Do your clients understand the true value of what you do? It's an important question, especially now that volatility appears to have returned to the markets. Are you sure your clients aren't wondering why they're paying you a percentage of their assets-and losing money? Again? Is losing less than the S&P a sufficient measure of your worth?
The clients are restless. Client service and retention are still Job One. Your best defense may be to make sure that you're articulating the value of the various services you perform.
"No doubt about it, 2010 will be characterized by the word change-clients seeking new advisors, advisors seeking new homes and mergers among firms that recognize that they can't go it alone any longer," says Andrew Klausner, founder and principal of AK Advisory Partners, a brand creation and marketing firm in Boston. "The common denominator among these trends, and the need we see, is that to be successful, advisors must clearly articulate their differentiating characteristics-their brand. Merged firms need to articulate the benefits of their new organization, and advisors who have switched firms need to convince clients to move with them."
"There are lots of underserved clients," says Chip Roame, founder and managing partner of Tiburon Strategic Advisors in Tiburon, Calif. "And while they may have been unhappy for a while, they were probably unwilling to move until now, because they were too scared. In addition, clients are aging, so we are going to see some account consolidation."
Tiburon's research shows that traditional full-service brokerage firms and banks are losing market share to independent advisors and, gulp, discount brokers. But contrary to popular assertions, he says, clients are not leaving wirehouses and banks en masse and running to independents.
One reason: It is easier and more tempting than ever for clients to go it alone. There is a wealth of information online via discount brokers (such as Vanguard, E*Trade and Schwab) and specialty online services (such as Financial Engines, Smart 401(k), Balanced Zone Investing and Folio Investing).
"Now that people have recovered from 18 months of seemingly endless bad news, they may be looking at you and the value you provide," Roame says. "Clients now have a year's worth of data to evaluate their advisors on how they reacted to the financial crisis and whether what they are doing for them is working. Investment management and advisory firms that have lost significant assets have had a year to see if they have been able to successfully adapt, operationally and strategically."
"The crisis was one of those near-death experiences," says Bob Veres, publisher of Inside Information. "The best advisors have been quick to communicate to their clients things like, 'I'm going to be here worrying for you,' and 'I'll see you through.' They have built closer personal relationships," Veres says.
The most important service the client needs? According to Veres, it's hand-holding: "Someone who's adaptable enough to help with personal life planning issues and put together a well-organized portfolio, who's a good communicator, who can help them understand what insurance to buy. Someone with deep knowledge who can quarterback the entire process." But clients have to recognize this multifaceted expertise-which means you have to make it part of everything you do.
Sue Stevens, founder of Stevens Wealth Management in Deerfield, Ill., and author of Put Your Money Where Your Heart Is, agrees with Veres. "At the end of the day, clients are looking for peace of mind," she says. "It's especially true when there's a lot of volatility and uncertainty. Anything we can do as advisors to keep things calm is valued."
She continues, "So we are very clear in laying out expectations. We've boiled our investment policy statements down to two pages; they are plain English and simple to understand. We update them every year and talk about them so that people know what to expect. Then if the market is volatile, we can say, 'Look, we're still within the parameters you were comfortable with,' and generally that helps."
Stevens also puts a lot of emphasis on deep diversification. She builds portfolios with 18 different asset classes; each one has a purpose in the portfolio. She goes through that individually, with each client, in the annual review. She also writes a monthly newsletter called Radiant Wealth.