Assumptions are helpful things. They provide us with a shortcut on decision-making, a way to justify our actions and a way to filter out the voices of those who disagree with our approach. They make life a little easier—unless of course, they are wrong.
Each year, Advisor Impact talks to investors across the United States, Canada and the U.K. as part of its Economics of Loyalty research. The results challenge some long-held assumptions, which go something like this: “If I can understand what drives client satisfaction, then I can do more of those things for my clients. If I do more of those things, my clients will feel great about the client experience. If they feel great, they will tell their friends and family. And, if that happens, I will grow my business.” The shortcut assumption is that if I focus on creating client satisfaction, I will grow my business.
In fact, our research highlights a tenuous relationship between satisfaction and referrals, but a very strong relationship between engagement and referrals. It also highlights the fact that the drivers of engagement and satisfaction are different. That means that seemingly innocuous assumptions might stop us from focusing on those activities that will truly drive growth.
Not satisfied to simply point out the potholes in the road ahead, Advisor Impact initiated an advisor-level study, speaking to more than 600 advisors, many of them Investment Advisor and AdvisorOne.com readers, on how best to execute the drivers of engagement. Clients can tell us what is important; the advisors who have successfully executed these strategies can help us do something about it.
The study culminated in the Engagement Roadmap, a model that highlights a tactical approach to both driving and leveraging engagement.
The Four Drivers of Client Engagement
The Economics of Loyalty identified 24% of clients as being engaged, which we define as those clients who are the most satisfied, the most loyal and who provide almost all referrals for advisors. The Engagement Roadmap picks up on the drivers of engagement and identifies the four activities that are most closely connected to creating that deeper level of commitment.
Step 1: Just Ask
The Engagement Roadmap begins with the most fundamental driver of engagement: giving clients a voice. Asking for feedback creates a sense of ownership and binds advisors and clients more closely together.
Ninety-four percent of advisors felt that feedback was critical to engagement. Of those who said they were using feedback very effectively, 73% used a written or online survey, 67% asked clients informally how things were going and 22% indicated they had used an advisory board. Whatever method you choose, use the opportunity to understand:
- Overall satisfaction on specific aspects of service
- What is most important to your clients
- What activities or communications they value the most
- What clients need and expect from the relationship
- If clients are interested in other services
- If clients have provided a referral
Advisors who felt they had an effective client feedback plan in place were differentiated less by how they asked than by how they used the information. Eighty percent of respondents actively followed up on client feedback in some manner.
Question No. 1 for advisors: Do you have an effective process in place to gather consistent and objective input on what your clients value, need and expect?
Step 2: Get the Fit Right
Most advisors readily agree that if the fit is not right—be that personality, values or style—there is a limited chance the client will ever become engaged. In fact, nearly 90% of advisors said ensuring that prospective clients met their definition of the ideal was “somewhat important” or “very important.” Despite that, less than a quarter of respondents indicated 75% or more of their clients met that ideal.
The Engagement Roadmap points to the five core activities to ensure that you are executing on this driver of engagement:
- Define your ideal client.
- Set minimum standards for prospective clients based on that definition.
- Create a defined process, typically a set of questions to ask during the discovery process, that will allow you to assess fit.
- Define a process to comfortably communicate to those prospects who do not fit.
- Define a process to assess your existing clients and determine if you will take action on those where there is not a good fit.
When describing the characteristics of the ideal client, as many advisors (69%) selected “shared values” as “minimum assets.” What differentiates those advisors who have implemented a successful process to assess fit is that they can connect their definition of the ideal with their onboarding process. They have found ways, informal or otherwise, to ensure that the client is right for them and they are right for the client.
One particularly telling finding: 80% of responding advisors said they were willing to walk away if the fit was not right.
Question No. 2 for advisors: Have you defined what characterizes your most successful relationships and linked that to a process to assess fit among prospective clients?