No matter what type of business model an advisor follows, it’s their ability to understand their clients that is the key to their success, found a new study by the Financial Planning Association, Capital Preferences and T. Rowe Price.
The study, “The State of Client Understanding,” found that advisors who use leading “know your client” behaviors are more likely to get deeper fulfillment from more client relationships, get more referrals and see a higher net client growth rate than those advisors who do not engage in those behaviors.
The new study sought to identify behaviors and techniques that advisors can leverage to know their clients. Survey results came from 311 responses from advisors in the United States, Australia and New Zealand. The majority had 20 or more years of experience, had a mix of fee and commission business models, and were RIAs. Client count was evenly distributed among less than 70, 70 to 129, and 130 or more clients.
Other findings in the study were that high-performing advisors, or what the study calls “behavioralists,” deliver value “by pinpointing ‘say-do’ misalignments.” That is, those advisors who can identify the difference between what clients say and what their behaviors show, and constructively resolve those gaps, show a higher success rate with clients.
Findings also showed that advisors who spotted the say-do disconnect, and took action, had a 30% client growth rate vs. 11% for those who didn’t, had double the referral rate (18% vs. 9%), and more fulfilling relationships (75% vs. 60%), according to the study.
Know Their Family, Too
Also, those advisors who were “more proficient in ‘know your client’” practices spent more time engaging their clients’ partners and children, the study stated. Further, they were 40% more likely to discuss aging-related lifestyle transitions and cognitive decline with clients and their families.
Today, only one out of seven advisors actually have this ability with clients, said Pat Spenner, chief marketing officer of Capital Preferences. What do they do differently? “Excel at pinpointing say-do gaps and work with clients and coach on behavioral change,” he said.
Behavioralists also “embrace tensions and deal with [them]. They see [those] as “points of opportunity,” he said. “[Behavioralists are] kind of are like a life coach.”