One of the central pillars of securities regulation, the “know your client” rule, requires firms and their representatives to use reasonable diligence in opening and maintaining accounts.
Knowing a client from a compliance perspective continues to be essential, of course, but in today’s hyper-competitive environment, deep knowledge of what constitutes client satisfaction with an advisor’s services has become equally important.
Financial advisors certainly know that clients are satisfied by responsiveness and performance. But those are essentially first-tier criteria.
Advisors can miss specific and perhaps deeper drivers of satisfaction by not probing to discover what clients actually want — a very rational response to the concern is that the advisor may not be able to satisfy a need once it is revealed. There’s a related belief that it’s best not to disturb a seemingly satisfactory relationship.
In either case, an advisor could be missing an important signal that would increase client satisfaction and strengthen the client bond.
Mentioned in a previous article was a recent study by the consulting firm of Oliver Wyman. After surveying clients of financial advisors, that study found that 77% of those surveyed would appreciate receiving advice about property and casualty (P&C) insurance from their advisor or an expert the advisor suggested.
In addition, almost half those clients surveyed said they would be more satisfied with their adviser if P&C advice were part of the mix the advisor provided; even more telling is the fact that more than a quarter of study participants said they would increase the amount of money they invest with that advisor if he or she made such advice available.
Significantly, 41% would also stay with the advisor longer, and half said they would be more likely to recommend their advisor if P&C analysis were part of the mix.
That level of sentiment about an area that infrequently comes up in advisor-client discussions may come as a surprise, yet P&C coverage is one area an advisor can readily address, even if they are not experts themselves, by developing relationships with professionals in the field. And, developing such relationships could be rewarding.
Clients, especially those who are financially successful, perhaps instinctively realize that without proper coverage they are at risk. That risk extends to financial advisors, who may not be aware of the extent to which the portfolios they have carefully crafted could be decimated if the costs of an accident or home repair exceeded the coverage of a client’s insurance policy.
In far too many cases, advisory clients have had to empty their investment accounts to bridge the gap between the reimbursement they receive from their insurance company and the total expense of repairing the damage, paying legal bills or satisfying a settlement from a personal injury claim. I’ve made this point before, but the concept of asset protection is so important, it bears repeating.
Even if the worst didn’t happen, financial advisors can demonstrably show their value by developing relationships with insurance experts who can help their affluent clients get more comprehensive P&C coverage and save money at the same time. Many clients are unaware of the potential discounts and savings that are available when using an insurance expert to find the best coverage in the most advantageous combinations.
Because only 28% of advisors provide P&C insurance advice either directly or through an outside expert, it seems clear that advisors who ask clients about their coverage, and then can provide a source of analysis and counsel, can enjoy a competitive advantage over their peers. In fact, 37% of successful individuals responding to the Oliver Wyman survey said they would consider switching to an advisor who provided such a service.
It seems like the time is right for advisors to address their clients’ P&C needs. If you have any questions about this topic, please email me at AskFran@Chubb.com.
Fran O’Brien is Division President, North America Personal Risk Services, Chubb.