For many advisors, particularly those catering to the affluent, winning the business of a prospective client requires more than a demonstration of one’s own abilities. They often also have to plant doubts about an invisible third party–the client’s current advisor.
That job is made easier, say sources interviewed by National Underwriter, when the current advisor fails on two counts: the quality of the expertise delivered; and, more importantly, the quality of the relationship.
“When an advisor communicates ineffectively and delivers a substandard outcome, that’s when [a client's] blood really begins to boil,” says Phil Buchanan, a senior instructor and consultant at Cannon Financial Institute, Athens, Ga. “They’re ripe for the picking by advisors who are committed to delivering a superior experience.”
Indeed, say experts, that ability to deliver a superior experience–to ‘wow’ the client, in the words of one–is key to establishing a durable relationship. The advisor who has earned the client’s trust but blunders by suggesting an inappropriate product or tactic may be afforded an opportunity to right the error. Clients are less forgiving when they have received the reverse: competent advice, but a poor relationship.
That’s not to say expertise, or lack thereof, should be discounted. Observers note examples where advisors made recommendations–some bordering on malpractice–that led to an irreparable rupture with the client. Simon Singer, a financial planner with the Advisor Consulting Group, Encino, Calif., cites a case of an 85-year-old woman who was sold a deferred annuity that entailed a 25-year surrender charge and a 20% commission.
Randy Scritchfield, president of Montgomery Financial Group, Damascus, Md., says that one of his clients, having been rated a substandard risk for health reasons, was lured into buying a life insurance policy for which the premium payments–$1,200–totaled more than one-quarter of his monthly income and secured a death benefit of only $25,000.
Other examples, though less egregious, might also send up red flags. Brian Walsh, a partner at Walsh and Nicholson, says he frequently speaks with prospects who named the wrong beneficiary (or no beneficiary) on a life insurance contract; were inappropriately sold class ‘B’ share investments instead of ‘A’ shares; or were never asked basic discovery questions about wills, plans for kids and long-term objectives.
How should advisors treat such failures? One thing they ought not to do, sources stress, is to badmouth the existing advisor.
Says Scritchfield: “One has to tread carefully when criticizing [an advisor] with whom the client has been working because this may be viewed as questioning the client’s judgment.”
Micheline Varas, an advisor with Vancouver, B.C.-based Equinox Financial Group Customplan, agrees, adding: “I don’t think anyone earns credibility by cutting someone else down. That makes the client second-guess the advisor who’s doing the criticizing.”
Producers also agree that, except in cases where clients were woefully ill-served, advisors should endeavor to preserve existing products and plans, tweaking them as necessary to better conform to the client’s objectives.
Scritchfield, for example, advised a couple in their late 60s to diversify a variable annuity that comprised primarily high-tech mutual funds. To recommend replacing the annuity, he says, would have been “irresponsible” because of the high surrender charge and the lost death benefit.
Sources differ about the wisdom of maintaining an existing client-advisor relationship. Singer says that, circumstances permitting, he’ll recommend asking a current advisor to join discussions with his own team of experts. He thereby enhances his chances of co-opting the existing advisor and of avoiding potentially contentious discussions over conflicting recommendations.
But accommodation, he adds, is not always feasible. When an existing plan is too far removed from the new advisor’s recommendations, then counseling clients to consider breaking with the current advisor is the best of course action.
“Generally, I don’t like to get personally involved in these decisions,” says Singer. “I don’t want to alert the now enemy [advisor] that something is going on in the woodpile.”
Such counseling also can backfire: Forced to choose between competing advisors and recommendations, the client might opt to stay the course, or tap the new advisor but later bolt.
That prospect, says Buchanan, highlights the importance of delivering a “superior experience.” Many advisors fail to inspire prospects, he notes, because they haven’t positioned themselves as the “go-to” person that many clients–particularly high-net-worth individuals who are accustomed to interfacing with multiple professionals–say they want. Or they haven’t defined the profile of client they want to serve.
Such advisors, he adds, generally occupy the “moveable middle” within their companies (e.g., advisors ranging from the 26th to the 65th percentile in terms of premium revenue generated, assets under management and the quality of the relationships they enjoy with clients).
In addition to defining a target audience, advisors must also establish a niche area of expertise and partner with colleagues who offer complementary skills, observes Varas. That may mean sharing commissions, but the rewards are greater than are achievable by not partnering.
“When you become an expert and surround yourself with other experts, you create a practice that’s geared toward always providing clients with the best available advice,” she says. “The commissions are far greater than is possible working as a generalist. And you make yourself referable.”
‘One has to tread carefully when criticizing [an advisor] with whom the client has been working because this may be viewed as questioning the client’s judgment.’