How often do you call your clients? If they’re affluent, it might not be often enough. According to a J.D. Power and Associates 2007 “Full Service Investor Satisfaction Study,” released on July 24, there is a substantial group of wealthy investors who aren’t happy with the service they’re getting. About 25 percent of respondents (who had $500,000 or more in liquid assets, and 90 percent of their assets with a single investment firm) reported low levels of satisfaction, primarily because of a lack of contact from their investment advisors. What’s worse, 5 percent of this group say they intend to switch firms within the next 12 months.
Basically, more contact means more “commitment” from clients—which leads to more business, says David Lo, director of investment services at J.D. Power and Associates in the release. Highly committed clients give you more of their assets, are less likely to switch firms and are more likely to recommend the firm’s products and services, the study found. But only 37 percent of clients surveyed consider themselves, “highly committed” to their investment firms, while 52 percent say they have “medium commitment.”
“For a firm with one million customers, shifting a modest 5 percent of investors from moderate to high levels of commitment can result in an increase of more than $5 billion in assets under management,” says Lo in the release.
So when is enough contact enough? One broker at a wirehouse who wished to remain anonymous says, at the very least, he makes 15 contacts per year, stressing that these are all by phone or in person. “Email is not intended to replace phone calls, it’s meant to supplement them. High tech without high touch is a failure,” he says.
Usually, that total breaks down to 12 phone calls (one a month), two social meetings and one sit-down lunch or dinner meeting each year, he says. Even if the phone call is 10 seconds long, just to say, “How is everything?” he says reaching out to the client is key. “If that’s done, you’ll never loose a client,” he says.
“I’ve seen advisors get lazy, and lose clients from not making a phone call in a case where one was necessary to relate something important about their account,” he says. In order to gauge how he’s doing, he meets with a client advisory board he put together once a quarter, sitting down with the clients to discuss the services he provides.
Barry Mendelson, founder and managing director of Capital Market Consultants (CMC), a business consulting, advisor training, and investment advisory firm says communicating with clients is not just a matter of frequency, but of content. Financial advisors are not spending the time to educate and inform clients, he says. They also need to communicate with clients in a way that demonstrates that they know what they’re doing, acting in the best interest of the client and have the resources to make good decisions.
The good news is, more investors want advice. Despite the increasing sophistication of do-it-yourself investing tools, the J.D. Powers study says the percentage of investors seeking advice increased to 59 percent in 2007 from 53 percent in 2006. What’s more, customer satisfaction was higher on average among investors who regularly seek advice from advisors than among self-directed advisors.
The J.D. Power study also ranked firms in terms on highest investor satisfaction, and Edward Jones came out on top for the third year in a row. The firm scored 802 on a 1,000-point scale, with particularly high marks in the categories advisor/broker and investment performance.A.G. Edwards came in second with 782 with good marks all around, and Vanguard third with 780, with particularly high grades for account statements and commissions and fees. The scores were based on six factors: financial advisor/broker; account setup and account offerings; investment performance; commissions and fees; account statements; and convenience.