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When it comes to building and maintaining strong perceptions of your value, you can’t leave communication to chance.
When clients sign on with a financial adviser, they want to know what the experience costs, exactly what service they will be getting for their money, and the rationale behind the investment approach. This need taps into the key value driver of ‘operational transparency’. Psychologist Michael Norton explains that when people can see the effort that goes on behind a service, they will likely see it as more valuable and trustworthy.1
It is clear from its website that Two Trails Financial Planning* in the US has taken operational transparency on board with its two-tiered fixed-fee package approach. Its ‘Summit Wealth’ and ‘Base Camp’ packages offer different levels of service which clients can see and understand before they sign up. This creates awareness of what goes into the service, increases appreciation of the effort, and helps prevent any surprises on the bill each month.
1. Set expectations
Financial plans, by their nature, involve a degree of uncertainty about the future. This can be challenging for clients, as human nature is naturally averse to this feeling, which aligns with the behavioural science principle of ‘temporal discounting’, where individuals tend to undervalue distant benefits whilst overvaluing more immediate returns and rewards.
As an adviser, however, this presents the perfect opportunity to proactively communicate relevant information to give clients a greater sense of predictability and control.
Proactive communication can be as simple as setting clear expectations for the year ahead, and outlining potential market scenarios so the client is ready to make decisions if needed.
You can set regular meetings with your clients to check on the strategy and progress, and provide market comparisons. You can conduct regular portfolio reviews, offering clear and concise updates in line with the client’s objectives. During times of economic downturn, you can increase the frequency of communication to provide support and reassurance.
This may sound like a lot of effort when multiplied across your client portfolio, but with emerging technologies like Artificial Intelligence (AI), it is getting more possible to make proactive communication effort free. For example, Morgan Stanley* advisers use AI via the firm’s Next Best Action tool, which draws on client phone, email and text interactions, as well as insight from their advice documents to prompt what the next most appropriate form of communication should be, and what it should be about.
2. Reassure clients beyond markets
Clients want to hear about market performance, but they also benefit from feeling reassured of your expertise. This desire for assurance taps into the behavioural science principle of ‘confirmation bias’, in which people seek out information that confirms their existing beliefs or decisions. They want external data points to confirm something they already know, that they are happy with you!
Our Advisable Australian research found that for Loyals, nearly six in 10 (59%) want continual assurance of their adviser’s ‘track record, consistency in results and tangible outcomes’.
For Newcomers (51%), assurance comes in the form of having an adviser with ties to other financial specialists (like accountants). Both Loyals (46%) and Settled clients (41%) will get assurance from your broader connections, such as other financial partners and platforms. (Figure 2)
To reassure your clients, you can share, perhaps on your website, your qualifications, professional networks, or your track record. You can also communicate annual highlights of your team’s training and accreditations so that clients know these are up to date. Via your email marketing or website, you can publish written or video case studies of client success stories. Perhaps you could invite clients to meetings or workshops with others in your professional community.
3. Share updates and rationale
Returning to operational transparency, communicating regularly about investment rationale and investment performance is a key step in proactive communications.
Our research found that these factors are highly valued – over half of all clients want you to explain why certain investments perform the way they do and offer alternatives when appropriate (55% Newcomers, 54% Settled, 57% Loyals); and Loyals in particular (54%) are keen to know why certain investments have been selected and how they are going to be managed. (Figure 3)
Transparency about investment rationale is a key approach taken by Illuminate Wealth Management,* a US-based firm, which provides clients with a year-end review that addresses past achievements, status, and future tasks (Figure 4). The timeline shows how they recap the accomplishments from the past year; the middle section provides colour-coded status updates to let clients know where they stand in each important planning category; and the Action Items section at the bottom clearly states what to do next.
In summary – proactive communication counts when it comes to loyalty, so focus on outlining future plans, providing reassurance about your expertise, and being transparent about your investment rationale, your fees, and service offering. Focusing on these steps could heighten the perception of your value with your clients for years to come.
*Please note this is not an endorsement by Netwealth and we have used these as case studies for illustration purposes only.
Reference
1 https://hbr.org/2019/03/operational-transparency
