OppenheimerFunds recently completed a project with CEG Worldwide in which we identified the key characteristics that make advisors client-centered.
To start, it's important to understand exactly what distinguishes investment-centered advisors from client-centered advisors. In general, investment-centered advisors tend to be more technically oriented and focused on developing investment strategies, structuring portfolios, analyzing risk and studying the stock market.
Client-centered advisors, in contrast, focus strongly on developing client relationships. This is not to say that they are not concerned about investments-in fact, many client-centered advisors have substantial skill in managing clients' portfolios-but that they don't let investments take priority over their relationships with clients.
The best way to understand the specific differences between client-centered and investment-centered advisors is to look at their differing priorities (see chart). Of note, 97.6% of surveyed client-centered advisors said that reassuring clients is very important to them, compared with only 20.8% of investment-centered advisors. Likewise, meeting with clients was important to 88.1% of client-centered advisors, but to only 19.8% of investment-centered advisors.
For investment-centered advisors, 69.1% said that analyzing the market was an important priority, compared with only 14.3% of client-centered advisors. Similarly, analyzing client investment positions was very important to 53.4%, but 10.7% for the client-centered advisor.
We find the differences in the two types of advisors fascinating. To us, the research points out all too clearly that investment-centered advisors are failing to do what their clients need most: be there for them. In contrast, client-centered advisors keep their focus where it belongs-on building their relationships with clients so that they can serve them better.
It turns out that client focus leads to some very real (some might say staggering) bottom-line rewards. The research looked at how both types of advisors fared over a six-month period in the first half of 2001. Even though this was already deep into the market downturn, client-centered advisors actually enjoyed substantial success.
Over that six-month period, client-centered advisors gained an average of 6.8 new clients, each bringing $269,000 in assets. Existing clients also brought them new business, with an average of 7.3 clients delivering $64,000 each in additional assets. This works out to nearly $2.3 million in new assets for each client-centered advisor-and that was during six months of a very difficult market.
On the other hand, the investment-centered advisors felt the full brunt of the market meltdown. Averaging only 1.3 new clients with $51,000 in assets each, and receiving additional assets of just $13,000 from less than one existing client on average, these advisors brought in just $76,700 in new assets over the six-month period.
The upshot? The client-centered advisors, by reaching out to their clients during a rough market, brought in 30 times more assets than those investment-centered advisors who failed to be there for their clients when they needed them the most.