From economic upheaval to market turbulence to regulatory changes: The truly enormous changes we've experienced during the past decade have greatly affected how you serve your clients and manage your practices. They've also had a huge impact on your clients' attitudes and expectations about managing their financial lives - and on whom they want helping them with that responsibility.

In the wake of these major developments, I see an important trend: Financial advisors are increasingly shifting their business models to a client-centric approach that emphasizes building great relationships with clients from a focus on investments and financial markets.

This is a profound and fundamental shift that's taking place in advisors' priorities. I believe this movement toward a client-centric industry from an investment-focused industry is gaining momentum - and that it can set the stage for much greater advisor success and client satisfaction moving forward.

This key finding comes from my firm's recent survey of more than 2,100 advisors of various levels of success and experience. CEG Worldwide's goals with this study was to get a clear view of the state of the overall industry, and to identify any key trends that might point the way to advisors' success going forward.



Back in 2001, our research showed that a large majority of advisors surveyed (86.2%) were investment-centric - that is, their greatest priorities were on investments, not client relationships. Client-centric advisors made up just 13.8% of the group.

That ratio has largely flipped. When we asked advisors to tell us whether their greater priority was building deep client relationships or maximizing investment returns, they overwhelmingly responded in favor of client relationships.

Over the past 10 years, the importance of taking a client-centric approach to better serve clients and enhance advisor success has become a common theme - indeed, it's advice that's been hard to miss. The underpinnings are straightforward: When advisors foster deeper client relationships, they gain a deeper understanding of their clients' financial concerns and are thus better able to effectively address these concerns.

This, in turn, results in greater client satisfaction - making it easier for advisors to ask for, and get, additional assets and introductions to prospects.

Clearly, there is ample evidence that the lessons of being client-focused are taking root. I don't mean to suggest that all or even a majority of advisors have made a full shift, but we do see substantial differences from a decade ago.



Of course, it's one thing to say that client relationships are your top priority and another to back up that claim. The good news: Advisors are doing so in a number of key areas.

Advisors are outsourcing asset management. Slightly more than half of the advisors surveyed (51.6%) rely on third-party providers to manage the majority of their clients' assets. By turning over the bulk of their asset management responsibilities to third-party outsourcers, these advisors are greatly freed up to focus on client relationships. (Of course, the new data also tells us that 48.4% of advisors don't outsource asset management and therefore have an opportunity to take a step that could greatly enhance their ability to be client-centric.)

Advisors are teaming up to get specific expertise. Slightly more than four out of 10 advisors surveyed (43%) leverage teams of outside experts to address their clients' other financial concerns. These advisors work with a broad mix of professionals, including accountants (68.2% of advisors who work with outside experts), estate planning attorneys (60.5%) and life insurance specialists (34.6%). This use of outside professionals not only enhances the level of expertise available to address client concerns, but also frees up advisors to engage in additional client-facing and business-building activities.

Advisors are focusing on client communication. The majority of advisors surveyed believe that the best response to a sharp market downturn is to reach out to clients, not to analyze their clients' portfolios. These advisors understand that it is during market downturns that their clients need to hear from them most - a key shift in attitudes from the past.

Advisors are satisfied with their client relationships. Basic contentment with client relationships is foundational for a client-centric approach. Advisors who are dissatisfied with their client relationships might be more inclined to focus more on the investment management aspects of their work and less on client relationship management. As it turns out, the advisors we surveyed have good relationships with their clients. More than 90% expressed satisfaction with their client relationships, with more than 40% stating that they were very satisfied. Just 6.8% overall were dissatisfied with their client relationships.

The shift isn't total: Our survey numbers show opportunities for a large percentage of advisors who could be taking steps toward a client-centered approach. But the industry as a whole certainly appears to be headed toward an approach that focuses intensely on the client relationship.



One note about the survey group: In many of our studies, we poll only well-established advisors who have practiced for a minimum of five years and manage at least $50 million in assets. As useful as these studies have been in identifying the best practices of elite advisors, we decided that we wanted a view of the entire industry to see whether it has progressed broadly.

We expanded our view to get even clearer insight into how the more successful advisors' practices differ from - and are similar to - those of their less-successful counterparts.

The 2,128 respondents were indeed a varied and diverse group.

* In terms of assets under management, somewhat more than half (55.3%) manage less than $50 million in assets, while 22.9% manage between $50 million and $100 million, and one in five has broken the $100 million mark.

* Their experience working with clients varied widely. While about a fifth (21.8%) have worked as advisors for 20 or more years, 28.3% have done so less than five years. The remainder is fairly evenly distributed between those two extremes.

* Advisors age 45 to 54 make up the largest slice of the group, at 26%, but were closely trailed by advisors age 35 to 44 (25.1%) and those age 34 or younger (24.8%). Advisors in the 55- to 64-year-old group represent 18.7%; finally, advisors age 65 or older make up 5.6%.

One other key finding: The advisors earning the highest incomes are often those who are doing a better job than their peers at developing a client-centered approach. By understanding and adopting their practices, all advisors can serve clients better and become more successful themselves.



John J. Bowen Jr., a Financial Planning columnist, is founder and CEO of CEG Worldwide of San Martin, Calif., a global training, research and consulting firm for advisors.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access