Univeris White Paper: Financial Advisors need to set bar higher; research shows ‘client engagement’* is what really matters

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Toronto, ON – September 30, 2009 – Clients’ expectations, needs and desires regarding their relationship with their advisors forever have changed. Research shows that clients have set a new playing field for their relationships with advisors, which can have significant impact on future practice growth.

“The key for advisors is to understand the new expectations of clients so they can move beyond a focus of satisfaction to one of engagement where deep relationships have long term focus and retention, and clients are willing to provide referrals enabling organic growth,” said Stephen Smith, Univeris’ Senior Director of Marketing. “We have partnered with Advisor Impact over the last four years to provide powerful insights to our clients and their 17,000 plus advisors and our product development strategy. Over this last year, we worked with Advisor Impact to mine its sizable database of advisor-client feedback from 2006 to spring 2009, to find what clients are telling advisors about running their businesses and why client engagement is the key to building a future practice.”

“We wanted to listen to investment clients and hear their suggestions that will help to maximize the value of the advisor-client relationships,” said Smith. “We found that the old notion of having satisfied clients is not enough to drive the needed organic growth through referrals or acquiring more share of wallet. Also highlighted in the findings was the fact that clients who have longevity with an advisor, which used to be a key indicator of client loyalty, can also question the relationship they have with their advisor. Advisors cannot rest on former satisfaction or loyalty levels, as research demonstrated that they need to proactively and consistently define their service offering and continue to exceed client expectations on service delivery.”

Added Smith, “Research showed that even though 95% of clients indicated that they were satisfied with their advisors, they were still not providing referrals. Referrals did occur only when investors were engaged with their advisors. There is a definite difference between the comfortable client who doesn’t refer and the engaged client who takes action and does refer.”

“In addition,” said Smith, “when clients were asked if they had ever thought about leaving their financial advisor, 100% of satisfied and longstanding, seemingly loyal clients have thought about it. They may appear satisfied and loyal, but are totally passive to such actions as referrals which are a core ingredient for practice growth.”

When clients were asked what happened to ‘client satisfaction’, clients said ‘it depends’ on three key points. It depends on the extent to which the advisor has built deep relationships with clients, is proactive in managing clients in turbulent times, and has clearly communicated their value in order to create a marked disconnect between the value of advice and that of market performance. To that last point, advisors have to constantly define and clearly communicate their service standards to separate them from market performance.

Julie Littlechild, President, Advisor Impact said, “Our Economics of Loyalty research showed that a client, who is neutral or even somewhat dissatisfied, can be extremely loyal to their advisor simply due to inertia, but behavior is influenced strongly by inaction.” Added Littlechild, “And while investment performance is clearly an important driver of satisfaction, we can see that many clients have remained satisfied during recent markets. We believe that in these cases, the advisor has done a better job of communicating the value that he or she delivers above and beyond investment performance. This reminds us that in good times and in bad advisors need to both define and communicate value.” When clients see their advisor as proactive in managing the relationship and when they have a clear plan in place for the future, they tend to see beyond investment performance. In the absence of understanding the value of advice, they tend to be more strongly influenced by investment performance.

Adding to the ‘loyalty card’, another interesting result came when looking at the research of those clients who are at risk and are considering leaving their advisors. Examining client feedback from September, 2008 to March, 2009 compared to that over the last three years, there was a slight uptick in the percentage of clients at risk of leaving their advisors, 6.1% versus 5.1% respectively. Said Smith, “Those advisors whose approach was to build an engaged client practice appeared to emerge as finding the key to managing down risk. These committed clients understood their advisor’s service delivery, despite investment performance, and did not blame their advisor for this performance. Clients who were at risk associated investment performance with their advisor creating a negative halo.”

Said Smith, “The key finding in this research showed that advisors with engaged clients have the upside potential to build their business through referrals and share of wallet while appearing to mitigate the downside of clients’ inaction.”

Industry research insights; next steps for advisors for building a deeper/engaged relationship with clients

1-Satisfaction and Loyalty are not enough. Research and listen to what clients want; they’re right in front of you and they want to tell you. Current market conditions demand that advisors look beyond client satisfaction to understand what the clients really expect in order to connect at a deeper level to create a fully engaged client practice.

2-Define the service offering versus market performance to each client; referrals will come from engaged clients who understand a clearly communicated service offering and want to ‘brag’ to friends of an advisor’s service and knowledge. Clients want to help family and friends therefore will refer when engaged.

3-There is no room for guessing; engaged clients demand that advisors have objective information for what they need, want and expect with an obvious process in place to deliver information to make educated decisions.

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*client engagement -definition� a truly ‘engaged’ client is one who is not only satisfied but among the most profitable when measured by propensity to refer, by the scope of relationship (extending to other family members), and by the number of services used of share of wallet.

About the research

Univeris partnered with Advisor Impact to provide a white paper with practical insights and action plans concerning advisor-investor relationships in Canada. Drawing on two key sources of industry data, the objective of this data mining exercise was to provide wealth management distribution firms and their advisors concrete ways to build a business in challenging economic times (the full white paper can be viewed on the Univeris website www.univeris.com).

The two industry sources that were analyzed were; first, The Advisor Impact Client Index focusing on the sub-set of 14,000 Canadian investors of over 56,000 clients in North America and United Kingdom, who responded in the last four years. Secondly, the Economics of Loyalty study conducted during 2008 examining the links between client satisfaction and client profitability, drawing from 1,000 randomly selected investors across the United States.

About Univeris

Univeris, headquartered in Toronto, Canada, is a privately held company and is the leader in enterprise wealth management for the Canadian market. Founded in 1991, Univeris has over 20 major financial services clients across Canada representing over 17,000 advisors. Univeris offers the most comprehensive enterprise wealth management platform with fully integrated back office operations, compliance and front office practice management for financial advisors. The corporate website is www.univeris.com.