Stress your value when talking to clients

Participants at this year’s Dollars & Sense roundtable discussion say data from the investor survey contains clues to how advisors can better convey their value propositions to clients.

The fact investors ranked “A periodic/annual review of my plans or accounts” as their primary need from an advisor indicates too much focus is being put on the investments aspects of the relationship.

“It’s part of what we do, but not everything,” says Kathleen Peace, CFA, CFP, Bennett March of IPC Investment Corp., Toronto. “It probably shows advisors in general are not properly conveying our value proposition as well as we could.”

She was encouraged to see the desire for a formal written plan rate highly but wasn’t surprised about the near 50/50 split among investors saying they had “a formal written plan.” Peace noted that, depending on a client’s life stage, there may not be any need for such formality.

“For some younger clients, the main advice is often: save, pay down debt and spend less,” she says. “It can really be that simple until they get to be in a more complicated situation.”

Nicole St. Denis, Investment Associate, ScotiaMcLeod, London, Ont., agrees clients can sometimes focus on the nitty gritty at the expense of the big picture. “They do like us to talk about investments. They’re very interested in those calls,” she says. “For our top clients, we offer detailed financial plans and the response has been incredible. It uncovers a lot of areas they hadn’t thought about before.”

Clients do often have misconceptions about what kind of advice they’re getting, notes Eva Froese, PFP, Investment & Retirement Planner, RBC Wealth Management, Calgary. “We can do a better job of making it clear to clients that we are delivering a retirement financial plan,” she says. “We should always be delivering some type of written plan whether it is a full detailed plan or just financial assessment.”

Advisors should keep in mind, though, that different clients have different definitions of what constitutes a financial plan. And that many clients approach higher-end planners after failing to get proper plans with other advisors.

“When I compare what a lot of advisors are providing as financial plans, they miss out on a whole raft of stuff outside their realms of expertise [DASH] including tax planning, wealth planning, estate planning often are not even addressed, says Bernie Geiss, CFP, CLU, RHU, Cove Financial Planning Ltd., North Vancouver, B.C. “I have yet to meet a client who actually had a written plan that they were brining for me to review, revise or get a second opinion on.”

James R. Taylor, CLU, Financial Health Management in Toronto, notes some advisors provide financial plans as an enticement for client business, as opposed to producing the plan as a true roadmap for the client. “If you’re a comprehensive provider you should be stating that in your engagement agreement,” he says. “If you’re only doing certain components of that you need to communicate that and establish it in a written document.”

Geiss adds the placing of a comprehensive financial plan is the number one concern raised by his clients. “I’ve seen retirement projections; illustrations of compounding; comparisons of RRSP versus non-RRSP and a whole bunch of little pieces but have rarely seen a document that provides advice around these areas,” he says. “The written document will provide them the ability to go back and review the purpose and objectives of the plan.”

Another fee-for-service planner, Cynthia Kett, CA, CGA, RFP, CFP, Stewart & Kett Financial Advisors Inc., Toronto, notes a combination of industry evolution and an increase in client education will boost the work of planers. “There are a growing number of financial planners in the industry and many of us do have baseline knowledge of financial plans,” she says. “Where clients are asking, advisors are trying to provide them, but the reality is there are very few firms actually compensated for doing the planning. The clients who ask for it get something and those who don’t ask won’t. It’s very client-driven.”

But, says Doug Gleed, VP & Regional Sales Manager, Invesco Trimark, the fact there too few advisors are doing effective planning is a challenge for the industry. “Clients are more educated now through other sources rather than just getting advice from their advisors,” he says. “The numbers here of 67% wanting an annual review is more of a comfort and sleep-easy position today than anything else.”

Roundtable participants were not as thrilled with overall ratings of client satisfaction. While the investor responses indicate advisors are generally doing a good job, the consensus was that numbers in the “very satisfied” category could have been higher.

“I wouldn’t be personally satisfied if our firm had received results like this,” says Kett. “I’d like to see a much higher level of very satisfied clients – definitely over 70% – so I think we still have room for improvement.

There was speculation the 36% of investors responding that they’re “somewhat satisfied” may in fact be shopping for a new advisor, given that current market conditions give them a lot of choices for moving their business.

“One of the things this statistic doesn’t tell us is whether or not that client has been with the advisor for very long,” says Geiss. “I’ve noticed, clients seem to shop more during uncertain times. A person who’s recently changed advisors is going to give a significantly more glowing report than if they had been with their advisor for a long time and are planning to change.”

The numbers could also be a hint to improve the quality of communication, says St. Denis. “When clients say they aren’t satisfied, it might be they need to be educated a little more,” she says. “Sometimes, it’s just a matter of sitting down with them and going through the portfolio and comparing it with some of the index returns and helping them realize they aren’t doing badly after all.”

Taylor, meanwhile, says he sees the numbers as providing a needed contradiction to what the mainstream media is saying about advisors. “Media portrays the advisor as not really fulfilling on obligations,” he says, “but these numbers suggest otherwise.”

Gleed agrees, comparing the behaviour of advisors during the 2008 credit crisis to the most recent downturn in early 2000, he says there has been noticeable improvement. At that time, a lot of advisors took what he termed an “I’m not going to show up approach.” This time, he says, the majority of advisors did show up to hold clients’ hands. “Overall, advisors learned a lesson and are doing a better job showing up during these difficult times,” he says.