of the services you deliver to your clients.

Stop! Don't turn the page. I can hear you saying, "Ho hum, another article on creating my value statement...something that will take me forever, and I will never actually end up saying it."

This article is not about value statements. It's about developing a practical process for everyday use--understanding how to connect your clients' perceptions to the real value you deliver.

Think of it this way: No matter what sets you apart, your clients' perceptions become their reality. To make sure they receive and recognize your true value, you must first define it for yourself and then articulate it as opportunities arise. When their perceptions match your value, clients can accurately share their positive experiences and your differentiators with family, friends and colleagues--often without even being asked.

I can't stress the importance of this enough. When clients can articulate your value as clearly as you do, it not only creates a stronger, more satisfied client base, but also empowers a network of advocates to voluntarily and enthusiastically recommend your services to the right people in the right way.

The Value Process

To do this, we've developed a three-step process for defining your value and communicating it in a manner that resonates with clients and their referrals.

Step 1: Define Your Value

Keep in mind that if you can't clearly articulate your value, neither can potential referrers. So take the time to think about the unique qualities you bring to each of your relationships and, more importantly, how each client benefits from what you deliver. Focus only on those factors you can control to provide a positive investing experience. Remember, it's about your performance, not the market's. There are three sub-stages in this step.

Identify your strongest features. Features are really nothing more than the facts--your background and business strategy. For example, these would include your number of years in business, education, professional certifications, and service model.

One of the biggest mistakes we see advisors make is to stop the process right here. Too often advisors talk just about their background and never educate the client on why it sets them apart from the competition and, more importantly, how it will benefit clients. For example, your education and years of experience can translate into peace of mind, attainment of goals, and ability to place short-term events into historical context, all of which benefits the client.

Establish your competitive edge. How does each feature set you apart from advisors who don't have the same qualifications? What you are really stating is why you are different from or better than other advisors.

Here again we see advisors not following through, making the conversations about themselves and not the clients. Remember, much of the decision-making process is emotional. When you are purely focused on facts about yourself and not how they benefit the client, you are missing a key opportunity for making a connection to your client.

Translate into client benefits. This answers the "So what?" question, which defines the benefit to the client. When thinking about the client benefit, take a minute to answer the following questions: Why is this good for my clients? How does it help them achieve their goals? Does this emotionally connect with my clients? Does this address the basic needs of my clients--to be heard and understood, to be treated fairly, to trust their advisor, to feel good about investing?

Here is an example that will help simplify these three sub-stages:

Stage one: Identify a key feature--"We have 20 years in the business."

Stage two: Establish your competitive advantage--"We have experience with various market cycles."

Stage three: Translate into client benefits--"This experience has allowed us to create a disciplined investment process that instills confidence to stay invested during turbulent markets, which will maximize your wealth potential and success."

Step 2: Gauge Client Perceptions

In everyday interactions, clients provide cues that invite you to gauge their perceptions of your value. If you fail to recognize these signals or simply ignore them, you won't know if your clients are recognizing your real value. Improperly informed clients usually base value judgments on investment performance, a variable advisors can't control. Probing for information allows you to uncover and connect their perceptions with your value. To better understand what I mean, take a look at the following example:

Typical conversation: A missed opportunity to discuss value

Client: "This was very helpful. I'm glad we got together."

Advisor: "That's always great to hear. Thanks for coming in today."

The question is: "Why did the client find the meeting helpful?" You may assume the client thinks a number of things, but unless you ask, you do not really know. If you are not aware, then you will not know how they are representing you to the outside world, which may very well be not how you want to be thought of.

Recommended conversation: Probe to discover perceived value

Client: "This was very helpful. I'm glad we got together."

Advisor: "That's great to hear. To make sure we continue to provide you with high-quality service, can you tell me what you found most beneficial about today's meeting?"

Client: "Well, the value of my account went up."

Is this valuable? Is it good that the client is happy because of the performance of the account? I am sure most advisors will agree that it isn't, because there is always the probability of the account going down next time. Our role is to educate our clients and remind them of our value as it relates to their needs.

Step 3: Make the Connection

After probing for more information, the final step is to connect your value to whatever clients say. As in the example above, most likely you will find that a client's perception is not always in line with your intrinsic value, because our industry is so performance-focused. The importance of this step cannot be underestimated. It is your opportunity to re-educate clients about why you add value--in a way that they can not only relate to but also be able to convey to others.

Example of making the connection:

Client: "Great job. I feel good about my portfolio these days."

Advisor: "What is it about your portfolio that feels good?"

Client: "Well, my performance has been really strong lately."

Advisor: "That's true. Of course, it's also true that your returns could be very different next quarter. In fact, I can almost guarantee it. In my 20 years of serving clients like you, I've seen various market cycles and know that the real key to success is your commitment to our consistent, time-tested process. When you're as confident in that process as we are, you stay invested through the ups and downs in order to maximize your wealth potential."

Notice how the advisor's response references a key feature (20 years in business), competitive edge (experience with market cycles), and client benefit (increased wealth potential). So now when the client thinks about the value you bring to the table, the perceived value is not a performance number but an emotional connection with you.

While it might be great to have a happy client whose investments are performing well, the reality is that you can't control the market's performance. However, your experience in up and down markets can translate into meeting the client's long-term goals.

Before high-quality referrals are made, you must clearly know and confidently communicate your differentiators so that existing clients recognize your value and can articulate it to others. Remember, if value is judged only by performance, then the quality of your relationships--and your referrals--deteriorates whenever markets decline. You must realign clients' perceptions if you want them to emphasize your real value--those that you can control--when talking to prospects.

As an advisor, you cannot guarantee positive market performance, but you can provide relevant benefits to your clients and their referrals across the inevitable market cycles. By translating your value into benefits clients can understand and relate to, you will develop an emotional connection that builds client loyalty, referrals, and ultimately, your business.


Susan L. Hirshman, CFP, CPA, CFA, CLU, is a managing director for JPMorgan Asset Management in New York. In that position, she develops strategies to provide wealth solutions to the affluent market. She can be reached at susan.l.hirshman@jpmorgan.com.

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