The IA 25 is decided each year by the editors of Investment Advisor, this year with the assistance of all the editors in the Investment Advisor Group, including those whose main efforts are spent at Research magazine and AdvisorOne. Most of the candidates are championed by editors who descry the influence of said candidate from their own perspective. But others are determined by popular acclaim among IA 25 honorees and advisors. Julie Littlechild, president and founder of Advisor Impact, is such a member of the IA 25, as she was last year. At advisor conferences, where she is a popular speaker, and in conversations around the industry, Littlechild and her cogent research are mentioned constantly.
There are many researchers who attempt to plumb the advisory world for insight into advisors’ preferred investing strategies or practice management techniques or their profitability levels. All those efforts are valuable and much appreciated. But nobody understands better how advisors interact with clients than does Littlechild.
"As an industry," says Littlechild, "we are at risk of selling clients short when it comes to the quality of the client experience. We have defined a standard of care (which puts the needs of the client first) and we have defined standards of competance (through CFP, PFS and other designations)." However, she argues, "we have not defined standards of service. As a result we are missing the third leg of the stool. An advisor can have good intention and strong expertise and still fail to deliver. And while a majority of advisors do, in fact, deliver a good or great level of service, standards are needed to help clients define and measure service delivery and to know that minimum standards are being met."
Clients, she says, need to know that their interests are paramount, that the advice they receive is sound "and that the service they are paying for is being delivered to the highest standard. If any one of the three is lacking that client may not reach his or her goals, which puts his or her financial future at risk. The industry, both advisors and clients, should demand an alignment between intention, knowledge and action. That is when the magic happens."
Advisors like to think that they understand their own clients very well. After all, they are their clients. They attracted them, they retain them. They serve them year in and year out, and if a few clients fire them, at least there are more coming in the door to replace those lost sheep.
What Littlechild does in her dispassionate researcher’s way is to point out that advisors may not actually know their clients as well as they think, that there are, as she says, “perception gaps” between advisors and their clients. A case in point from recent research among advisors and the clients of advisors that Advisor Impact has conducted (and which Investment Advisor and AdvisorOne readers will be able to read at their leisure later this year): In a preview of her latest survey on a matter of much interest to advisors—referrals—Littlechild described a yawning perception gap. Sixty percent of advisors surveyed said they had asked their clients for referrals, but only 16% of clients of advisors said their advisor had asked them for a referral.
Beyond discerning those gaps, which advisors can do with their own client base through Advisor Impact’s client audit service (it’s better if a third party conducts research among your clients), Littlechild is at least as interested in finding out how to close those gaps. What are the drivers of client engagement, she wonders, and by asking the right questions, she can find the answers. It appears there are four such drivers, by the way: fit, service, leadership and partnership. By improving client engagement, you not only make it more likely that you’ll retain that client and get referrals, but you’ll be on the path to honing a client list that matches your skills and values, and become more profitable along the way.
It might be the case, for instance, that an advisor is not clearly articulating to her clients what her value truly is. That goes directly to the heart of referrals as well, of course: If your clients don’t clearly understand what you’re providing and why you’re particularly good at it, they won’t be able to re-articulate that value to their friends, family members and other people who might benefit from what you have to offer. Julie Littlechild’s research is helping to push the practice of financial planning squarely into its future as a profession.
Returing to her theme of what constitutes a meaningful service standard, Littlechild says it should be characterized by a clear definition of what a client can expect that is communicated to clients and reviewed regularly, a process to ensure those standards are appropriate for, and understood by, clients and a means to measure success in delivering on those standards.
"What is different about defining a standard of service is that the standard can technically change based on the needs of the client but this does not excuse a lack of standards around what a client can and should expect," she said. "In our world this also means finding a way to measure success: feedback allows an advisor to ensure that he or she is delivering on a standard of service that may differ by client.
Referring to her work, she says "we're on something of a mission to help advisors define, measure and drive deeper relationships with advisors. Ultimately that process benefits both advisors and clients."
Find out who was named on the 2012 IA 25 in Investment Advisor's May issue.
Check out more extended interviews of the 2012 IA 25 at AdvisorOne.
Read more about Julie Littlechild from the 2011 IA 25.