When Netflix recently announced structural changes that translated into higher prices for many of its customers, within a week, the move generated 12,000 client posts on the company's blog, the overwhelming majority of them angry. The resulting apology from the firm's CEO, "I messed up. I owe everyone an explanation," did little to defuse the discontent. As one customer asked, "Seriously, you thought [it was] a good idea to make it more expensive and complicated for us to manage our queues? Really?"
The Netflix fiasco illustrates a fundamental business dictate: Before you make a major change, know how your customers feel about your business, and whether they will view the change as beneficial for them as well. The lesson is surely applicable to financial industry practitioners.
There was a time when the biggest concern for advisors making the leap to a new firm was the reaction of their prior employer. With the advent of the broker protocol, the risk is now quite different. Gone are the days when clients would jump from one brokerage platform to another with blind trust. Today's clients have been schooled by 15 years of headlines about busted bubbles and industry scandals while their portfolio returns have suffered.
Try to answer honestly, and rather than focus on the small things that irritate you every day, take a 20,000-foot view of the whole picture. What issues prompt you to want a change? Do they involve technology, service and support, management, products, marketing, cultural makeup, regulatory concerns, compliance or compensation?
Once you have a clear picture of the reasons for change, you're ready for the next step: taking the pulse of your clients. The pitfalls here are manifest. Depending on your status as an employee or an independent contractor, you may have to tread carefully. Any implication that you are considering a move may risk breaching your responsibility to your employer.
A positive way to begin client conversations is to communicate your appreciation for their loyalty, and follow that with a statement that you are evaluating your services and those of your firm. You want to know how they feel. Do they have any concerns about your service or the direction your firm? Are they satisfied with the array of financial products you offer? Do they sense any potential conflicts of interest in their relationship with you? What are you doing well and what might you improve upon? Does anything bother or frustrate them?
Yes, the questions may open Pandora's box. But your primary objective is to get your clients to open up and offer their candid opinions about your professional relationship. In doing so, you are likely having a conversation no other advisor has had with them. You actually want to hear some concerns or complaints. Asking the appropriate questions will not only help you learn what your clients care most about, it will also more deeply invest them in your relationship.
But be cautious. Clients who have been with you through the market whipsaw of the past few years may have economic scars as yet unhealed. You surely don't want a conversation that needlessly reopens those wounds. Similarly, you don't want your discussion to deteriorate into a wholesale criticism about your firm. Try to keep the discussion balanced with attention to both the positive and negative.
The responses should help you decide whether the contemplated move is practical and can be achieved without a significant loss of clients. If you decide to go forward, the issues expressed by your clients provide leverage for the change. Later, you can position the move as a response to those concerns, reminding clients about the important issues they had raised and explaining why the move will be better for them.
This conversation may be daunting, but the consequences of making a move without a solid rationale are infinitely worse. If you can't offer a good explanation for your move and a reason why it will benefit your clients, they are likely to question your motives, either overtly or silently. If you offer them only a better compensation package or some vague promise of a better something-or-other, you're putting a rather large strain on your credibility and their loyalty. On the other hand, if they are unreservedly satisfied with your current firm and you move anyway, you have a problem that defies justification.
If you decide not to move, the client interaction will still be useful. It will improve your relationships by demonstrating that you care what they think. Few things cement your bond with your clients as firmly as asking for their feedback. A long time ago, a successful and pretty bright mentor told me, "Never assume because your clients aren't complaining that everything is all right. Always take their temperature before they come to you with a fever."
Edward K. Riley is chairman of E.K. Riley Investments, LLC, a full-service independent brokerage and investment advisory firm. Headquartered in Seattle, WA., E.K. Riley has eighteen west-coast offices. He can be reached at 206-832-1524 or [email protected].