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The advisory profession faces a critical juncture. Advisors must adapt to changing client expectations and deliver on the full promise of financial advice or become irrelevant. Recognizing that people tend to perform to what is measured, the industry can jumpstart needed improvement by redefining advisor success beyond traditional metrics like production, client satisfaction and retention, which often fail to capture the true value of client relationships.
By shifting the emphasis from traditional, advisor-focused metrics to prioritize broader client-driven indicators such as client advocacy, advisors can cultivate meaningful connections and drive sustainable growth – as indicated in our previous discussions.
In the final installment of this series, I evaluate the merits of an integrated approach that marries traditional and modern metrics, aiming to enhance understanding of an advisor’s impact, strengthen client relationships, and drive sustainable growth.
Changing the lens with RQI
The advisory profession has long viewed traditional metrics like production, assets under management (AUM), client satisfaction, loyalty and retention rates as accurate indicators of successful client relationships. While these metrics offer some insight, they overlook the deeper underlying fundamentals. In today’s rapidly changing financial world, advisors need a more holistic approach to fully grasp their impact on clients and the value of their client relationships.
Enter the Relationship Quality Index (RQI). This tool represents a shift in how we think about measuring advisor success. By blending Net Promoter Scores (NPS) with additional metrics that attribute value to the client relationship including trust, loyalty, overall experience, and value for fees, the RQI offers a more complete picture of the client relationship. It measures not just the level of advocacy but also the quality and value of the experience being advocated for.
Using RQI and the other client-driven data discussed in the previous article, advisors can now track client interactions more effectively, understand how their experience is perceived, and get a clearer picture of client sentiments. This approach provides meaningful strategic insight on how to improve client relationships, and strengthens loyalty and advocacy among clients.
With organic growth stagnant for most of the industry, the value of using more comprehensive and client-centered data to provide insight and strategic direction is increasingly apparent. Traditional measures, while informative, do not capture the full scope of an advisor’s impact, nor do they offer a specific direction on how to improve.
Advisors will benefit from adopting a wider range of metrics that better evaluate the quality of their client relationships and the caliber of their advice. This broader approach, including tools like the Relationship Quality Index (RQI), provides a lens for a more accurate and holistic understanding of practice performance and value. It marks a shift to a more client-centric future, where success is gauged by the strength and depth of client relationships and exceptional client advocacy.
Tom Rieman is CEO & founding partner at Practice Intel, a data-driven platform designed to scale organic growth with e-learning resources and an objective Relationship Quality Index (RQI) to drive superior firm evaluation and growth.
A message from Advisor Perspectives and VettaFi: Dive into alternative investment opportunities at our upcoming Alternatives Symposium on May 30th, and gain insights into diversifying portfolios beyond traditional equities and fixed income.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
