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4 Ways for Advisors to Better Engage Clients

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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 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 Engagement Roadmap

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

Advisor Feedback

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:

  1. Define your ideal client.
  2. Set minimum standards for prospective clients based on that definition.
  3. Create a defined process, typically a set of questions to ask during the discovery process, that will allow you to assess fit.
  4. Define a process to comfortably communicate to those prospects who do not fit.
  5. Define a process to assess your existing clients and determine if you will take action on those where there is not a good fit.

The ideal clientWhen 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?

Step 3: Create a Deeper Connection

While engaged clients often describe their experience as intangible, like a deep personal connection, a sense of being guided or a sense of trust, those descriptions have tactical foundations. They do not happen by accident. Connection requires a meaningful client experience that is defined, communicated and measured.

The Engagement Roadmap points to the following core activities to create deeper connection:

  1. Segment your clients based on the value they deliver to the business.
  2. Define your service offering by segment, including frequency of contact, range of services and client appreciation.
  3. Analyze your capacity to ensure that you can deliver on your defined service standards.
  4. Communicate your plan to clients.
  5. Create a tracking process to ensure that no client falls through the cracks.

About two-thirds of advisors say they segment clients based on value, with the vast majority focusing on assets (83%) and revenue (78%). Assessing fit is about uncovering the deal-breakers. Segmentation, on the other hand, simply helps you define value in order to structure a meaningful and profitable client communication plan.

When to Walk Away from a clientWhat differentiates advisors who have successful communication plans is not only that they have defined annual contact goals (76%), but that those goals are tied back to client expectations. There is no one way to communicate with clients. Client input should help you determine if they value client appreciation events or activities (about half of successful advisors do them), if workshops are meaningful (about 40% of successful advisors do them) or if a written summary of action items from a review meeting will be helpful (nearly 70% of successful advisors do them).

Question No. 3 for advisors: Do you have a clearly defined client experience, by client segment, that is meaningful to clients and profitable to deliver?

Step 4: Take the Lead

Engaged clients describe their advisors as “leaders,” i.e., they provide guidance in making difficult decisions. According to our research, advisors who are leaders are (by client definition) those who are proactive, who provide reassurance and who keep clients focused on the long term and making the difficult decisions associated with doing so. A majority (87%) of advisors say they are “somewhat effective” or “very effective” leaders. The most recent client data in the Canadian market suggests this number is overly optimistic.

The Engagement Roadmap points to the following core activities to support leadership:

  1. Clearly define the role you will play with clients as it relates to their financial lives, considering the scope of your role across other professionals and the family, as well as how you would define strong leadership.
  2. Refine the client review to ensure you are actively focusing on the relationship in addition to the plan or portfolio.
  3. Conduct relationship reviews that will communicate and reinforce the role you play in the lives of your clients.

There is a perception gap between the advisor and client on the issue of the advisor’s role. While a majority of advisors feel they play a central role in their clients’ lives, many clients see that differently.

Question No. 4 for advisors: Do you have a clear sense of how your clients define leadership and the activities that will support that positioning?

Leveraging Engagement

In addition to considering how they might drive greater engagement, many advisors are rightly focused on how they can leverage their already engaged client relationships.

We know, from the Economics of Loyalty survey, that client satisfaction and client loyalty are not closely connected to referral activity. In fact, we know that being comfortable providing a referral is not closely connected to referral activity nor is asking for referrals. We also know that a small percentage of clients—your engaged clients—are providing virtually all of your referrals.

The research shows that clients refer to help a friend or family member. This simple fact further supports the notion that our fundamental assumption that our clients refer to help us grow our business is, at best, wrong. At worst, it may harm our relationships.

Asking for referralsAdvisors report that their clients are very comfortable providing referrals, with more than 70% of advisors indicating that half or more of their clients would refer. They are right; in fact, more than 80% of clients say they are comfortable providing a referral. The reality is that advisors said they only received, on average, nine successful referrals in the last 12 months.

While low, these numbers reflect the investor research, which clearly demonstrates that virtually all referrals come from a small subgroup of engaged clients. If nothing else, it is clear that if advisors are asking for referrals, that message is not getting through.

Question No. 5 for advisors: Do you have a defined process to leverage engaged client relationships to drive referrals?

Putting It All Together

Client engagement sits at the intersection of what is right for your clients and what is right for your business. Engaged clients are the most satisfied and loyal, and they drive virtually all of the referrals in your business. To that extent, engagement matters. The Engagement Roadmap takes those facts, drawn from client research, and asks for the next step. What are the specific tactics that will directly impact engagement and growth, and how can the 600 advisors we spoke to help you think about execution? But don’t wait: one step forward is all it takes.


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