Steve Luckenbach’s article in the April issue of Investment Advisor, “The Path to Authentic Client Service,” centered on an indisputable point: The poor image the financial services industry suffers can’t be elevated without improved service. I loved his sincerity and intent. The goal of optimal service is beyond dispute. To accomplish that, in my view, more tactics are needed than those he presented.
Think IBM in the 1940s, ‘50 or ‘60s: It never, ever had the best computer by any industry standard—yet always dominated the field. Why? Because while it always had a very good computer (comparable to the role of investment returns in our realm), it also was superior in all the other business disciplines, creating the best overall customer interfacing package. IBM particularly stressed besting peers at a near holy trinity of sales, service and marketing. This multi-generational Watson family/IBM multi-disciplinary commitment is legendary.
Too many RIAs think one-dimensionally and see marketing as advertising and self-promotion—particularly smaller firms—and, somehow in our intangible world, bad even though it is no different, truly, than with tangibles. That sour image taints the phrase “marketing.” Fact is we don’t do nearly enough marketing if you see marketing correctly. Simply, great marketing starts with consumer learning—which is the initiator to all great sales and service.
The Proctor & Gamble Effect
Yes, many do marketing. Fewer know what they’re doing. It is indisputable, in my opinion, that Proctor & Gamble has demonstrated marketing excellence almost forever. And a Proctor & Gamble marketing alumni knows for a fact that marketing doesn’t start with self promotion, but with a disciplined, intimate, evolving consumer learning process—and that fuels all client interfacing actions. Without it, sales and, as importantly, service will be sub-optimal and off-base.
Many RIAs will dispute that, claiming they know their client intimately because they deal with them closely. If you think that way I ask you to contemplate what is more important: what your prospects and clients say to you, or what they say behind your back? The latter dominates.
You Must Focus On It
Ironically, my firm is often criticized for doing too much marketing because of our ubiquitous advertising. But folks don’t fathom the amount of consumer learning behind our ads. Forgetting other consumer learning tactics, in a given year we do between 20 and 75 focus groups scattered around America—each aimed at learning a specific tidbit we don’t know about how our clients or prospects think and feel, so we can better advertise, sell and service. I emphasize all together because, as I cover later, á la IBM, they all feed each other. The purpose of focus groups is to get participants to say things central to their needs and desires that they would never, ever say to you via the sales or service effort.
From focus groups we know prospects search advisors out online, but existing clients rarely do. Existing clients don’t feel they need to: They judge you based on their interaction with you. Hence websites and all search engine optimization efforts are better aimed at prospects than clients. If your first Google page falsely conveys that you’re terrible it will impair your ability to get new clients, but hardly hurts at all with existing ones.
We’ve also learned that most clients have a slight hostility to any new service offered. Their perception? Any new service must somehow take resources away from what they were getting before; since they were okay with what they were getting, this new service is probably negative. Any new service must be presented to overcome this as: “This newbie is not a diminution of your prior benefits.”
Hence, too much service is bad sometimes. We learned most clients don’t like our long, exhaustive quarterly review—it’s too much for them and they don’t even try to read it—but about 20% love it. So we do it, provide a brief executive summary that implies they don’t need to read the rest, and presume we’re doing it for the 20% not the 80%. Of course we don’t know with certainty which are which. Then, we do a weekly one-page review that the 80% love, but the 20% don’t mind—because it’s short.
Another silly lesson you may hate: We learned overwhelmingly clients don’t want a Christmas present—irritates them now matter how you twist it—but they won’t tell you directly.
Early on in client focus groups we learned startling realities I’d never envisioned. One time the group moderator was late. The clients were there alone for a long time and started rambling. Turns out if you leave clients alone together most love it. Their termination rate drops through the floor. We saw things I never fathomed just by putting people in a room alone and letting them talk among themselves. First, counter to what you may fear, the happy ones talk up the unhappy ones—not the other way around. The happy ones act toward the unhappy ones like psychologists. The happy ones like that. The unhappy ones need the unbiased counseling. They all happy up! Second, they feel it’s unique since they truly distrust our industry and don’t think any advisor would allow clients to spend extensive time together comparing notes. But since we trust them to do so, they feel they can then trust us.
So, we created a national program where we hold lunches at local restaurants—paid for by us—with about a dozen clients each, picked at random in a given geography. A firm representative (sometimes provided by the restaurant) is there to introduce everyone, who then explains he or she will leave and they will be alone to compare notes and discuss whatever they want. The termination rate from those attending is about 10% of that for our firm otherwise. Another benefit: About half these folks become friends after the event, and clients have a hard time firing you, it turns out, if their friends remain with you. We try to get as many of our 25,000 clients to these lunches as we can every year for obvious reasons. It pays for itself. It’s one of many unique, easy forms of service that came directly from doing consumer learning.
Being Specialized Takes Labor
Another example: We don’t appeal to everyone and neither will any firm. Some folks act startlingly different than others confronted with the same inputs. You’ve seen that among your clients. So we took some people as obvious variances and started doing formalized profile surveys to ask questions. From that we learned that among our client base we have six drastically different groups of psychological profiles, as different as night and day, all wanting different things. Knowing that helps us sell and service them more uniquely. We have more specialization of labor than most of the RIA world. But from knowing these personality profiles we can engage in still more specialization along profile lines which further benefits our clients.
Our sales people don’t set their own appointments. Using this profiling information we’ve learned to have our appointment setters ask a set of nine questions that have a greater than 95% probability of putting the prospect correctly into one of these six profiles. Our client service people can do the same thing again with existing clients. From that we are early in the ability to more clearly target sales and service to their personalities in a scientific way. All this comes from consumer learning.
Love and Marriage—You Can’t Have One Without the Other
One personality group simply wants to delegate via trust—that’s it. To them trust is most important and earning it is all you need to own their heart. Another group wants continual reaffirmation that you can provide expertise—what we call an expertise engager. For them it is seeing the expertise that provides confidence. Another wants counseling, pure and simple—appreciates advice the way they would with a psychologist or minister. Another is a controller and wants to feel like they’re in control, even if you’re doing it. A fifth group mostly wants to be left alone and for them good client service is minimalist—less is more. Finally, there are hobbyists. Today we can target these personalities early in the relationship, and can tie everything from our direct marketing activities and post-sales service activities directly to psychological profiles. Soon we hope to have our sales force specialized the same way. Yeah, so what? My overarching point is marketing is consumer learning, which feeds sales and service in ways they can’t feed themselves.
Small advisers legitimately can’t afford to do much of this. Depending on how you do focus groups, each costs between $6,000 and $10,000, and requires contracting with a moderator who runs the group—different ones operate slightly differently. It’s non-trivial to know what is best for you. Then, too, the RIA hasn’t built a skill set to figure how to ask the best questions to get the information sought. Hence initial efforts can be frustrating, causing RIAs to give up. My advice: Band together with other RIAs to share costs. If you did 10 focus groups, sharing costs with nine buddies, and sat behind the screen each time, it would cost you maybe $8,000—but you would learn a lot. The real question: Will you have the courage to act on what you hear clients and prospects say that you’ve never heard before because they’re saying them behind your back, not to your face?
Don’t Subordinate Sales
Too many advisors who want to provide better service think we should “shift our focus from selling to service.” Wrong! There is no need to discount or deny either. Á la IBM of old, sales, marketing and service all reinforce each other—a near holy trinity. You can’t have one without the other. A great professional sales organization lets you see if you can tactically apply the things you think you learn in consumer learning. As Steve Luckenbach has said well, “Don’t believe everything you think.” True marketing is a cauldron of idea generation and creativity. Selling separates great ideas from great outcomes; but then, so does service. My advice has long been to do them all equally. Separate via specialization of labor: your sales folks from your post sales service folks. Now you get two sets of ideas from different vantages on what you’re doing with your clients and potential clients. See them as two different sets of internal consulting organizations you can lean on and listen to. The RIA world has too long thought of itself as a specialized craft somehow separate from Main Street, but we are basically a consumer services function and have more to learn from consumer services and products companies than from Wall Street—or any craft. Craft is limiting. Great marketing, sales and servicing, applied equally, is uplifting to you, your prospect and client.
Ken Fisher is CEO and chief investment officer of Fisher Investments in Woodside, Calif. Read more about him from the 2011 IA 25.