Client frustration. It’s an all-too-familiar problem that often stems from your clients feeling confused or overwhelmed about their investments. Left unmanaged, it can sour relationships and, ultimately, cost you their business. It’s no surprise that in today’s unpredictable market, stress and frustration are on the rise.
So what steps can financial advisors take to diffuse frustration and offer clients the peace of mind they’re seeking? Here are some suggestions.
Double down on trust
Always remember that your clients are coming to you from a place of trust. Even during moments of frustration, assume best intentions on behalf of the other person.
According to the CFA Institute’s 2022 Investor Trust Study, levels of trust in financial services have reached an all-time high. The study identified five factors driving trust in financial services across 15 global markets:
- Strong market performance
- Fee compression
- Tech-enabled transparency
- Greater access to markets
- Personalized products
“Half of retail investors and more than four-fifths of institutional investors say that increased use of technology has increased trust in their adviser or asset manager, respectively,” explains the study.
At the same time, the study acknowledges that it’s tough to sustain trust during periods of volatility. The solution to this challenge, according to the CFA Institute, is technology. The study points out:
“For the first time, most retail investors (56%) envisage that in the next three years, access to technology platforms and tools through which they can execute their investment strategies will be more important than access to a human being for assistance.”
Using technology, financial advisors can offload the responsibility of everyday check-ins, especially during volatile seasons when clients may be worried or in need of clarity. Technology is the real-time engine to ensure that everyone is on the same page and that communication remains strong.
With the right technical infrastructure, financial advisors can focus on the human touchpoints that matter most. This approach creates an ongoing communication loop that builds trust.
Introduce sustainable fee structures
Understandably, fee structures can be an uncomfortable topic to bring up with clients. Remember; however, that your clients selected your firm in the first place because of your value and capabilities.
It’s important that financial advisors’ fee structures reflect the service and value being provided. Research from McKinsey points to an emerging trend in the rise of “hybrid households” as a fee structure.
“Clearly, more clients and advisors are choosing fee-based accounts,” explains the study. “However, 41 percent of households remain transactional only, and 34 percent of households have both fee-based and transactional accounts—hence the term “hybrid.” Affluent clients are even more likely to be hybrid, with 61 percent of households with $2 million or more in assets holding both account types.”
The percentage of assets controlled by hybrids is now 55%, which is up from 46% in 2016 due to clients taking advantage of multiple account types.
The goal is to implement fee structures that reflect your firm’s true quality of service. When your team operates sustainably, your clients receive the best possible level of service.
“Most firms continue to set and manage pricing policies within product lines, but those lines are clearly blurring,” writes McKinsey. “Advisors need tools and policies that help them consider the entire relationship when determining and communicating price with clients.”
Your clients want you to do great work. Relationship-driven fee structures are crucial to making sure everyone wins. It may be a good time for your firm to reassess its pricing model.
Prioritize human relationships
As your wealth management business grows, so will your reliance on data. That means a large amount of your time is spent working with numbers rather than spending time with clients directly.
This absence of face-to-face communication may result in doubt, uncertainty, or misunderstanding. That’s because, according to research from Morningstar, wealth managers aren’t always clear on what their clients value most in their advisor-investor relationship.
In an interpretation of the Morningstar report, Michael Kitces has created an analysis that breaks down differences between what clients value and what financial advisors think that clients value:
What clients say is the most important
- Helps me reach my financial goals
- Has the relevant skills and knowledge
- Communicates and explains financial concepts well
- Can help me maximize my returns
- Has a good reputation and positive reviews
What advisors say clients find important
- Understands me and my unique needs
- Helps me reach my financial goals
- Keeps my interest in focus with unbiased advice
- Communicates and explains financial concepts well
- Has the relevant skills and knowledge
There are a few simple takeaways from this comparison:
Clients are goal and outcomes oriented. They view their financial advisors as experts and trusted partners. Strong communication helps clients feel confident in their wealth managers’ knowledge base.
As a wealth manager, you can help your clients remain at ease by sharing resources proactively.
Final thoughts
The bottom line is that your clients trust your expertise and want to establish a true partnership. Communication is the key to articulating your firm’s value and commitment to your clients’ successes.
Learn more about CircleBlack
CircleBlack is an all in one management platform for the wealth management industry. You can think of it as an operational dashboard to better connect financial advisors and their clients around a shared perspective. The outcome is better collaboration.
To learn how our software can help you build, manage, and grow your wealth management practice, get in touch.
Disclosures
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.