Despite recent focus on client engagement and experience throughout the industry, advisors don’t seem to be connecting well with many of their clients.
A majority of advisory clients do not feel appropriately engaged, according to “How Can Advisors Better Communicate With Clients,” a survey sponsored by investment research platform YCharts.
In fact, nearly two-thirds of advisors’ clients in the survey, 64%, said that their advisor contacts them “infrequently” or “very infrequently.” Of these infrequently contacted respondents, 66% said that more frequent communication would increase their confidence in their advisor and their financial plan.
Sean Brown, YCharts CEO, argues that much of the recent focus on client engagement is little more than lip service.
“There’s a lot of talk but not a lot of execution and action,” says Brown. “Advisors are not communicating well currently: it’s not enough, and it’s not the right information – but they’ve been forgiven of these sins a little bit because we’re in the 11th year of a bull market.”
YCharts found that strong communication between advisors and clients is key for retention -- 85% of respondents said that communication style would be considered when deciding to retain their advisors, and even more, 88%, said communication would impact whether or not they would refer the advisor’s services to someone else.
Excellent communications was also one of the top three most important factors named by clients for choosing an advisor. The other two most important factors were understanding the client and their goals, and portfolio performance.
“There are meaningful consequneces to not communicating well,” says Brown. “One is that clients don’t have as much confidence in their plan, two is that they’re not going to recommend you to friends and family and that’s the No. 1 way advisors get new clients, and three, they will have a higher propensity to look around for someone else to manage their assets. There’s a looming, ticking time bomb in advisor communication that’s goint ro really get exacerbated when the market decides it’s going to change course.”
Clients are coming to expect proactive communications from their advisors. Three-quarters of the respondents said that they value their advisor’s ability to anticipate questions and contact them in advance -- 35% strongly agreed that proactive communication from an advisor is important, while another 40% said that they somewhat agree.
Personalization is also important in client communications, according to the survey’s respondents. Three quarters of them said that they would like to see updates from their advisors personalized to them with statistics, visuals and relevant articles.
“You can’t do an ad hoc personalized message with every client every day,” said Brown. “But you can know enough about clients to say that you have 10 of them interested in understanding NetFlix or cryptocurrencies or retail sector firms, and you can send them targeted communications about those things. Those people can end up feeling personalized even if the message is a copy-paste of some perspectives on NetFlix or cryptocurrencies. Personalization like that can be replicable, scalable and deliverable to multiple clients.”
Communication channel was also key for YChart’s survey respondents – 79% said they would like for their advisors communicate with them via e-mail, 29% would welcome text messages, 26% would like newsletters, and another 26% said they wanted updates in face-to-face meetings.
There is also demand from advisory clients for information on topics outside their own portfolio. For example, two-thirds of respondents wanted to receive market-related news, saving and planning tips from their advisros via e-mail. Fewer respondents wanted such updates via phone calls and text messages, but only 2% of respondents said that they weren’t at all interested in hearing their advisor’s perspectives.
“Clients want multi-modl, multi-channel communications,” said Brown, who pointed to Ritholtz Wealth Management as an example of effective market-related communications. “Their strategy is to build social media relationships with oodles of people so that people will feel like they know them. That will lead to people trusting Ritholtz with their nest egg, and the firm won’t do anything groundbreaking, they use passive strategies – but they’re building multi-million dollar relationships through a social media and multimedia forum.”
The study’s authors concluded with some tips for advisors to improve their client communications:
- Commit to a cadence – create a rhythm for client communications where blog posts, videos, newsletters and personalized e-mails are generated regularly and at predictable time intervals.
- Create new touchpoints and opportunities – the status quo of client communications is not ideal for most clients, so advisors should increase opportunities to connect to keep themselves, their services and their value at the top of their clients’ minds.
- Segment your clientele – some high-value clients will demand more high-touch services and personalized attention, but make sure lower-tiered clients do not slip under the radar.
- Hone in on understanding clients and their goals – understanding and empathizing with client goals and wishes is the foundation of effective engagement.
For its research, YCharts sponsored a survey of 666 U.S. households engaging the services of a financial advisor during fall 2019.