Implications of Complacency
Practice Management
Rico Casares
Agenda
•
Key research findings of Advisor Impact’s “Rules of
Engagement”
•
Implications of research findings
Key research findings of Advisor Impact’s
“Rules of Engagement”
Client engagement defined
• Value
• Advice
• Leadership
Create
• Confidence
• Clarity
• Control
Drive
• Engagement
• Loyalty
Fuels
• Referrals
• Wallet Share
• Services
Growth
•
Client engagement should be an aspirational goal that should drive all
activity because it is strongly connected to loyalty and growth.
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
Satisfaction
56% of clients are very
satisfied
Loyalty
71% of clients are extremely
likely to keep advisor
Likely to Refer
51% of clients say they are
likely to refer
Actually Referred
28% of clients say they have
actually referred
Leadership
64% of clients see their
advisor as a leader
Advice
45% of clients say advice is
critical to reach goals
Client Engagement
Only 28% of clients engaged
Majority of clients do not feel engaged
12%
39%
25%
24%
14%
22%
36%
28%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Disgruntled
Complacent
Content
Engaged
2011
2012
Percentage of survey respondents
at various engagement levels
Why does engagement matter?
•
Share of Wallet
•
Referrals
•
# of services utilized
•
Performance dependent
•
Fee sensitivity
Advisors drastically underestimate what clients are doing without them.
Assets show potential for engagement growth
20%
76%
80%
24%
0%
20%
40%
60%
80%
100%
120%
Advisor-reported
Client-reported
% of clients who DO NOT own a direct account
% of clients who DO own a direct account
Source: Cerulli Associates, “Looming threats: Daunting challenges face traditional advisor-centric distribution models,” 2012.
Majority of
accounts are
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
Source: Advisor Impact, Economics of Loyalty, 2010; Fidelity, Insights on Advice, 2012.
Service
% Clients Expressing
Interest in Service
% Advisors
Offering Service
Tax Planning
53%
13%
Personal Trusts
50%
11%
Potential to increase value beyond performance
33%
51%
0%
10%
20%
30%
40%
50%
60%
Strongly agree
All Clients
Engaged Clients
Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact’s Economics of Loyalty Research, 2012.
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
Engagement relates to high value, despite fees
27%
24%
15%
40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Neutral
Very High
All Clients
Engaged Clients
Q: How would you describe the value that you receive
from your primary advisor, relative to the fees paid?
Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact’s Economics of Loyalty Research, 2012.
•
Substantially more
engaged clients rate value
as high or very high
•
Far fewer engaged clients
feel neutral towards their
advisors’ value
Roles to solidify trust
Leader
Planner
Educator
Trusted Advisors go
beyond straight
investment management
and take a more all
inclusive approach to their
client relationships.
Advisor as 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
64%
16%
19%
85%
6%
9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Yes
No
I don't know
All Clients
Engaged Clients
Q: Do you consider your advisor a strong leader?
Clients want you at the center
28%
41%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Central Role
All Clients
Engaged Clients
Q: Which of the following best describes the role that your advisor plays
relative to other professional advisors with whom you work?
Source: Advisor Impact, The Rules of Engagement: An Industry Report Card Based on Advisor Impact’s Economics of Loyalty Research, 2012.
•
Engaged clients want the
advisor to play a central role
in coordinating with my other
professional advisors when
required
Opportunity to deepen the engagement model
Clients want one trusted advisor to be the center of their financial lives.
Investments
Planning
Insurance
Banking
Attorney
CPA
Etc.
HNW
Separated Model
HNW
Investments
Planning
Insurance
Banking
Attorney
CPA
Etc.
Trusted
Advisor
Engaged, Comprehensive
Wealth Management Model
Clients want more than performance
18%
25%
30%
26%
31%
37%
0%
10%
20%
30%
40%
I pay for help in defining
or articulating my goals
I pay for the development
of a financial/investment
plan
I pay for ongoing
monitoring of my goals
and plan
Engaged Clients
All Clients
Q: When you think about the fees you pay your advisor, to
what extent do you agree/disagree with the following?
Educate to build client advocates
Clarity
Confidence
Control
Advisors must educate
their clients on the
rationale and relevance of
their advice to instill trust
thereby solidify their
Client Concerns – Opportunities for Education
10%
15%
20%
14%
12%
36%
27%
4%
7%
14%
31%
28%
36%
45%
Leaving a financial legacy for a charity
Caring for elderly parents
Leaving a financial legacy for my children
Dealing with the rising costs of
health/long-term care
Coping with a significant market downturn
Ensuring my spouse it taken care of
Maintaining lifetime income needs
Very Concerned
Very Prepared
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
Basic Service
Personalization
Comprehensive
wealth management
The path from satisfied to engaged
Satisfied
Engaged
Establish personal goals
Plan for life changes
Provide a road map /
clear plan
Improved financial literacy
Informed choices
Consistent delivery
Meet expectations
Conservation of Wealth
Gifting Strategies
Retirement planning
Estate planning
Tax planning
Insurance planning
Business Planning
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
Standardize, then customize
Standardize
the process
Segment
clients and
services
Define the
experience
Standardize
materials
Consistently
implement
Customize the experience
Goals, wants,
needs and
expectations
Life and
financial
motivations
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
Building trust through discovery
63%
33%
30%
43%
8%
24%
With valued advisor
Without valued advisor
Chart Title
Know only about the assets
they manage and nothing more
Know their financial situations
thoroughly, but nothing more
personal
Know everything about their
lives, financially and personally
Source: Fidelity, Insights on Advice, 2012.
Engaged clients with valued advisors want them to know more.
Percentage of clients who say
they want their advisors to…
LEVELS OF SERVICE
TAILORED TO
CLIENT NEEDS
Core Investment
Management
•
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
Financial Planning
•
Financial Position Analysis
•
Retirement Need Analysis
•
Distribution Strategies
•
Education Funding Strategies
•
Tax Planning
•
Protection Planning
•
Estate Planning
•
Account Aggregation
•
Document Vaulting
Comprehensive Wealth
Management
•
Conservation of Wealth
•
Gifting
•
Trust Integration
•
Charitable Giving Tax Strategies
•
Executive Compensation
– Deferred Compensation
– Stock Options
– Concentrated Equity Positions
•
Business Planning
•
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
•
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
Deepen your engagement opportunities
Source: Fidelity , Insights on Advice, 2012.
•
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
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
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
–
Engaged clients are more
likely to place the highest
value on the plan in helping
them reach their financial
goals
25%
37%
28%
49%
0%
10%
20%
30%
40%
50%
60%
Very valuable
Source: Advisor Impact, The Rules of Engagement: Executive Summary, 2012.
Q: How valuable is your written plan in helping you
reach your financial goals?
Advice pays off
Comprehensive advice correlates with increased wealth.
Source: Terrance Kieron Martin Jr., Michael S. Finke, “Planning for Retirement,” December 2012.
