Implications of Complacency

Transcription

1 Implications of Complacency Practice Management Rico Casares VP, Practice Management Consultant For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.

2 Agenda Key research findings of Advisor Impact s Rules of Engagement Implications of research findings Taking action to promote engagement For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 2

3 Key research findings of Advisor Impact s Rules of Engagement For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 3

4 Client engagement defined Client engagement should be an aspirational goal that should drive all activity because it is strongly connected to loyalty and growth. Value Advice Leadership Create Drive Confidence Clarity Control Engagement Loyalty Fuels Growth Referrals Wallet Share Services Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 4

5 What comprises engagement Clarity 61% of clients are very clear on their financial goals Confidence 41% feel very confident they will reach their goals Control 43% of clients feel in very high control of their futures Advice 45% of clients say advice is critical to reach goals Leadership 64% of clients see their advisor as a leader Satisfaction 56% of clients are very satisfied Likely to Refer 51% of clients say they are likely to refer Loyalty 71% of clients are extremely likely to keep advisor Actually Referred 28% of clients say they have actually referred Source: Advisor Impact, The Rules of Engagement: Executive Summary, Client Engagement Only 28% of clients engaged For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 5

6 Majority of clients do not feel engaged Percentage of survey respondents at various engagement levels 45% 40% 35% 39% 36% 30% 25% 20% 22% 25% 24% 28% % 14% 12% 10% 5% 0% Disgruntled Complacent Content Engaged Source: Advisor Impact, The Rules of Engagement: Executive Summary, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 6

7 Why does engagement matter? Share of Wallet Referrals # of services utilized Performance dependent Fee sensitivity Attrition risk For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 7

8 Assets show potential for engagement growth Advisors drastically underestimate what clients are doing without them. % of clients who DO NOT own a direct account 120% % of clients who DO own a direct account 100% 80% 24% 60% 40% 80% 76% Majority of accounts are unidentified! 20% 20% 0% Advisor-reported Client-reported Source: Cerulli Associates, Looming threats: Daunting challenges face traditional advisor-centric distribution models, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 8

9 The positive effects of engagement Higher levels of client engagement lead to: Greater share of wallet 44% of engaged clients have advisors who manage 75+% of assets, compared to only 22% of complacent clients Enhanced profitability Engaged clients want to cluster more services with a valued advisor Service % Clients Expressing Interest in Service % Advisors Offering Service Tax Planning 53% 13% Personal Trusts 50% 11% Estate Planning / Gifting 62% 47% Source: Advisor Impact, Economics of Loyalty, 2010; Fidelity, Insights on Advice, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 9

10 Potential to increase value beyond performance Q: To what extent do you agree or disagree that your primary advisor adds value above and beyond market performance? Far more engaged clients agree their advisor adds value beyond performance Engaged clients are much more likely to separate the value of their advisory relationship from monetary returns 60% 50% 40% 30% 20% 10% All Clients 33% Engaged Clients 51% 0% Strongly agree Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 10

11 Engagement relates to high value, despite fees Q: How would you describe the value that you receive from your primary advisor, relative to the fees paid? 45% All Clients Engaged Clients Substantially more engaged clients rate value as high or very high 40% 35% 40% 30% 27% Far fewer engaged clients feel neutral towards their advisors value 25% 20% 15% 15% 24% 10% 5% 0% Neutral Very High Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 11

12 Role of the Trusted Advisor For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 12

13 Roles to solidify trust Leader Trusted Advisors go beyond straight investment management and take a more all inclusive approach to their client relationships. Planner Educator For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 13

14 Advisor as leader Q: Do you consider your advisor a strong leader? Engaged clients look to their advisor to lead them in making difficult decisions, staying on track, and crafting a realistic vision of the future Clients describe leadership as providing active guidance in their financial lives 90% 80% 70% 60% 50% 40% 30% 20% 10% All Clients 85% 64% 16% 6% Engaged Clients 19% 9% 0% Yes No I don't know Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 14

15 Clients want you at the center Q: Which of the following best describes the role that your advisor plays relative to other professional advisors with whom you work? Engaged clients want the advisor to play a central role in coordinating with my other professional advisors when required 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 28% 41% Central Role All Clients Engaged Clients Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 15

16 Opportunity to deepen the engagement model Clients want one trusted advisor to be the center of their financial lives. Separated Model Engaged, Comprehensive Wealth Management Model Investments Investments Planning Planning Insurance Banking Attorney CPA Etc. HNW Insurance Banking Attorney CPA Etc. Trusted Advisor HNW For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 16

17 Clients want more than performance Q: When you think about the fees you pay your advisor, to what extent do you agree/disagree with the following? Engaged Clients All Clients I pay for ongoing monitoring of my goals and plan 30% 37% I pay for the development of a financial/investment plan 25% 31% I pay for help in defining or articulating my goals 18% 26% 0% 10% 20% 30% 40% Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact s Economics of Loyalty Research, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 17

18 Educate to build client advocates Clarity Advisors must educate their clients on the rationale and relevance of their advice to instill trust thereby solidify their client s engagement Confidence Control For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 18

19 Client Concerns Opportunities for Education Q: For each, please indicate your level of personal concern/preparation with these issues. Maintaining lifetime income needs 27% 45% Ensuring my spouse it taken care of 36% 36% Coping with a significant market downturn Dealing with the rising costs of health/longterm care 12% 14% 28% 31% Leaving a financial legacy for my children 14% 20% Caring for elderly parents 7% 15% Leaving a financial legacy for a charity Very Concerned 4% 10% Very Prepared For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 19

20 Clients want help reaching their goals Engaged clients see their advisor as leading them in making difficult decisions, staying on track and crafting a realistic vision of the future Clients evaluate if the advice they are receiving is helping them to reach their financial goals 89% of investors say the advice they receive is important or critical in reaching financial goals 97% of engaged clients say their advisors advice helps them reach goals The process of helping investors think about advice in relation to goals can drive further engagement Clients value your help in improving financial literacy and knowledge For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 20

21 Take action to promote engagement For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 21

22 The path from satisfied to engaged Satisfied Engaged Basic Service Personalization Comprehensive wealth management Improved financial literacy Informed choices Consistent delivery Meet expectations Establish personal goals Plan for life changes Provide a road map / clear plan Conservation of Wealth Gifting Strategies Retirement planning Estate planning Tax planning Insurance planning Business Planning For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 22

23 1. Deliver the right service to the right clients Segment clients Enables advisors to tailor services and strategies to evaluate profitability of client relationships Define your ideal client Engaged clients are more likely to focus on fit with respect to values and communication style than other clients Targeted client education Create better financial literacy Focus on how goals are affected Address possible emotional roadblocks For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 23

24 Standardize, then customize Standardize the process Segment clients and services Customize the experience Define the experience Standardize materials Goals, wants, needs and expectations Life and financial motivations Risk approach Preferences Consistently implement For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 24

25 2. Reinforcing your value proposition Holistic discovery process Personal goals, aspirations, concerns Financial priorities, disclosed assets Define service standards and models Service being provided Frequency Communicate the service model to clients Engaged clients are more likely to indicate that service standards have been formally communicated Engaged clients tend to expect and receive more review meetings For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 25

26 Building trust through discovery Engaged clients with valued advisors want them to know more. Chart Title 8% 30% 24% Percentage of clients who say they want their advisors to Know only about the assets they manage and nothing more 63% 43% 33% Know their financial situations thoroughly, but nothing more personal Know everything about their lives, financially and personally With valued advisor Without valued advisor Source: Fidelity, Insights on Advice, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 26

27 LEVELS OF SERVICE TAILORED TO CLIENT NEEDS Financial Planning Comprehensive Wealth Management Conservation of Wealth Gifting Trust Integration Charitable Giving Tax Strategies Executive Compensation Deferred Compensation Stock Options Concentrated Equity Positions Business Planning Core Investment Management Financial Position Analysis Retirement Need Analysis Distribution Strategies Education Funding Strategies Tax Planning Protection Planning Estate Planning Account Aggregation Document Vaulting Financial Position Analysis Retirement Need Analysis Distribution Strategies Education Funding Strategies Tax Planning Protection Planning Estate Planning Account Aggregation Document Vaulting Review Goals and Objectives Risk Tolerance Analysis Investment Policy Statement Net-Worth Analysis Cash-Flow Analysis Asset Allocation Portfolio Rebalancing Portfolio Performance Tax and Cost Basis Reporting Review Goals and Objectives Risk Tolerance Analysis Investment Policy Statement Net-Worth Analysis Cash-Flow Analysis Asset Allocation Portfolio Rebalancing Portfolio Performance Tax and Cost Basis Reporting Review Goals and Objectives Risk Tolerance Analysis Investment Policy Statement Net-Worth Analysis Cash-Flow Analysis Asset Allocation Portfolio Rebalancing Portfolio Performance Tax and Cost Basis Reporting For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 27

28 Deepen your engagement opportunities Investors are increasingly interested in additional services provided by their valued advisor As a result of this demand, a need gaps have emerged Tax planning/preparation 53% of investors seek this service, but only 13% of advisors offer it Personal trust services 50% of investors have expressed interest in this service, and only 11% of advisors provide this Estate planning and gifting An overwhelming 62% of investors seek advice in this area, but approximately 47% of advisors offer this counsel Source: Fidelity, Insights on Advice, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 28

29 3. Establish a Wealth Management Experience Develop a defined, structured client experience process Discovery Comprehensive plan design Implementation Quarterly roadmap that outlines the core elements of your service model Monitor and manage outcomes Focused on long-term objectives For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 29

30 Documenting clear plans and goals Help clients articulate and document a vision for their financial future 60% of engaged clients have a written financial plan Q: How valuable is your written plan in helping you reach your financial goals? 60% 50% 40% 37% 49% Engaged clients are more likely to place the highest value on the plan in helping them reach their financial goals 30% 20% 10% 25% 28% 0% Very valuable Source: Advisor Impact, The Rules of Engagement: Executive Summary, For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 30

31 Advice pays off Comprehensive advice correlates with increased wealth. Average retirement wealth over time, based on planning model $250, $200, $150, Comprehensive advice yields 2X more than self direction Comprehensive Manager Planner $100, Self Direction No plan $50, $ Source: Terrance Kieron Martin Jr., Michael S. Finke, Planning for Retirement, December For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 31

32 4. Integrating your professional network Play the quarterback with clients, keeping other professional advisors informed and involved. Involved other professionals in critical decisions Leverage document sharing capabilities Meet regularly 41% of engaged clients say their advisor plays a central role in their financial lives, coordinating across other professional advisors For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 32

33 Action summary 1. Deliver the right service to the right clients Action Items Segment your client base Define your ideal client Educate clients on rationale and relevance 2. Reinforce your value proposition Define service models Communicate the service model 3. Establish a wealth management experience Implement a holistic planning approach Goals and event driven engagement 4. Integrate your professional network Coordinate services across needs areas For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 33

34 Using Advisor Impact for client surveys For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 34

35 Easy to execute and cost effective Basic (Self Directed) Program Create a survey that meets your needs, invite clients to participate and access in-depth reporting and tools. No cost for Gold Advisors Premium (Guided) Program Enhance the basic program with access to a dedicated senior consultant who will provide guidance and coaching to help you create and implement a plan to actively use your client feedback. $750 for Gold Advisors 35 For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 35

36 Thank You For Broker-Dealer / Advisor use only. Not to be reproduced or shown to the public.. 36

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