Clients have never been more jaded, or advisors more fatigued. And no wonder. As advisor coach Matt Oechsli, who heads the Oechsli Institute in Greensboro, N.C., puts it: “Right now, we’re in a Category Five financial tsunami. The trust factor the affluent have with Wall Street has been shattered, and it’s unlikely to be rebuilt to the level we’ve known it in our lifetime. People are spooked. People are scared. And affluent clients, who are usually pretty much on top of these things, are beside themselves.”
Yet a new Oechsli Institute “data point” suggests that only 13.4 percent of advisors have increased their personal “face time” with clients. And that’s very bad news indeed when you consider this sobering statistic: Following the 2002-2003 market decline, according to Spectrem Group, it took up to four years before investors were happy with their advisors again.
“There’s a huge lag between market recovery and relationship recovery. Research shows clients wanted to hear from their advisors much more often and it took many years before they were comfortable again,” notes George H. Walper Jr., president of the Chicago-based research and consulting firm. “If the market rebounds over the next six months, advisors can’t just take a deep breath and say it’s over with.”
All but forgotten in this mess: Difficult markets are the best time to win new assets. Why? Investors are starving for good advice and a compelling value proposition that combines solutions with high-touch communication.
When the dust finally settles, John Bowen, CEO of CEG Worldwide in Northern California, predicts the largest group ever of losers and winners as the advisory market shakes out.
“It’s clearer than ever before that it’s about the relationship,” he says. For the most part, investments have been commoditized — and the only asset class that’s up is cash. “There’s no place to hide,” he adds. “It takes being proactive, and the opportunity to win hasn’t been better.” Already, Bowen has observed some sizable results. One advisor he knows, for example, worked his top 20 clients hard and brought in millions of dollars in new assets in 30 days. Another has grown his business by over 50 percent. For that matter, staying even in a declining market like this one is no mean feat.
“What a lot of clients are saying is that they are extremely frustrated and they don’t trust their advisors,” Bowen says. “Frankly, what advisors do over the next year on being proactive will define the rest of their careers.”
That’s tough talk — with huge consequences.
Here are 10 tips to help put your practice in the win column:
1. Communicate. It’s such a basic, but most advisors fail at it on a fundamental level. Consider this: A recent Spectrem Group survey shows that failure to return phone calls is the most common reason for high-net-worth clients to part with their advisors.
Still, significant numbers of advisors have gone into a duck and cover mode. “They’re doing it for very human reasons: The news is miserable. People are emotionally upset because they’ve had so many losses and some actually blame their advisors. To put yourself in front of your clients in an environment like this is to open yourself up to being vulnerable and open to people who are really stressed out and negative. To say the least, it takes a lot out of you,” says Michael E. Kitces, director of financial planning for Pinnacle Advisory Group in Columbia, Md.
But just a little human outreach goes a long way.
As Dennis Gallant, president of Sherborn, Mass.-based Gallant Distribution Consulting, notes: “I know one advisor whose client called and said ‘I know you’re busy. I know you told me not to worry. I just need you to tell me one more time.’ The client just wanted reassurance and the advisor calmed him down. All of that is about communication. If you’re not communicating with your clients, you’re going to lose money. This is going to be a huge weeding-out period.”
2. Set up relationship reviews. Joe Lukacs, president of International Performance Group, a financial advisor coaching company in Melbourne, Fla., suggests re-profiling your top clients and asking such questions as: What is most important to you about our relationship? Are we meeting your requirements? Is there anything else we can do to enhance the communication between us? What is most important to you with regard to your money and investments? What are your concerns about your portfolio?
“The client you’re working with today is not the same client they were pre-October. We’re at a seminal moment. Things won’t go back. There isn’t a normal anymore,” says Lukacs. “I’m advising all of my [advisor] clients to re-profile — and they’re finding shifts in what’s important to clients in terms of risk tolerance and what they want out of their relationship with their advisor. This has to be formalized. You can’t make assumptions.”
3. Go after all of a client’s assets. There is no better time than in a fractured environment like this one to press this key point. Set up an appointment and pursue this tack: ‘I can’t be a full solution provider unless I have all of your assets.’
As Gallant notes: “This is a terrific opportunity to talk to clients you have partial relationships with. The clear message here is: Until I get all of it, I can’t provide any solutions. I can’t protect on the downside or manage risk if I only have a slice of their net worth.”
4. Focus on referral marketing. In a disjointed market, nothing carries more weight than a referral from a trusted source. “Right now, this is probably the most critical thing an advisor can do,” says Matt McGinness, principal of Best Practice Research in San Diego. Hand out business cards and brochures to your clients and centers of influence, asking them for referrals. “Put the things in place for your clients to talk about you and your firm. Create the mechanics.”
And here’s a heads-up from the Oechsli Institute: While 83 percent of affluent clients have a negative reaction to being asked for a referral, 79 percent say that, if asked, they would gladly introduce their advisor to someone “specific” — such as their sister, Mary, or accountant, Joe.
5. Craft your story. How easy have you made it for your clients to talk about you and your firm? For an analogy, McGinness points to the fictional Tom Sawyer. “Everyone remembers how he got the kids to whitewash his fence, but how did he do it? He told a whopper of a story about how much fun it is to paint,” he says. “If you want your clients to do that difficult job for you, you’ve got to make it easy for them to talk about you.”