A new school year is starting, and kids are going back to the basics–trading summer camps for classrooms, skateboards for school supplies, and video games for textbooks. Like these returning schoolchildren, investment advisors are also going back to basics this year as they attempt to navigate the current market environment. In this month’s article we will examine one of the most important basic skills receiving renewed attention: client relationships.

Advisors’ return to relationship basics is one of the largest shifts we’ve seen in ten years of collecting data through AdvisorBenchmarking. The 2008 market crisis has advisors focusing on fundamental issues such as regaining assets and effective client relationship management. Advisors ranked “relationship management” as the most important area for running an advisory firm, according to almost half (45%) of survey participants. They also named finding new clients (88%) and communication with clients (79%) as the most challenging areas of their businesses. In other words, advisors are struggling with some of the most basic aspects of the business: client relationship management and client communication.

Relationship Managementis the Key for Referrals

The advisory business is a people business, and relationship management is a critical component of an advisor’s job. People prefer to work with someone they like at the best of times. In light of the market meltdown, worried clients will increasingly demand expert interpersonal skills as well as excellent financial management from their advisors. One of the major challenges for investment advisors today is how to attract new clients while retaining current ones. For both jobs, good relationship management is key.With a tough 2008 behind us, many dissatisfied investors are shopping for new advisors–and asking friends and family for suggestions. There is tremendous opportunity now to sign on new clients by actively seeking referrals from your existing ones. Most professionals (86%) believe that their top source for increasing assets under management (AUM) in the next five years will be referrals from existing clients–continuing the trend we’ve seen in the past. In our 2008 survey, advisors reported gaining more clients by actively seeking referrals than they had in 2007–12% compared to 5%. However, many advisors confided that they are uncomfortable with soliciting referrals from clients. They don’t feel confident with the process and don’t have formal referral programs in place.

How can you help yourself solicit referrals and attract new clients, as well as manage existing client relationships? Start by polishing your communication skills. To go back to the basics:

l Ask questions and listen carefully.

l Articulate your ideas and your advice with conviction to inspire a positive client response.

l Find meaningful ways to assess and address clients’ core values and concerns.

l Consider asking your clients about their communication preferences–in person, by phone, or through email. While younger clients may prefer e-communication, older clients may prefer more traditional phone and in-person contact. But don’t make assumptions–ask them.

l Consider a client satisfaction survey that assesses how well you’re doing in all aspects of your practice, such as your responsiveness, proactive approach, and performance. The answers can help you focus your relationship management strategies to ensure client loyalty and stability.

l Consider putting an emergency communication plan in place so that the next time you need to reach out proactively to clients you’ve got a foundation in place to facilitate it.

The basic fact is this: Clients can be your advisors too. They can tell you what they need from you to remain satisfied and loyal customers. They can advise you on prospective new clients who are dissatisfied with their current investment advisors. Good client communication and relationship management are your keys to tapping client advice–and taking advantage of opportunity in the investment advisor market today.


Maya Ivanova is a market research manager with Rydex|SGI AdvisorBenchmarking She can be reached at mivanova@advisorbenchmarking.com.

Rydex|SGI AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business.

AdvisorBenchmarking is an affiliate of Rydex|SGI. The analysis on Rydex AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general in nature, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments|SGI and it affiliates or any of its affiliates.