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Financial Planning > Charitable Giving > SRI Impact Investing

Client Engagement on the Rise: Advisor Impact

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For those who think financial advice is commoditized, think again. A new report from the research and consulting firm Advisor Impact found that nine out of 10 clients said the advice they received played an important or critical role in meeting their financial goals.

 The report, titled “The Rules of Engagement” and sponsored by Genworth Financial Wealth Management, contained surprisingly good news for advisors and the job they’re doing. It described 28% of clients as engaged clients, up from 24% a year ago. Some of its other findings:

• 79% of clients said they somewhat agreed (46%) or strongly agreed (33%) that their advisor added value over and above market performance

• 66% of clients said they somewhat agreed (43%) or strongly agreed (23%) that their advisor delivered value relative to fees charged

• 84% of clients said they had a high (31%) or very high (53%) level of trust in their advisor

• 64% of clients described their advisor as a strong leader, jumping to 84% among clients the report categorizes as engaged.

While the results of the study are positive, Advisor Impact CEO Julie Littlechild points out that there is work to be done. She notes that trust in the industry as a whole is low, despite high levels of trust in individual advisors (there is substantial untapped potential). Also, advisors only meet with 10% to 15% of the referrals that are made to them.

The latest report draws on data collected through Advisor Impact’s Economics of Loyalty research, launched in 2008 and now being conducted annually in the U.S., Canada and the United Kingdom.

Julie Littlechild“Our new Client Engagement Index is a simple but powerful reflection of the health of an advisory business and of the industry,” Littlechild (left) said. “As compared to other measures of success, it is the only one that captures the quality of the client experience and actual referral activity in a single number.”

The Client Engagement Index is being published in the context of several other metrics, referred to as the “Essential 13”, a set of data points that will be tracked on an ongoing basis to assess consumer sentiment, the role of advice, key performance indicators for advisors, and the impact of engagement with respect to value and trust.

“We believe that client engagement is the most critical metric for advisors and for the industry because it reflects both the client experience and the potential for growth. Engaged clients are the most satisfied and loyal, they perceive higher value in the role of advice and they will drive almost all referral growth for advisors,” Littlechild said.

According to the current Advisor Impact study, Client Engagement—which is a composite score reflecting individual levels of satisfaction, loyalty and referral activity—has increased four percent since 2010, which is when the last study was completed.

“It is gratifying to see the Client Engagement composite score move from 24% to 28% over the past two years,” Littlechild said. “This tells us advisors are working harder to build relationships and shore up the erosion of trust we saw as a result of the market scandals and banking crisis in 2008 and 2009.”


Read Financial Planning and Commoditization, Pt.1: Defining Terms by Michael Kitces on AdvisorOne.


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