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Every day, individuals are presented with a seemingly endless stream of news and often conflicting analysis. Investors aren’t sure how to read the mixed signals. Skepticism is healthy, especially in a digital world where nothing is as it seems: Social media has enabled false pretenses and the Internet makes sources of information an ever more important consideration.
Investors can find themselves struggling to distinguish between expert advice and propaganda.
Natixis Global Asset Management recently surveyed1 individual investors to gain insights into financial advisors’ relationships with their clients – and uncover lessons for advisors hoping to strengthen those relationships. The key takeaway: Clients’ trust in their advisors runs deep; however, advisors can earn even higher levels of trust. Advisors who can fully deliver on client expectations will go beyond trust to lasting loyalty.
The good news is that investors have a robust baseline of confidence in their advisors. Nearly nine in 10 investors surveyed (88%) say they trust their investment professional. Yet advisors can do more. Just one-third of investors say they are completely happy with what their advisor is currently providing them.
To build lasting trust, it needs to be earned. Our survey findings suggest five steps advisors could take to strengthen client relationships.
Up your game to meet client expectations. Some advisors focus on asset allocation, believing their job is to deliver a diversified investment portfolio – period. But that’s just a start. The survey found that investors want much more professional help. They also want their advisors to assist them in tax planning (41%), evaluating risk (40%), estate planning (36%), long-term care (24%) and managing debt (19%). Advisors should expand their toolkit, acquiring the expertise to meet client expectations and becoming more like the full-service family offices used by high-net worth individuals.
Don’t forget about the soft skills. Even as they build new quantitative skills and capabilities, advisors need to understand that investors also want them to talk about other concerns. For instance, significant numbers of investors say they want their advisors to offer investments that are better connected with their personal values (30%) and want help engaging their families in discussions about financial planning (25%). Most of all, they want their advisors simply to listen more (40%). Automated advice has a place in financial services, but so does the human touch, and advisors who can connect with their clients beyond digital spreadsheets will be more successful.
Provide a complete package of qualifications. Advisors often assume that investors care only about fees. However, in deciding on a new advisor, investors look at multiple criteria. While the majority do consider fees first (51%), a close second is qualifications and credentials of the advisor (48%), followed by referrals from friends and family (44%). Just behind these are the size and reputation of the advisor’s firm (34%), then the advisor’s ability to develop an all-inclusive financial plan (29%) and access to tax-efficient investments (21%). Fees matter – but the other criteria are so close behind that advisors need to offer a complete package by, for instance, building referral sources and acquiring new certifications.
Reach out to do-it-yourselfers. While almost all investors could benefit from professional guidance, some manage their own money. However, there are opportunities for advisors to reach such self-directed investors. The survey found that, even though they believe in their own abilities to make investment decisions, two-thirds of such investors say an advisor can help them achieve their financial goals. They say they need help with understanding risk (33%), estate planning (29%) and tax planning (25%).These are areas in which advisors can add value and generate business from clients they may have thought were out of reach.
Leverage relationships for referrals. Despite the growth of social media and the Internet more generally, digital media lags as a source of new business for advisors. When searching for an investment professional, investors look first to friends, family and colleagues (31%), followed by professionals such as their lawyer or accountant (21%). The Internet (10%) and social media (9%) trail far behind as sources. The lesson: Cultivate current clients in order to find new ones. And the best way to do this is by building strong personal connections.
Once an advisor has formed a strong connection with a client, the relationship is likely to last. The survey also found that a majority of investors value their loyalty to their advisor above their allegiance to his or her firm. This connection is so strong that six in 10 investors said that, if their advisor moved to another firm, they would follow him or her despite the hassles often associated with changing firms. The effort in taking the steps above to build trust and loyalty is well worth it for advisors looking to build a successful practice.
David Goodsell is executive director of the Durable Portfolio Construction Research Center at Natixis Global Asset Management. The Center is dedicated to analysis of issues and trends important to investors, advisors, money managers, employers, governments and policymakers. Goodsell joined Natixis in 2001 after serving with Liberty Funds (now Columbia/Threadneedle) and Fidelity Investments.
1 Natixis Global Asset Management surveyed 750 individual investors across the United States with a minimum of $100,000 in investable assets. The online survey was conducted in February 2017 and is part of a larger global study of 8,300 investors in 22 countries and regions from Asia, Europe, the Americas and the Middle East.
Read more articles by David Goodsell
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
