Over the last decade, financial professionals have witnessed unprecedented economic volatility, which in turn has caused increased uncertainty for many investors. In addition, the public’s trust and confidence in the financial industry has radically eroded, forcing advisors to take a second look at the service and value they offer their clients.
Most top financial professionals have concluded they must offer higher levels of service and value to retain existing clients and attract new prospects. Studies, such as the Edelman Trust Barometer 2012, indicate that clients are clear about what they want and expect from financial professionals.
They want to work with someone who will listen to them, who has high ethical standards and puts clients ahead of their own interests, and who is fully open and transparent when it comes to charges and fees.
Although most financial advisors would rank themselves high in these areas, studies show that the public is giving them low marks. This disparity indicates that there is a wide gap between what the public wants and what professionals are perceived as providing. In response, top financial professionals have changed the way they approach their businesses. They understand that fees and other forms of compensation must be more closely aligned with the level of service and value they bring to clients. Further, they realize they must communicate their value much more effectively to prospective clients.
One way top financial professionals are helping to facilitate a better approach to their businesses is by shifting to a fee-based model. Advisors shifting to a fee-based model have come to understand that it can provide the opportunity to offer a higher level of service and value to their clients. Having a steady stream of recurring revenue allows them more time to focus on the needs of their clients by freeing them from the constant pressure to sell more.
Furthermore, investors want and need advice. They want an advisor who will be their advocate and help them establish goals, create a strategy to achieve those goals and then help them implement their plan and stay on track. A fee-based practice enables the advisor to better represent the client’s best interests rather than only representing products.
Communicating Is Key
Clearly communicating the value advisors bring to clients will help build confidence and trust. For example, all too often, financial professionals assume that clients understand what they do for them behind the scenes, when in fact, clients only see what is presented to them. Highly successful advisors have learned how to effectively communicate the services and value they bring to their clients, and they tie their pricing to those services. To do this, I recommend creating a list of the specific services advisors offer, which can be used to help clients understand their value and can also be used as a great marketing tool. Taking this step can help advisors manage client expectations and enhance the quality of the relationship as well.
Financial advisors who have mastered this approach have learned not to offer the same services to all clients. They tailor their services to targeted client groups. They have defined their ideal clients and understand which clients groups they can best serve. This allows them to clearly define the relationship and reinforce their value. Most investors are happy to pay when they understand what services are being offered and the value their advisor provides. Taking the time to help clients understand what to expect from advisors and then providing full transparency regarding all fees, charges and expenses will help clients see that their advisors’ pricing is truly tied to the service and value they bring.
Keith Johnson is vice president of Practice Management for Curian Capital, responsible for advisor-facing educational content, sales and marketing presentations, tools and resources. Johnson also works closely with the organization’s broker/dealer partners offering business consulting and coaching programs that enable financial advisors to improve the efficiency, productivity and profitability of their practices.