Client Feedback Guides Advisors

By Kristen McNamara

NEW YORK (Dow Jones)—Client feedback, says Julie Littlechild, is like a global-positioning system.

“It tells you if you’re on the right track with your business model and strategy,” says Littlechild, president of Advisor Impact Inc., a research and training firm for financial advisors.

Many advisors, however, don’t know how to ask clients what they think of the services they provide. Or advisors fear the answers they’ll receive.

Practice management experts suggest a multipronged approach, including written surveys, focus groups and in-person conversations. Advisors who pose the right questions and respond to feedback can bolster client satisfaction and loyalty. That, in turn, can lead to long and profitable relationships and new client referrals.

One sign that client feedback is more than just a feel-good exercise is a new Wachovia Corp. (WB) program linking advisor compensation with client loyalty. Advisors who meet several criteria, including high marks on client-survey questions that measure loyalty, can receive sizable bonuses.

Industry research indicates few advisors have a system for querying clients, but that more successful advisors do seek feedback.

In a recent survey CEG Worldwide conducted of more than 2,000 advisors at various types of firms, less than 6% said they had a formal process for assessing client satisfaction, says John Bowen, chief executive of the consulting firm. Yet nearly a quarter of those who describe themselves as wealth managers, and who make more money than their generalist peers, said they have a feedback-gathering process.

A number of research firms conduct client surveys for financial advisors.

Advisor Impact gives advisors a menu of statements from which to choose, such as: my advisor fully understands my financial goals for the future; my calls and email are returned promptly; and the frequency with which my advisor contacts me meets my needs. Clients rate their overall satisfaction with each statement on a one-to-five scale, then rate the importance of each attribute.

Advisor Impact compiles the results and a company executive calls advisors to discuss the findings and next steps. KLB Financial Inc., an advisory firm near Minneapolis, was surprised by some of the responses it received from a recent Advisor Impact survey.

Despite good turnout at client-appreciation events, investors didn’t place a high value on these functions. Co-owner Dana Brewer says she and her colleagues are now deciding whether and how to redirect their time and money to services of greater importance to clients.

Clients did, however, appreciate the “state of the state” summary letters the advisors send with clients’ quarterly portfolio results. The advisors didn’t realize the reassurance the letters provide was so valuable to clients.

Some coaches aren’t keen on written surveys, saying they don’t capture the nuances of face-to-face conversation, and clients may not want to take the time to respond or to criticize their advisor.

Researchers say a personal letter sent with or in advance of the survey, which expresses appreciation for the client’s opinion and the advisor’s interest in improving the work he does for investors, can encourage response. Clients should also be given the choice of replying anonymously.

Focus groups are an effective vehicle for generating new ideas or discussing changes an advisor is considering, such as the addition of a junior partner or change in fee structure, researchers say.

Similarly, client advisory boards, or small committees of top clients, can provide ongoing input on matters such as marketing plans and the industries in which clients work.

Consulting firm Clientwise LLC has created a process to help advisors query clients in person.

The firm suggests advisors phone clients with whom they feel comfortable to request a meeting. At the meeting, advisors should ask for permission to take notes, state three attributes they genuinely like or admire in the client and ask the following questions: What is the one thing you value most about how my firm and I serve you? What is one thing you would most like me to change or improve about what I do? If you were to describe the service my firm and I provide, what would you say? When you think about the other professional advisors in your life, whom do you trust most and why?

“From a relationship management perspective, advisors need to make sure they know clients and deepen relationships by asking more insightful and open-ended questions,” says Clientwise founder and President Ray Sclafani.

Advisors must also set new clients’ expectations and recalibrate the expectations of existing ones. Long-term clients, whom advisors often think they know best, may still refer to the advisor as a stockbroker and not realize the range of services the advisor can provide, Sclafani says.

He suggests advisors take a few minutes at the start of each client meeting to outline their offerings, including the ability to connect investors with other professionals.

Wachovia Securities revised its client-survey process in late 2005. It mails a four-page survey to batches of clients every three months, asking them to rate various services on a seven-point scale, says Theresa Roddy, Wachovia’s director of quality and service.

Three pivotal questions ask about satisfaction with Wachovia and the client’s advisor, likelihood of continuing the relationship, and willingness to refer friends and colleagues.

Wachovia branch managers and business-development experts help advisors act on the survey results.

Wachovia will also consider the responses to these three questions in determining whether advisors are eligible to receive bonuses as part of a new program introduced in March. The program, called 4front, is aimed at building client loyalty.

The Oechsli Institute, a financial-advisory consultancy, recently created its own client questionnaire.

President Matt Oechsli suggests advisors send their top 25 clients the survey, which asks clients to rate, on a five-point scale, statements such as: You feel you’re receiving a high level of personal service and our communication is clear and avoids industry jargon.

Advisors will need to analyze the findings on their own and should alert respondents – in conversation or follow- up mailings – to changes made in response to the feedback.

Follow-through leads to improved service and efficiency and tells clients their advisors are listening.

Oechsli says: “If you don’t act on the results then you’re a fraud.”

Originally published in Dow Jones Newswires, April 2007.