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Financial Planning > Tax Planning

Why It's Time to Streamline Client Onboarding

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The COVID-19 pandemic is affecting almost every facet of daily life in America and around the world, with changes that many observers believe are becoming the “new normal” for most of us.

The independent advisory industry has not been immune from its effects. The widely publicized impact on businesses, and consequently our financial markets, is changing our industry as well.

The silver lining is that some of these changes are working in favor of several businesses, and the advisory business is one.

We’ve seen through our clients that the ongoing investment market volatility combined with the pandemic’s impact on most industries, and probably some of the psychological effects of “sheltering in place,” are driving many investors — who until now managed their own finances — to seek professional advisory help.

Here’s the bad news: The increase in business has revealed a critical weakness in how most advisory firms onboard new clients.

The problem is that most firm owners have not taken the time to consider the inefficiencies of the client onboarding process, and these can overwhelm the system during growth spurts.

This strains not only firm owners, but staff who are left to serve existing clients while also handling more new clients. New business is overwhelming, and advisor burnout is not a recipe for success.

Over the past several months, we have witnessed advisors not following up on prospects simply because they are tapped out and don’t want any more clients to serve.

Consider the revenue lost when your advisors have halfhearted meetings with qualified prospects and do not follow up. This may be stifling growth, and possibly could have major consequences on those firms for months or years to come.

The Growth Trap

Lack of time to follow up with clients is the real issue when an advisory firm goes through high growth periods. To solve that problem, start by looking at all the firm’s processes and determine ways to reduce any cost-inefficiencies. That means reengineering the firm to accommodate the growth all while hiring and training new advisors faster.

Improving the client onboarding process is the easiest and fastest way to transform time crunches and capitalize on growth opportunities. When a new client first agrees to work with the firm, onboarding serves as a trust-building process.

Most advisory firms will deliver this feeling of trust at the beginning of the client relationship by providing a detailed portfolio allocation and financial plan and front load a large amount of work in the first three months.

A typical onboarding process begins when the client schedules their first appointment. Typically, for most advisors, it means:

Week 1: A data-gathering meeting, where an advisor determines a client’s goals and gets detailed information about their financial situation.

Week 2: The advisor creates a detailed investment allocation and/or financial plan for a client.

Week 3: A presentation meeting, during which an advisor presents the investment plan and financial plan to the client.

Weeks 4–12: Implementation or when investment accounts are transferred, and investment and financial planning recommendations are implemented.

Week 12: A follow-up meeting, when the advisor reports plan progress to the client.

As you can see, during growth spurts, the labor intensity of the onboarding process over a 12-week period can create a high volume of work that needs to be done by advisors who already are serving existing clients.

In periods of higher than normal growth, how many new clients can your firm onboard in any given 12-week period? And, what are you going to do if the volume of new clients exceeds what you can service before you have time to hire and train additional advisors? Are you going to turn away prospects? We hope not.

Instead, the solution is often a realignment of the expectations during the onboarding process. We have found that most firms can avoid this growth trap by creating better systems within that process.

Under Promise, Over Deliver

Here are two ways to rework your new client process to help accommodate and survive higher than average growth periods:

1. Create “Methods of Engagement”

When a new client joins your firm, there is already a level of trust that has been built with your brand. The goal of the process is to deepen the trust, which is built in two ways: alignment of expectations and delivering the expectation.

If you say you are going to deliver in one, two, three weeks, you better deliver. But the same is true if you say you are going to deliver in four, five or six weeks. The point is, what you say you are going to do is what the client will expect.

We have seen much success during this pandemic when firms extend their onboarding processes from 12-weeks to 24-weeks. To do this, tell the client upfront what is going to happen over the 24-week period, ensuring you deliver on time.

When growth slows down, if you deliver faster, well, the client is usually pleasantly surprised by it.

2. Focus on allocation needs verses protection needs.

Many financial advisory firms produce a detailed financial plan at the beginning of the client relationship covering all the topics from retirement planning to estate planning to insurance needs. However, to allocate the investments properly, you only “need” to know the client goals, retirement objectives and tax issues.

The allocation needs are those that relate to investment accounts. All other financial “needs” relate to protecting their assets. Instead of producing a detailed financial plan at the beginning of the relationship, break it up into two parts.

In the first 90-days, focus on what needs to be known to allocate the investments, and in the next 90-days, focus on the remaining needs, like adjusting the insurance, reviewing the estate beneficiaries, etc.

The client onboarding process is critical to the success of any business. In higher growth periods, it is essential an advisory firm adjusts to accommodate an influx of new client relationships.

Making small changes to expectations, timeframes and communications tied to how your firms processes to new clients will help you work through growth cycles with more ease and less stress.

Angie Herbers is an independent consultant to the advisory industry. She can be reached at [email protected].