Client retention and managing reputation are now clear priorities for advisers, writes Nigel Bowen.
If there’s one insight that even the most casual observer of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has retained, it’s that finance-industry types are commission-obsessed con artists, right?
Well yes and no.
Research by Roy Morgan conducted prior to the royal commission found the general public didn’t have a high opinion of financial planners’ ethics and honesty. While it’s too early to have any reliable data, it seems improbable anybody involved in Australia’s finance industry would be rated more highly on integrity after the royal commission than before.
While the general public may have a sceptical view of advisers in general, they tend to have a higher opinion of their own adviser. This may seem odd but it’s hardly unusual. Many Australians are critical of doctors, lawyers and politicians while simultaneously holding their own GP, solicitor or local member in high regard.
“Almost by definition, any ongoing client of a financial adviser has a high level of trust in that adviser,” observes OnePath national risk specialist Mark Neil.
“Advisers have been moving away from commission-based investment products and towards fee-for-service models for years. Where commissions are still part of the mix, they have long been disclosed to clients.”
Transparency is key
Mr Life Insurance managing director Peter Byrne says transparency was an important theme that emerged from the royal commission.
“I’ve had a fee-for-advice model in place since 2015,” he says. “If I’m arranging life insurance for a client I give them a one-page document that details my initial and trailing commission and explains all the admin tasks I shoulder to earn those commissions.”
Byrne’s approach ensures transparency and shows the client how the adviser is renumerated. It gives the client the power to decide if they want to go ahead or not and negates the grey area that has had so much negativity and focus during the royal commission.
“I haven’t had any pushback from clients before, during or after the royal commission. I don’t think any of them would want to pay a substantially higher upfront premium to remove the commissions,” explains Byrne.
Association of Financial Advisers chief executive officer Phil Kewin echoes Neil and Byrne.
“It’s early days but the royal commission doesn’t appear to have had a negative impact on client retention for advisers,” he says. “Most of the life insurance horror stories during the hearings involved people who didn’t have a financial adviser.”
Kewin points out that the vast majority of advisers do the right thing: “They proactively service their clients, fully disclosing their commissions before any transactions are undertaken. This, along with providing personalised advice and reviewing clients, is what commissions pay for.”
Getting sticky with your clients
It appears the royal commission hasn’t made it more difficult for advisers to retain clients.
That’s good news, as advisers have enough on their plates trying to stop clients cancelling insurance policies and abandoning investments for standard reasons. And it is understanding those reasons and giving them context that should be a priority for advisers now, in the post-commission environment, say sources.
Simple software solutions can be one of the best answers to achieving this. Neil believes programs such as Microsoft’s Money Plus and myprosperity are excellent tools to prevent clients making short-sighted decisions, such as cancelling insurance.
Platforms that empower clients and give them realistic projections to help them track their performance over time will not only engender trust, it will allow them to enter into a partnership with the adviser to reach their agreed goals.
The very simple technology providing the most significant return for Byrne’s firm is an email that’s sent to every client once a year. It invites them to come in for a review, prompts them to think about whether they might be eligible to make a claim and asks them whether they need to update their personal details.
“Any firm could easily introduce something like that but, as far as I know, none have,” Byrne says.
Don’t go dark
As mentioned, Australians usually like and respect the advisers they know. But how do you overcome the trust deficit when you’re trying to attract new clients who don’t know you?
Up until relatively recently, trust would be built through face-to-face meetings. Nowadays, advisers are unlikely to get to the meeting stage if they haven’t first established their trustworthiness online.
“In 2019, both potential and existing clients are going to Google you,” Byrne says. “That being the case, you should encourage your satisfied customers to leave reviews on rating sites such as Adviser Ratings.”
At the time of writing, it appears Adviser Ratings is on track to achieve its self-declared goal of being to Australian “financial planners what TripAdvisor is to hotels” (i.e. the website consumers consult before doing anything else).
“Whether by monitoring the Adviser Ratings site, which is a useful resource, or by having an old-fashioned face-to-face chat, advisers need to be obsessive about identifying changing customer demands and rectifying sources of customer dissatisfaction,” Byrne says. “In the digital age, word soon spreads if a business isn’t hitting the mark in delivering what customers want.”
Neil concedes most Australian financial advisers now do seek feedback. But he argues many advisers have plenty of room to improve the regularity and comprehensiveness of client feedback and the speed with which that feedback is acted upon.
Retaining your clients
“Clients will stick with you if they believe you have their best interests at heart,” Byrne says. “Demonstrating [this] sometimes requires tough love. If a client wants to cancel an insurance policy, I suggest they get a medical first. I also ask both the client and their spouse to sign off on the cancellation.
“Finally, I send a letter stating that by cancelling their cover they are accepting full responsibility for any financial hardship that may result. If they still want to cancel – and about half of them do – I take comfort from knowing they’ve made an informed decision.”
Kewin says advisers face increased regulatory and education demands: “We expect fintech should help advisers meet some of those demands. However, from what members tell me, the best customer-retention strategy remains providing outstanding customer service.”
“It can be easy to skip past the basics when thinking about customer-retention,” Neil warns.
“For example, having a well-defined customer value proposition is important to both attracting and holding onto clients. If a firm is struggling, they often need to rethink and refine their CVP before investing in more client-engagement technology.”
Neil points out OnePath offers advisers a range of customer-retention tools that will help with:
- sharpening their CVP
- generating referrals
- segmenting their target market
- creating brand advocates
- establishing a consistent brand personality
- hosting popular client events
- understanding the client journey
- running net promoter score surveys
- making effective use of social media.