In Practice June 8, 2007

The Adviser-Client Communication Disconnect

According to clients, more is not always better when it comes to meeting with their advisers.
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A recent survey by State Street Global Advisers and Knowledge @ Wharton said that advisers must focus on the quality and not quantity of client communication, because clients are not interested in more communication than they have at present. The survey of 500 consumers and 366 financial advisers found that although some advisers would like to increase the frequency of client meetings, their clients didn’t feel the same. More than half (51%) of advisers say they would like to communicate with their clients on a monthly basis compared with the 36% of clients  which concurred. Nearly half (49%) of clients preferred quarterly communications.
In fact, advisers and clients don’t even seem to agree on how frequently communication is occurring currently, let alone in the future. While 39% of advisers say they currently communicate monthly, only 24% of clients agree. The two groups agreed that quarterly communication is taking place for about 45% of clients, but almost twice as many clients as advisers 17% and 9%, respectively, said communication only takes place annuall, while 7% of clients say their advisers “almost never’ communicate with them.
Telephone is the most frequent mode of communication (about 40% of the time), followed by face-to-face meetings and e-mail, each cited by about a third of respondents. Although advisers prefer face-to-face communication (57% cited it as their desired medium), 41% of clients want e-mail, and 39% want face-to-face, while another quarter (26%) prefer telephone contact.
Not only did the survey find a disconnect between advisers and clients about communication frequencies and methods, but clients are not as satisfied as advisers think they are. Fifty-six percent of advisers said they thought their clients were “very satisfied” with the service they are getting, but less than half (24%) of clients reported feeling that way. On other aspects:
  • 34% of clients were “satisfied” with the service from their adviser (compared to 29% of advisers predicting their clients felt the same);
  • 28% were only “somewhat satisfied” (while only 16% of advisers said so); and
  • 7% of clients said they were not at all satisfied with their advisers (no advisers believed this to be true).
However, about the same about of advisers and clients said the clients were extremely satisfied (9% and 7%, respectively) perhaps suggesting that the top advisers are truly delivering excellent service.
Still, nearly three-quarters (70%) of clients reported they had not been asked how their adviser might improve the relationship, the report said. This suggests that many clients feel disconnected from their advisers, and advisers can work to make their value proposition be that they will pay attention to their clients, the paper suggests.
In Practice June 8, 2007

It’s A Matter of Trust

As adviser client relationships move from one that revolves around picking investments to one more focused on personal counseling and education, it’s important to maintain trust.
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In fact, 69% of clients say trustworthiness is the most important attribute in the selection of an adviser, according to a recent report by State Street Global Advisors and Knowledge @ Wharton, report, titled “Bridging the Trust Divide: The Financial Advisor-Client Relationship.”
According to the paper, there are three levels of trust between advisers and clients:
  • trust in technical competence and knowledge;
  • trust in ethical conduct and character; and
  • trust in empathetic skills and maturity.
The first type of trust, according to the paper, can be summarized by the question “Do I trust that you know what you’re doing?” Investors turning to financial advisers want someone who is experienced and knowledgeable. Investors want help making difficult financial and personal decisions – and trust in their adviser’s ability to provide that assistance is fostered by a high level of technical competence. In fact, about half of clients (47%) said knowledge is the most important attribute to serving clients well, while only 26% of advisers agreed.
Advisers cautious of overemphasizing their personal skills may in fact be hurting their credibility with clients, the report said. However, the authors cautioned that an adviser must emphasize his or her skills correctly, in a way that is clear but not overly simplistic.

Reputation Risks

The second type of trust is represented by the question, “Do I trust you not to steal money from me?” What is often important here is reputation, which can sometimes mean brand, the paper said. According to Eric Bradlow and David Reibstein, Wharton marketing professors cited in the report, financial services companies, who have established brands, may have an edge with potential clients.
Lastly, clients want to know that if they share personal details about themselves or their family, the adviser will be able to handle that information professionally. Investors are now turning to advisers are looking for help with “softer” advisory services, the report says, such as personal counseling and instruction. Clients are looking to connect with their adviser on a more personal level, similar to a desired relationship with a doctor. Advisers who are not able to “integrate the financial and personal into their financial advisory process…will likely face limitations in the advisor-client relationship and may find that they are ultimately unable to satisfy the client.”

Not a Fixed Quantity

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Even if those three levels of trust are present at first, the report warns that “trust is not a fixed quantity and is easily diminished.” Although people may think that weak investment returns are why advisers lose clients, Bradlow says “advisers tend to underrate the importance of professionalism.”
Bradlow says the professionalism of an adviser’s staff when working with clients is very important to building a client’s trust in an adviser, especially because 80% of a client’s contact is frequently with an adviser’s assistant and support staff, not the adviser. If staff isn’t reinforcing the adviser’s persona and brand, it can be difficult for clients to get a solid sense of who they are working with – impeding the development and fostering of trust.

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