Two recent research studies upended the conventional wisdom about why advisors lose clients – one an internal study by a large investment firm, the second a research report from the consulting firm Accenture.
The internal study probed the immediate reasons that its advisors lost clients. Historically, conventional wisdom was that there were two key triggers for clients to leave: unhappiness with performance, which was often related to unrealistic expectations, and changes in circumstances – clients passed away, moved due to work transfers or changed residences when they retired.
In other words, most advisors felt there was nothing they could do about losing these clients.
This research study identified performance and changes in circumstances as reasons for defection, but pointed to three other reasons that clients leave:
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Value: Clients felt that they are not getting good value for the fees they paid and looked for lower cost alternatives.
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Attention: Clients believed that they were not getting enough attention on issues like preparation of a financial plan or resolving service issues.
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Relationship: Clients were unhappy with the relationship with their advisor.
Providing value
The Accenture study, Wealth in the Digital Age, amplified those findings. A broad range of investors in the United States and Canada were asked about the value provided by their advisor, and the majority of the wealthiest respondents reported that they are questioning the value from their advisors:
When asked about attitudes towards their advisor, almost three in 10 said that they don’t feel important enough to their advisor or that they are getting enough attention and feel that their advisor is too expensive.
These findings should be a wake-up call for advisors, especially those targeting million-dollar-plus clients. In the period ahead, I’ll be exploring how advisors can address some of these satisfaction gaps. Not all of the reasons for dissatisfaction are under advisors’ control and many are complex and challenging to address – if the reasons that clients become unhappy were easy to fix, they would have been resolved and every client would be 100% satisfied.
Here’s the good news: There is one cause of client unhappiness that is entirely under your control. All it takes is a 10-step checklist whenever a client reports a service issue.
Managing moments of truth
The concept of a “moment of truth” originates from work by Procter and Gamble, widely considered the consumer goods firm best at looking at problems from the customer’s point of view. That knack, along with a strong commitment to research and development, has led to 23 brands with global sales over $1 billion, including household names like Pampers, Febreze and Tide.
P & G’s marketers analyzed the customer experience and identified two moments of truth. The first comes at the point of purchase, when consumers decide whether the value justifies the price.
But the real moment of truth come when consumers put the product to the test to solve the problem for which it was purchased. That moment is acute if someone who bought Pampers or Tide has to deal with an especially messy situation.
Swedish business leader Jan Carlzon brought this same mindset when he took over as president of the money-losing Scandinavian Airlines in 1981. In an early employee workshop Carlzon said, “We have 50,000 moments of truth every day,” referring to contacts with its passengers.
Financial advisors have many moments of truth as well. But one of the most important comes when a client encounters a service issue – a statement has been mailed to the wrong address, a check was deposited to the wrong account or a request to change beneficiaries didn’t happen.
How you or your team respond to that “moment of truth” determines whether clients feel important and that they’re getting the attention they deserve. If you don’t handle those issues well, trivial as they may seem, it undermines your relationship. On the other hand, resolving day-to-day issues such as those right and relationships emerge stronger; research shows that when customers feel listened to and their issues are addressed, they feel better about a company than if the problem hadn’t happened. (The exception is when these issues are part of an ongoing pattern of mistakes, which creates a different kind of challenge.)
The importance of these moments of truth is why one advisor whose team manages $5 billion starts his daily team huddle with a list of unresolved client complaints. Until they figure out how to address those issues, they don’t move on to the next item.
A 10-step checklist for client issues
Even if the will and desire exists to make problem resolution a priority, you still have to ensure that this gets translated into practice. In his book, The Checklist Manifesto, physician Atul Gawande described how using checklists reduced plane crashes and improved outcomes from surgery.
If you’re really serious about getting moments of truth right when clients call with issues, implement this 10-step checklist.
Step one: Listen
Whether clients call with a problem or raise one in a meeting, your first priority is to focus all your attention on listening to what they have to say. Suspend any irritation you may experience to take detailed notes of what clients are telling you. And look for hidden meaning that can come from their tone – if you’re in a meeting, look for body language and facial expression.
Step two: Apology #1
As soon as the client has finished describing their problem, deliver a sincere apology: “I’m terribly sorry to hear that you’ve run into this problem. There’s no excuse for this.”
Chances are that the screw-up arose from a glitch in your back office and that it wasn’t your fault. That’s not important – what is important is that the client feels that someone is taking responsibility.
Step three: Clarify
After apologizing, ask clarifying questions to get as much background and detail as possible. The simple words “Tell me more about that” will yield important additional information that will allow you to fix the problem. Just as important, asking follow up questions lets clients know that they are being listened to.
Having done that, confirm your understanding by saying: “Just so I’m 100% clear, let me summarize what I’ve heard.”
Step four: Agree to next steps
Once you have all the information you need, outline what you’ll do next and let clients know when you’ll get back to them. Even if you think you can fix the problem on the spot, it’s good practice to take the time to ensure that the problem gets fixed right the first time. And in suggesting a time when you’ll get back with a solution, be sure to build in a buffer so that you know that you’ll be able to meet and ideally exceed the deadline for a response.
Step five: Apology #2
Before ending the conversation, apologize a second time: “Once again, I’m terribly sorry about the inconvenience you’re run into here. We do our very best to eliminate errors but unfortunately as hard as we try, occasionally mistakes do creep in.”
You may feel that a second apology is unnecessary – after all you’ve already said you’re sorry. The truth is that just because you said the words doesn’t mean that clients heard them. To ensure clients feel listened to and know that you’re truly sorry, make a point of apologizing again at the end of this first conversation.
Step six: Get buy-in on the fix
After you’ve investigated the situation and resolved the problem, get back to the client with the solution. Explain what happened and what you’ve done to fix the issue. At that point, ask two key questions
First, “Does this fully address your concern?”
And second: “Is there anything I can help you with today?”
Even if the issue is trivial, in some cases clients may be questioning whether they’re sufficiently important to you and have enough of your attention. This is your chance to reassure them on this.
Step seven: Follow up
We’ve all run into situations where we were told that a problem had been fixed, only to discover that not only had the issue not been resolved, but sometimes a new mistake had been made. You need to follow up to ensure that whatever was supposed to happen to fix the problem has actually taken place and that the mistake has been fixed.
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Step eight: Check back
At this point, a quick call or email to your client makes sense to ensure that the mistake has been corrected. Remember, just because you thought the mistake was corrected doesn’t mean that clients are satisfied on this.
Step nine: Apology #3
In that follow-up call or email, apologize one more time. Remember, clients have been inconvenienced and you want to ensure that they know that you’re sorry.
Step 10: Monitor interactions
Finally, make an extra effort to monitor interactions for this client over the next while. We’ve all had the experience where problems are contagious and the same client seems to run into issue after issue. Apologizing will be of little benefit if clients run into persistent issues.
Some might look at this list and say that these 10 steps are overkill in response to minor issues.
But remember – when a client runs into a problem, it is a moment of truth as they evaluate their relationship with you. That moment is a test – put this 10-step checklist into place and you’ll pass the test and prove your worth many times over.
Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written commentaries, go to www.danrichards.com.
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Two recent research studies upended the conventional wisdom about why advisors lose clients – one an internal study by a large investment firm, the second a research report from the consulting firm Accenture.
