Amazing Relationships

How to make clients feel you are irreplaceable.

By Tracey Longo

The one thing all thriving investment advisors know about client service can be summed up in one short phrase: Ask the client.

It’s not that veteran advisor Charlie Haines doesn’t know that his clients want him to invest their money successfully. He knows that all too well. But it’s all of the other things they want, often unspoken and even ill defined in the clients’ own minds, that he wants to nail down when he starts working with them. That’s why Haines pays a clinical social worker to meet with clients to help them define their true goals. “This is life planning wedded with financial planning and we believe it’s the future,” Haines says.

Joe Biondo is a crackerjack portfolio manager by most standards, even launching a mutual fund, the Biondo Growth Fund, earlier this year to satisfy all of the clients who can’t afford his firm’s wealth management business. So how does he know what clients want? He and his four relationship managers ask them in interviews, get feedback from a 12-client advisory board and take a multitude of client suggestions from a newly launched Q&A Section in the firm’s monthly newsletter. “The response has been overwhelming,” Biondo says. “It helps us shape and refine our offerings.”

It was a sad day in 2007 when New Orleans-based Resource Management Inc. (RMI) associates arranged to fly the body of a client’s son home to help a family that was out of the country and too bereft with grief to do it themselves. “We tell our clients our engagement is so broad it encompasses everything, and we mean it,” says partner Randy Waesche, who with partner Michael Zabalaoui has helped clients launch companies, negotiate the purchase of businesses and homes, create pension plans and even unions and invest in highly profitable venture capital and oil and gas partnerships. “There is nothing we won’t do for clients and they know it,” Waesche says.

While the great service experiences advisors are delivering will vary depending on a firm’s principles and its client base, what they share is the ability to provide meaningful communication and client-centric assistance in a timely fashion.

Now, here’s the point: While this article features advisors who can highlight meaningful and even touching tales about the service they provide, experts say these advisors are the exception, not the rule, in the industry. “Truly robust client service hasn’t been on the radar screen for advisors in a long time,” says veteran advisory consultant Mark Tibergien, a partner with Moss Adams, Seattle. That’s especially troublesome during a profession’s growth phase when it is more likely that service will fall between the cracks. “What’s worse is that so few firms have built systems for evaluating client experiences,” he says.

Today, many advisory business are in an all-out growth mode. “[Some] practices are getting very, very large,” Tibergien says. In 2000, just 11% of firms in the industry were generating annual revenue of $1 million. Today, the median annual revenue for all firms is $1 million.

While almost all advisors’ assets have been buoyed by the rising tide of boomer retirement, experts warn that this rarefied moment in the industry’s business cycle simply won’t last. Building a meaningful client experience is especially important as clients become more demanding, investment offerings are commoditized and as-yet fairly passive competitors step up their game to get in on baby boomers’ increasing need for investment advice.

How do you compete and still maintain a healthy profit margin? By turning a commoditized product into an meaningful client experience. Think Starbucks. Think Build-a-Bear, Tibergien says. “These folks charge premium prices, not because their commoditized products warrant it, but for the unique and thoughtful client experience they provide around these products.”

While many advisors want to believe they can keep doing what they’ve been doing—after all, haven’t they been successful up until now?—it really isn’t true, say consultants who track and benchmark the industry. “The problem is, when it comes to service, what got you here, won’t get you there,” says Tibergien. “The big question for each of you is, how do you know if your service strategy is still relevant? Do you know what optimal clients want? And, how do you build that client experience going forward?”

Boomers’ looming retirement, that transfixing event involving tens of millions of Americans, will quickly redefine the best advisors, says Ray Sclafani, president and founder of ClientWise, a consulting and coaching firm in New York City. “Those advisors who truly want to become more relevant in their clients’ eyes are those who are thinking about how and where clients want to spend their time,” Sclafani says. “The top advisors we work with know that their job transcends just building a client’s affluence. They’re having conversations with clients about what the next ten and 20 years will look like and what the client wants his and her legacy to be. The most successful folks we coach are those who see themselves as the facilitators of clients’ overall goals and dreams.”

It’s very likely that advisors have been fairly spoiled up until now, both in terms of a dearth of real competition and client attrition rates, but both are due to increase in the coming years. While advisors are accustomed to losing just 1% to 2% of their client base each year, that could more than triple, Tibergien predicts. “When we asked clients who had left their advisors in the past five years why they terminated their relationship, they said it was because they didn’t believe their advisors could help them with the next phase of their lives—distribution planning.” In others words, clients who hired advisors to help them accumulate wealth for retirement didn’t know those same advisors could manage their money in retirement. Whose fault is that?

What you communicate to clients, how you deliver the message and how often you “touch” the client is becoming more of an art and science than ever before. Do your clients know what you can do for them as they move through the various stages of their lives? Are they able to articulate the actual value you deliver? Can and will they tell referrals about your services? If not, your communication process has gaps, says David Nelson, president of Strategic Business Management Solutions Inc. in Long Beach, Calif.

Nelson, who was a senior vice president and director of retail training at Raymond James for more than a decade, today finds himself coaching advisors to ask their clients the kinds of questions that lead to the construction of a meaningful client service experience. “You have to be able to anticipate what clients will need down the road. How do you do that? Ask them, ‘How do you see your future? Will you be spending your days knitting grandkids booties or traveling the world? Are you still intent on launching that boutique? How many grandkids do you want to put through college? What’s new? What’s shifted?’” Nelson says.

Clients’ goals aren’t static or stationary. Staying abreast of changing needs and wants is a fundamental of delivering pertinent client service, Nelson adds. Sometimes, finding out about a pending divorce or major shift in financial needs or plans may be as simple as saying: “These were your plans last time we met. Has anything changed since then that I should know about?”

Some firms, such as The Biondo Group in Milford, Pa., which manages some $435 million for approximately 400 private wealth clients and a growing number of institutional investors and fund shareholders, like to get creative when it comes to client communication. The firm has four relationship managers on staff whose job is to call clients and ask: “‘Are we doing everything we need to be doing for you?’” says Joe Biondo Jr. “We also ask if there is any product or service we don’t have. What we hear most is that they would like to be contacted more.”

Basically, says Biondo, the number one service he believes clients want advisors to deliver—above and beyond performance—is trust. Research from Moss Adams bears that out. Investors reported that the most important facet of their advisor relationship is that their “advisor is trustworthy,” the firm’s 2006 Advisor Impact survey found.

The Biondo Group launched the “Ask Us” section in their monthly client newsletter in 2006 and the staff is delighted with the overwhelming response, as well as the feedback they’re get from their 12-client advisory board, which meets for regular dinners with firm principles and staff. The firm also holds annual spa and golf outings for clients and a bi-annual seminar at a nearby resort where they discuss business over lunch and then set families loose to play golf, tennis or swim.

“When you go through rough market periods, which inevitably happens, people don’t stick around because they’re happy with performance. They stick around because they continue to feel important,” Biondo says, once again channeling Moss Adams findings.

“When we ask clients, ‘Why do you stay with advisors?’ they tell us, ‘Because their staff makes us feel important,’” Tibergien says.

Having great staff, especially staff that operates as a team, will become even more critical in the days ahead, says ClientWise’s Director of Coaching Services Liz Manibay. “I coach teams all the time and the problem is often that their roles are not defined, they don’t have weekly team meetings, they don’t have vision and strategy sessions and they don’t have common goals,” Manibay says. “When we turn that around, the increase in energy and client service grows exponentially.”

Equally important, Manibay says, is to know who your best clients are and which ones are truly paying the bills. At most firms today, it is still the top 20% of clients who contribute 80% to a firm’s revenues. A good coach or consultant will be able to provide intelligence reports to an advisor that clearly delineate the profitability and cost of each client. “You have to know who your platinum clients are so you can devise your service experience and marketing efforts around their wants and needs,” she adds.

That’s exactly why R.W. Rogé & Co. in Bohemia, N.Y., has developed three tiers of customer relationships, as well as launching The Rogé Partners fund. At the top tier of planning in the firm’s roster is its Unique Wealth Management Experience clients, who have a minimum of $1.2 million. Those clients who only want investment management are called Strategic Access Portfolio clients and must pay a minimum monthly fee of $1,250. The firm has also introduced it’s WealthBridge Strategy program, so that investors who are getting started, as well as kids, grandkids and referrals from existing wealth management clients have a meaningful place to turn for investment management and basic financial planning.

For wealth management clients, the firm “focuses on anticipating clients’ overall needs, including college funding for grandkids, Medicare planning, estate planning and even assistance in shopping for residential retirement and care facilities,” says Roseanne Grande, managing director of client services at the firm. “We are also in the process of launching a geriatric planning department, which we believe will benefit our clients and their aging relatives.”

Knowing thy client has been a near-biblical mandate for a small but select group of advisors. Charlie Haines, who heads a firm by the same name in Birmingham, Ala., could lead this group. “We probably merged psychology and money earlier than anyone else in this business,” says Haines, who manages $500 million for about 200 clients.

Haines brings in a clinical social worker to talk to new clients within a month or two of being hired. “We work on family, friends, physical wellbeing and even philanthropy,” says Haines. “We started doing this about 15 years ago when we became dissatisfied with our client experiences and just dealing with the issue of money. We know great planning is not just about the money. It’s about the issues underneath the money.”

While Haines has created a highly personalized service experience designed to give clients everything they want, his vision has also come to include legacy planning and philanthropy. “Just because the client is not asking for something doesn’t mean you shouldn’t be trying to provide it,” says Haines. “We should be learning from our older clients to see what they need, so we can position our practices more precisely to help the rest of our clients as we move forward.”

Envisioning the next ten or even 20 years of client needs and expectations will help advisors plan strategically so they stay ahead of their competition, ClientWise’s Sclafani says. Advisors of the future who identify their market and articulate their value proposition clearly will be most relevant and most able to charge for their services, he adds.

Which brings us to that touchy subject of pricing. “Advisors tend to be apologists about what they charge, but [you] profoundly change the lives of your clients,” says Moss Adams’s Tibergien. Ask yourself this: Is your pricing aligned with the value you deliver, the way you communicate that value and the perception of what competitors charge and deliver?

“If not, that’s when complaints start rolling in,” says Waesche of RMI, “when clients perceive that they’re not getting value for what they are paying.”

RMI has shunned an asset-under-management fee structure and instead charges its 300 clients retainer fees on the $650 million it manages. RMI is, of course, in the minority when it comes to formulating a pricing scheme. The majority of advisors charge 75 to 100 basis points to manage $1 million, Moss Adams says. Waesche says RMI has opted to use a retainer fee instead so that its advisors will never be tempted to retain assets that might better be deployed elsewhere to serve the client’s best interests.

That may be the ultimate in client service experience and trust building—the knowledge that your advisor really is putting your interests first. RMI is on to something with its retainer fees, says Sclafani. “I think the advisor of the future will charge clients the way attorneys do, and that would mean using retainer fees to charge for value.”

Originally published in Financial Advisor Magazine, January 2007.