The Financial Planning Association has released new findings on the correlation between successful businesses and how well financial advisors know their clients.
A new study says that if you understand your clients on a deeper level, it leads to a dramatic increase in the number clients.
“Financial planners who engage in leading ‘know your client’ behaviors see 56 percent higher client willingness to recommend and 72 percent higher net client growth rate,” said the association in its research.
The FPA partnered with Capital Preferences, a financial technology firm, and mutual fund company T. Rowe Price for the study, in which it surveyed 311 client-facing financial advisors and planners from three countries: 126 responses were from the U.S., 134 from Australia and 51 from New Zealand. The association benchmarked advisors on 80 behaviors, methods and competencies, which it identified through interviews with industry thought leaders and dozens of other advisors.
The more advisors understood their clients’ behavior and goals, the more they increased their chance at success with clients and their overall career, the FPA said. Those behaviors included understanding client goals, managing family dynamics and applying insights from understanding clients to deliver a better client experience.
Highly proficient planners spend more time directly engaging their primary clients’ partner and adult children. They are also more likely to discuss aging-related lifestyle transitions and cognitive decline with their clients and their families.
Advisors who targeted a specific client type had a better grasp of these behaviors and therefore saw greater outcomes, according to the study.
There’s often a misalignment in what clients say they will do and how they actually behave. Advisors who address that saw a 30 percent growth rate while those who didn’t saw only 11 percent.
“Clients actually want to be called out by their financial planners when their actions don’t match their goals,” said Frank Paré, the 2018 president of the Financial Planning Association.
Clients who addressed that discrepancy between client goals and actions also saw more referrals.