Financial advisors are often called “relationship managers.” My experience, however, has been that while advisors are fantastic at client service, they aren’t actually doing much to “manage” their relationships.

“Service” describes the act of responding to people’s needs, helping and perhaps pleasing them. When you “manage a relationship” you’re setting goals and managing expectations, setting the rules of engagement and making sure clients understand these rules. Managing a relationship means you’re making it more sustainable, balancing the desires of your client with the practical reality of your business. That means a lot more than just giving them help when they want it. Ultimately, it is about ensuring that the relationship is profitable and successful for your firm as well.

For your advisory practice to be successful, you need to offer both excellent service and sound relationship management. Otherwise, you’ll be overrun by service activities that reduce your firm’s capacity, damage its efficiency and cut into its profitability. By managing, you’re not simply curtailing your client’s demands. You’re ensuring that all his or her requests can be executed with the necessary level of quality, free of mistakes and problems. Good relationship management can also ensure that a firm’s professionals are available and focused on following a service process. If they aren’t, they might otherwise be distracted by small items or less than ready to work with clients.

Some advisors figure that dealing with client problems is like performing triage—dealing with problems in an emergency as they occur. A well-managed relationship goes beyond simple triage.

What It Means

In my experience in practice and observing our many advisory clients, managing a relationship means a number of things:

• It means they must define, communicate with and agree with the client about the goals of the relationship. Within a firm, those goals are usually understood implicitly—they come from its mission and strategic plan. When you’re hammering out the goals with the client, however, the goals will be expressed in a document—a proposal or a contract, for example—and they must be repeatedly re-examined and recommunicated.

• It means setting and managing the expectations of the client. You and the client must agree on what the measures of success are in the relationship. If you’re managing the relationship correctly, you’ll never be in the position of answering uncomfortable questions such as, “Why is the market up 15% while my portfolio is only up 5%?” If market outperformance is the wrong yardstick, the clients should have been educated about that from the beginning; instead, you should have deepened their understanding of the planning and investment process, giving them a different idea about success.

• It means defining the rules of the engagement and the process of working together. Part of your job is to educate the client about the best way to work with the firm—knowing whom to call and when, knowing which professionals play what roles and the nature of the firm itself.

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