From the February 2010 issue of Investment Advisor • Subscribe!

The Affluentialist: Trends in Client Communication

Stronger channels boost productivity, satisfaction, and profits

Nothing will completely replace the benefits of face-to-face client meetings, but the pressure for greater efficiency and convenience is propelling advisors to try new means of communication. Not surprisingly, most new channels appear with new technologies or updated applications of old techniques.

Following are eight technology trends affecting you and your clients to which you should pay attention.

1. Productivity Is Connected to Dollars Spent on Technology

Broker/dealers that carve out larger annual budgets for technology have more productive advisors, according to a 2009 study by Cerulli and the Financial Planning Association (The Cerulli Edge Advisor Edition, Second Quarter). The right technology correctly applied drives higher levels of practice efficiency and allows staff members to take over tasks formerly assumed by advisors. With the saved time, advisors can devote more of their energies to client relationships and building their practices.

2. Advisors Are Online More

Months of market turmoil have propelled advisors to spend much more time online--25% spent an additional three hours weekly looking for ideas to build their practices, reviewing client information, and communicating with clients, according to a report released last fall from the financial industry research and consulting firm kasina (What Advisors Do Online 2009). Interestingly, the use of technology was tied to an advisor's age, assets under management, and type of practice. For example, advisors aged 36-50 used Blackberries to access online content--not just e-mail--more than other age groups, and another 10% planned to start using their smartphones in that way.

3. Multiple Channels Are Best

Successful relationships with affluent clients depend on many factors, but a 2009 Forrester study unearthed a surprising technology influence (U.S. Millionaires Use Multiple Channels to Interact With Their Financial Advisors). The more channels each client uses to communicate with an advisor, the greater the level of satisfaction with that advisor. Frequency of contact drove satisfaction, too, but more so when combined with wider choice of communication channels.

According to the study, most wealthy clients already interact with their advisors via many means:

o Most wealthy clients interact with their advisors via at least three channels.

o Almost 60% of those who use advisors have communicated with their primary advisor using three or more different channels in the past 12 months.

o Clients find the most satisfaction from telephone and in-person meetings.

o For e-mail, 62% consider it an acceptable method of communication.

4. More Senior Clients Tweet and Surf

Most wealthy investors of all ages spend time online each week, with more than 90% of those devoting at least one hour to working on financial activities, states a 2009 Spectrem Research finding (Communicating Effectively With Investors). Surprisingly, the study discovered that the 18-50 age group and the 51-60 group spent almost identical hours online. For those over age 61, however, many more didn't touch a keyboard, but for those who did, half spent one to 10 hours online and 32% more than 11 hours (see Older and Online sidebar).

5. Compliance Concerns Prevent Many Advisors From Using Social Media

While some independent advisors have taken a running leap into the social media pool, many of the larger financial services firms remain extremely conservative about what they allow advisors to say. Once FINRA releases its upcoming new guidance on social media--especially the details about approvals prior to posting new content--the firms may relax some, but their concerns go beyond FINRA to include liability and branding issues, for example.

6. Communicating Proactively Means More Than Telephoning

Although many advisors added staff in recent years to service client needs, those employees with more experience in back-office tasks weren't much help when the phones started ringing as the markets trembled. "Advisors realized they needed to do a couple of things as a result of the downturn at the end of 2008 and into 2009," notes Joel Bruckenstein, publisher of the Technology Tools for Today newsletter (www.techologytoolsfortoday.com). Some advisors narrowly interpreted the advice from practice management consultants to have a lot of touches with clients to only mean making phone calls and sending letters.

While it's important to remain sensitive to each client's preferred communication channels, those preferences evolve, as the trend data above indicates.

7. Video- and Audioconferencing

Videoconferencing has recently taken off as a new communications tool, particularly by firms with high-net-worth clients. This tool can be especially effective with clients who travel often or live part of the year in other states. In the future if there is a market drop, for example, advisors would already have videoconferencing capabilities in place. Instead of making 50 individual phone calls, they would use e-mail and other means to invite clients to the conference. Advisors would also have the advantage of adding stronger visual elements, such as PowerPoint slides prepared ahead of time and whiteboard notations to illustrate key points during the online meeting. It's also easy to record the sessions and post them as videocasts of the event on a Web site for viewing by other clients who couldn't attend live--and for prospective clients wanting to learn more about a potential advisor. The recordings also provide advisors with the opportunity to review their presentation skills and refine them for the next conference.

8. A CRM System Can Drive Communications and Efficiency

While some advisors have aggressively pursued efficiency with new applications for unified investment platforms, financial planning, document sharing, customer relationship management, and secure Web sites where clients can download their statements, the majority seemed to be figuring which functions they need and how it all works together. Improving workflow and sharing of client data across platforms so it doesn't need to be entered several times into different applications is the focus of many in the industry.

Customer relationship management (CRM) is one example for improvement of client communications where firms could find the technology that supports their relationship building. When all staff uses it with a clearly defined workflow, a CRM system would become the central repository for all client data, activities, task management, reports, and documents. Meeting notes, e-mails, phone calls, etc. would all be available. While the benefits may be clear, adoption has been gradual. At least one prominent firm with ultra-high-net-worth clients still uses spreadsheets as their "CRM system."

At the Heart, Communicate

New technologies have played a major role in the growing number of independent advisors and in the transformation from commission to fee-based practices. When the old wirehouses no longer controlled the securities transactions--and the discount online brokers offered cheap trades--advisors moved to consultative client relationships to provide value. Today, even sole proprietors living in rural areas have access to sophisticated financial planning applications and retirement planning tools plus a full range of products on one platform from broker/dealers.

The most recent period of market turmoil has once again proven that regular client communication remains the heart of a practice built for the long term. When clients initiate most contacts or when advisors learn much later about major family events, the communication bonds aren't strong enough. Technology can help.


Lewis Schiff is the principal of Advanced Planning Group, a private wealth specialist for advisors and their clients and the author of The Middle-Class Millionaire. He can be reached at lewisschiff@advancedplanning.org.
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