The Affluent Relationship Shift

Nashville—“How important do you think it is for our support personnel to be involved in helping manage the business and social components of our client relationships?” Jerry asked with a perplexed look on his face. “My assistant is terrific in a reactive manner, handling incoming calls and so on, but are you suggesting she become proactive? If so, how?”

This was a good question, but it reflected more on Jerry’s relationship with his affluent clients than with his support team. His relationship with his affluent clients was predominately business. There were a few clients whom he occasionally invited to an event, but these events weren’t held frequently, his primary assistant was not involved, and not many clients attended. Yet, the second affluent macro shift is all about the type of relationship financial advisors (and staff) develop with their affluent clients. Obviously, Jerry was doing something wrong—he didn’t really have a personal relationship with his top clients and had never really made the effort to develop this type of relationship.

In our latest affluent investor study we segmented the advisor-client relationship into two categories:

· Purely Business
· Business-Social

We then ran a multi-variant analysis for all of our findings, including the criteria our affluent respondents ranked as extremely important. What we discovered was an eye-opener—expectations were met more frequently when our affluent respondents had both a business and social relationship with their primary financial advisor. Another surprise was the magnitude of the impact this broader relationship had in different areas of financial services. For instance:

Creating and executing an up-to-date financial plan
· Purely business relationship: advisors not meeting expectations.
· Business-social relationship: advisors meeting expectations.

I’ve outlined a couple other areas our affluent respondents ranked extremely important, to help explain why we consider the expansion of the advisor-affluent client relationship to be a macro shift. Take notice of the disparity between business only and business-social relationships in meeting expectations:

Possessing a full breadth and depth of industry knowledge
· Purely business relationship: advisors not meeting expectations.
· Business-social relationship: advisors exceeding expectations.

Clear and timely communication
· Purely business relationship: advisors not meeting expectations.
· Business-social relationship: advisors meeting expectations.

Our findings outlined above, plus others that I don’t have space to share with you in this issue of Practice Management, make it obvious to us that today’s affluent investor wants more than just a business relationship with their financial advisor. Why, you might ask. Much of it has to do with the trust deficit that has grown as this Great Recession continues to linger. When we get to know someone on a personal level, we feel as though we know the person better. The better we know them, the more we trust (or distrust) them.

Today’s affluent aren’t as concerned with how smart you are (you better be everything you represent yourself to be), since they’ve seen a lot of smart financial people rip off affluent investors. And this goes far beyond Madoff. They want to feel as though they know you on a personal level so they can determine what type of a person you are. If you pass their “good person” sniff test and you’re a true professional advisor, you’re in. They trust you and your recommendations.

For many advisors this will be a sea change. It will be necessary for advisors and their staff to spend more time socially with their affluent clients. For advisors who already interact with their affluent clients socially, it’s important to include both spouses.

In today’s environment, the trust issue is critical; it can never be assumed, and it has a direct impact on an advisor’s ability to meet the expectations of today’s affluent investor. Advisors who fail to take either of these macro shifts seriously (gender and relationship) while working with today’s affluent will find themselves vulnerable. Not only will they find themselves challenged in strengthening the loyalty of their affluent clients, they will also find themselves handicapped when it comes to acquiring affluent clients. How so? Word-of-mouth is the most dominant element in affluent spheres of influence.

Responding to these shifts should not be overly complicated. Regarding the Affluent-Advisor Relationship Shift, meet with your team and assess the nature of your team’s relationship with each of your top clients. When did you last meet with them face-to-face? Were both spouses involved? Have you ever done anything non-business with them? Has your support staff ever interacted with them socially? If so, what was the event and how long ago did it occur? Do you know their passion points? And finally, how well do your affluent clients know you on a personal level?

I’m sure you get the idea. Once you’ve profiled your top clients in this manner, you’ll want to get out your calendar and begin to schedule, at least on paper, your “developing a social relationship” campaign. Getting back to Jerry’s initial question, support personnel can help in this process in small ways. They can extend every client call with a bit of personal conversation, ask about the client’s family, talk about their own family, and gather any additional personal information that might be useful in surprising and delighting this affluent client in the future.

This is real-world affluent relationship management.

Tis the Season to Socialize

Toronto: “I had three client appointments cancel last week,” moaned Anthony, then adding in some frustration “I’m not going to bother chasing down people during December, nobody want to discuss business during the holidays.”

Anthony was obviously upset and his emotions weren’t allowing him to think clearly. Without boring you with our entire conversation, suffice it to say I shifted the conversation to the motto elite advisors adhere to throughout the holidays; tis the season to socialize.

Amongst the many nuggets uncovered in our latest affluent research, there is one factoid that every advisor working with affluent clients must understand; advisors who socialize with their affluent clients have 3xs the center-of-influence penetration over advisors who only have a business relationship. This presupposes that the advisor has a healthy business relationship in both cases. The same factoid holds true for referral alliance partners; CPAs, attorneys and the like.

One might think that once advisors are armed with this information that they’d make socializing with their affluent clients a priority. Not so. For some reason, many advisors struggle with the concept of mixing business with pleasure. From our perspective, this type of strategic socializing should be part of an advisor’s marketing budget. And the holiday season is the ideal time to invest both your time and money into getting social with your affluent clients, referral alliances, and their respective centers-of-influence.

Let me walk you through five simple ‘Tis the Season steps that might help you breeze through this holiday season like an elite advisor...

1. Make a list of the clients, referral alliance partners (CPAs, attorneys, etc.), and active pipeline prospects that you can get face-to-face with during this window.

2. Take your calendar and start mapping out how you envision your social schedule to play-out through December. Lunch, dinner, drinks, parties, and so on. This requires pairing social activities with each individual on your list. Consider this your planning phase. But don’t let it overwhelm you, the idea is to use it as a starting point.

3. Determine your strategic intent for each social interaction; sourcing a name, having your client bring a guest for you to meet, asking to be introduced, gathering more personal information that can be used to “surprise and delight” sometime in the future, getting invited to a holiday party (You’ll find yourself getting invited naturally; you won’t have to force it.) and so on.

4. If can’t possibly make all the invitation calls yourself, carefully assign these “strategic socializing” names amongst your team. Be careful with this, many of these people will need a personal invitation by you. Regardless, as you work to fill your calendar it’s a good idea to have twice a day huddles with your team, morning and evening, to make certain everyone is on the same page with your calendar.

5. Attend every holiday party or social get-together you can that involves these affluent centers-of-influence. You’ll also want to host one or two of these events yourself. Remember, intimate events are more powerful – they don’t need to be big bashes, nor do they have to break the bank. They can be low-key as they’re social.

For those clients where geography makes it impossible for this type of personal socializing, a thoughtful gift (bottle of wine, champagne, fruit basket, etc.) is a nice touch. You’ll want to compliment your gift with a “holiday greetings” phone call.

As you probably have some, if not a lot of these steps already completed, use the above to stimulate your thoughts and conversation within your team. There is no one way to socialize with strategic intent, but not getting to know your clients and referral alliance partners on a personal level is a big mistake.

Tis the season to socialize!!

Elite Advisor Teams are Raising the Bar

Atlanta: "It seems as though everyone on our team is working feverishly," explained Walter and then adding, "I know this is the perfect environment for change, but my partner and I just can't seem to get started. What does your research say about these elite teams and how they're handling this ongoing crisis?"

It seems as though I've been answering some version of Walter's question since the financial crisis hit in 2008, with the recent volatility serving as a reminder of the basic truism; within crisis lies opportunity. For elite teams and advisors this opportunity centers around strengthening the loyalty of their affluent clients and acquiring the friends, colleagues, and family members of their affluent clients. Elite teams have mastered this relationship management - relationship marketing nexus.

Before peeling back the onion and getting into some of the details of elite financial teams, let me start with sharing some of our 2011 Q2 findings. On average, advisors on elite teams have much stronger client loyalty, (71 percent to 26 percent), bring in nearly 3xs the new assets, and have a significantly higher level of career satisfaction, (61 percent to 40 percent).You don't have to take too deep a dive into the details to understand why these elite teams are able to perform at higher levels in these challenging times.

However, there are a handful a useful insights - for instance, a much greater percentage of elite teams are in a vertical structure (senior advisor functioning as the team leader) as opposed to a horizontal structure (equal partners); 59 percent vertical and 32 percent horizontal. As I explained to Walter, effective team leadership is the foundation of elite teams and is what enables them to be proactive and opportunistic in times of crisis. Walter's team is horizontal and they've yet to address the team leadership issue.

Our research has also identified a large gap between elite teams and the general population of teams in terms of roles and responsibilities...

Elite Teams 77% clearly defined roles and responsibilities

All Teams 45% clearly defined roles and responsibilities

Our only surprise in this finding was that only 77% of elite teams claimed to have clearly defined roles and responsibilities amongst team members. We would have thought that figure would have been higher, although this could be explained by the fact (2011 financial advisor research) that elite advisors strive for excellence and tend to be more self-critical, coupled with the fact that 32 percent of the elite teams are horizontal in structure, which makes role clarity more challenging. Regardless, there is a large gap between elite teams and the rest of the field regarding clearly defined roles and responsibilities. This is a factor in the disconnect of "everybody working feverishly" in Walter's team but not being able to capitalize on the current environment.

One other telling area involves "linking individual performance to the team's goals" - only 9 percent of the general population of teams are performing extremely well in this area as opposed to 25 percent of elite teams. This highlights a number of issues:

1. Elite teams are far from perfect. Many can improve the effectiveness of their team leadership, roles and responsibilities can be fine-tuned, and a better effort can be made in communicating how individual team members impact the team's goals.

2. All teams would benefit from re-visiting their goals, making the necessary current crisis adjustments (relationship management and relationship marketing; increasing new client acquisition goals) and communicating this repeatedly to all team members.

3. Every team, elite or general, and every solo advisor, can use this current environment as a catalyst for improvement.

4. Although elite teams aren't perfect, they are also far ahead of the rest of the field in virtually every metric measured.

Our expectation is that the elite teams will continue to improve and further distance themselves from the field. However, every advisor and every team should strive to improve. Couple the expectations of today's affluent investor with the heightened skepticism fueled by the financial crisis, and more wealth management teams and solo advisors need to be working towards achieving elite status.

Shakey Markets Action Plan

Market volatility increases the importance of working with a real financial advisor. It’s the time to be PROACTIVE and go on offensive!!!

Be proactive with contacting your affluent clients. This can be done through calls, personal meetings, lunch and learns, and social interaction. In the last serious downturn, only 19.9% of advisors increased their face time with clients. Don’t let this be you!

Call every prospect in your pipeline – this is the perfect time for a 2nd opinion – to offer help and guidance. Invite to any lunch and learn, economic update and other client events.

Be prepared for social conversations around the turmoil. These can all be opportunities for offering a 2nd opinion. Avoid getting into details about the markets. Focus on the “mini-close” for a 2nd opinion.

Roll-up your sleeves and get working! Be prepared to work through the weekend; talking to clients and providing 2nd opinions.

May the force be with you,

3 Highlights from our Pre-Released 2011 Teams Research

The following are three highlights from our pre-released research report on teams. Keep your eyes out for the full report to be released soon!

1) Wealth management teams are playing a significant role in the world of financial services. However, the majority (55%) of advisors are currently not working on a team. With little difference in key metrics such as career satisfaction, new assets acquired, and client loyalty between solo advisors and advisors on the general population of non-elite teams, advisors are likely to be more cautious towards becoming part of a team. That said, advisors on elite teams excel on all key metrics.

2) The disparity in career satisfaction between advisors on elite teams (61% very satisfied ) and the rest of the field (43% and 40%) raises the question; are they “very satisfied” because they are elite or are they elite because they love what they do (they’re very satisfied) ? Most likely the answer is somewhere in the middle, these elite team advisors love what they do, are committed to excellence, and have developed into an elite team as a result. What we did find interesting is how the career satisfaction of solo advisors had a meaningful improvement from 2009 to 2011; 29.6% to 43% very satisfied, while career satisfaction of financial advisors associated with the general population of teams remained basically the same; 41.6% in 2009 / 40% in 2011. It is also worth noting that solo advisors are currently more satisfied with their careers than advisors on teams, while advisors on elite teams lead the field by a wide margin.

3) It is interesting to note that there is little difference between the vertical and horizontal models in the general population of teams. Whereas, there is a major disparity in the elite teams between vertical (59%) and horizontal (32%) models. With team leadership such a key ingredient in all elite teams, it appears that a challenge amongst horizontal teams centers around the leadership issue.

Eliminating Time Wasters

Phoenix: “We recognize the importance of continually improving our service model,” Robert said. “But there are only so many hours in a day, and we can’t afford to be continually hiring new support personnel to meet the service expectations of our affluent clients.”

I couldn’t agree more. No advisor will achieve “service nirvana” by constantly hiring more personnel. In fact, it’s been our experience, in more than two decades of coaching teams and dealing with virtually every aspect of practice management, that a number of issues must be addressed before considering any new hire. In this issue, I’m going to discuss one of the more insidious of these pre-hire issues—existing time wasters.

It might be helpful if I put all of this into the context of affluent client loyalty. Every 21st-century financial practice wants their clients to be loyal, especially their affluent clients. In our 2011 Q1 affluent research project, we asked affluent investors: “What would cause you to search for another financial advisor?” Two responses trumped all others and were a virtual tie for Number One:

* Poor service.
* Repeated mistakes.

As I’ve written about repeatedly, this financial crisis has placed financial advisors into a new world where the advisor/client relationship has forever changed. The amount of services today’s affluent investor is expecting to receive, combined with the level of personal service they are demanding, highlights the importance of best-of-class support personnel. This component of a financial practice has become indispensable.

Financial advisors who recognize the importance of this component and are willing to invest the time, energy and money into developing excellence within the role will find themselves reaping the rewards of the positive word-of-mouth influence generated by their affluent clients. With just a little fine-tuning, most financial advisors are capable of making significant improvement in this critical area without spending a lot of money. The first step in such fine-tuning is to correct any existing time wasters.

To help you along in this process, I thought it would be helpful to review the Time Waster section of our 2011 Q1 Administrative Assistant Survey. Please take notice of the differences in perception between advisors and assistants in virtually every category. This is the heart of the issue.

 

The above graph outlines the major administrative assistant “time wasters” from the perspective of both the advisor and the assistant, all of which interfere with providing personal service and eliminating mistakes. But this also highlights a serious performance reality: many advisors don’t really know what their personal administrative assistant is doing throughout the course of a day. Whether it’s advisors complaining of their assistant’s inability to prioritize, or servicing smaller clients, or cluttered desks, existing time wasters will not be corrected until advisors and assistants get on the same page.

The following five-step exercise will help you find any existing time wasters hampering your team. This is a delicate exercise. You don’t want your assistant to think his/her job is in jeopardy (unless it is). Let them know you’ll be running the same exercise personally to see what areas eat into your productive time as well:

1. Ask your support staff to rate him or herself in each of these categories in the above graph using the following five-point scale (1 = not a time waster, 2 = not a serious time waster, 3 = could use improvement, 4 = a time waster, 5 = a serious time waster) for your support person.

2. Independent of your support staff, each advisor also rates each of these categories.

3. Meet as a team to discuss your rating of each category.

4. Agree on an action plan to correct the top three serious time wasters that everyone agrees upon.

5. Reconvene in 30 days to determine the progress. If serious time wasters are corrected, repeat step 3 for all remaining time wasters.

Improvement in service begins with advisors knowing what their assistant is doing during their working day. When this occurs, a natural clarification of roles and responsibilities follows, as well as improved communication between advisors and support personnel.

Today’s environment has created a tremendous opportunity for advisors to differentiate themselves through their personalized service and solutions. The days of viewing support personnel as an automatic solution to service issues, only to be treated as an after-thought once hired, are long gone. I recognize none of this is easy, but eliminating existing time wasters doesn’t cost any money, it will help improve your service model, and will keep you from making a hasty or unnecessary hire (which could cost you dearly).

Does Your Practice Have a Social Media Plan?

Fort Lauderdale: “We’re considering integrating social media into our marketing plan,” Joseph started out saying. Then he backtracked—“Yet, all we hear about it is what we can’t do from a compliance perspective. What is the benefit of even getting involved?”

First, as I explained to Joseph, it is essential that he understand his broker-dealer compliance guidelines regarding the use of social media. Then I reminded everyone in the audience of the recent 60 Minutes interview with Wael Ghonim, the Egyptian Google marketing executive, who attributes social media as the driving force behind Egypt’s regime change.

Social media is already playing a huge role in how people throughout the world communicate. My feeling is that it’s smart to become an early adopter, but in doing so, it’s important to be careful and to engage it with strategic intent and guidelines.

To help address this topic in more detail, I’ve decided to ask Kevin Nichols, our resident social media guru, a handful of questions.

Q. Can exposure through social networking be helpful to an advisor’s practice?

A. Yes, but it must be used properly. The reality is that every member of your practice is an extension of your brand. If used properly, social media can serve as a powerful tool that allows every member of your team to have their “ear to the ground.” This will help them listen to clients and develop a reputation for being responsive–just the opposite of the former Egyptian government.

Q. How can advisors use social media effectively in today’s environment?

A. It’s important to be operating from a plan. As an advisor, what is your objective? If your intentions are to connect with prominent players in your community to enhance your brand, it is important to approach the possibility of connecting to these people through mutual connections—and ask for permission! The last thing you want to do is make a bad social media impression. On the other hand, if your intention is to enhance your prospecting, social media is a great vehicle for enabling you to understand the relationship between people you currently know (top clients and centers of influence) and people you want to know (prospects).

However, you don’t want to ask for an introduction through social media. Once you’ve gathered your intelligence, you simply call your client or COI, as there are various ways to segue into that conversation seamlessly.

Q. What are your thoughts about advisors tweeting and blogging?

A. For most advisors, this should be avoided. This is what scares FINRA and most compliance departments. For advisors who do a lot of writing, they should check with their legal department and explain exactly what they plan to do. If they get permission, they will want to make certain that it’s in writing. Reading something like “Corporate Blogging for Dummies” is not something I’d recommend for advisors. FINRA is currently giving social media another look, but as it stands now there are simply too many legal ramifications for advisors who blog and tweet.

Q. If an advisor adopts a social media plan that involves COI branding through establishing the right connections, and marketing by orchestrating an introduction, how much time and attention needs to be devoted to monitoring all the connections?

A. That’s a great question. Ideally, I recommend advisors review their connections as the first thing they do every morning and then again in the evening. You can never be certain what has been posted, who has asked to be connected, and so on. This can happen during the day or at night, and people who use social media are on it constantly. I recognize this is a bit much for most advisors, but at a minimum, your social media plan should include daily maintenance—either morning or evening.

As you begin to get a feeling for Kevin’s social media advice, everything appears to revolve around common sense. You want to adhere to the same communication guidelines you would use in any other communications medium. If you don’t want to see your communication on the front page of your local paper, if you don’t want an association you have with someone broadcast all over town, or if you don’t want to be associated with private information being broadcast to the world, stick to your plan and work it.

Also, any attempt at using social media as an infomercial for your practice (testimonials, etc.), will likely lead to being shut out of most affluent connections in your community. On the other hand, if your plan focuses on developing the right connections to be used very carefully, you’re likely to significantly expand your affluent connections.