More On Legal & Compliancefrom The Advisor's Professional Library
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
You’ve been on a few "dates," and you talk on the phone every couple weeks, but how well do your prospects and existing clients know you and understand your core personal investing philosophy? Small talk breaks down barriers and common interests keep the conversation moving, but taking the advisor-client relationship to the next level takes some work—and a lot of research.
A recent Fidelity Investments survey gives us a head start by elucidating the communication divide that holds many advisors back from taking the big plunge with their prospects.
“This report highlights the importance of brokers and advisors creating robust public profiles that tell their stories, including their personal investing philosophies and how they—and others—value their services,” said Sanjiv Mirchandani, president of National Financial, a Fidelity Investments company.
Does your value proposition align with your prospects’ values?
Your ability to provide them with comprehensive financial planning is what will bring them to you in the first place. But once you capture their business, they tend to value the superior investment performance (60%), wealth protection (47%), and access to investments (36%) that you offer them. In other words, the basics are still key to a successful advisor/client relationship.
But don’t sell innovation short. One of the areas where advisors and high-net worth clients and prospects diverge the most is in their use of technology. Face time with HNW clients is a precious commodity, but don’t make the mistake of assuming prospects and clients prefer communication via traditional media like snail mail and telephone calls.
The survey found that HNW clients favor electronic communication media more than their advisors. Twice as many millionaires than advisors would like to use technology-enabled media—smart phone applications and social media. While 85% of millionaires are willing to communicate through social-media, e-mail, and text messages, only 43% of brokers and financial advisors share that willingness. And your millionaire clients are also more likely to use LinkedIn than you are (28% to 16%). And a third of millionaires already use social media in general as part of their professional life.
Facebook and other social media sites are still in a regulatory fog, but that shouldn’t necessarily stop you from testing the social media waters. The SEC and FINRA are carefully scrutinizing the use of social media at firms but haven’t yet drafted rules about its use.
As reported in an earlier edition of Advisor’s Journal, the SEC is requesting information about advisory firms’ policies concerning social media sites—both professional and personal—so don’t make the mistake of seeing social media as the Wild West of advertising. All rules that apply to in-person communications also apply to communications on social media sites, according to FINRA.
While the fundamentals of prospecting and client retention are still king, don’t make assumptions about your prospects’ needs and wants; they might surprise you. Face-time should be the goal, but don’t lose an opportunity to touch base through technology.
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See also The Law Professor's blog at AdvisorFYI.