Clients are less willing to refer their adviser in today’s market environment, so planners must work harder to win back their loyalty. Kristen Paech reports.
If loss of trust and poor investment advice/ returns are the main reasons for leaving a planner, then planners are arguably more vulnerable today than they have been for many years. Statistics from SuperRatings released in late August revealed that the median balanced super fund posted a 1.1 per cent loss in July, taking the rolling 12-month return down to minus 6.7 per cent.
In most cases this is down to financial markets, rather than poor advice, but that’s little consolation to consumers. It is therefore not surprising that the latest ING Australia-commissioned Nielsen research on client and adviser expectations has found obtaining new clients, and keeping existing clients, is becoming more challenging for planners.
Nielsen found the likelihood of a client recommending their adviser to friends or colleagues in the next 12 months has slipped from 38 per cent last year to 30 per cent this year. The proportion of people who are “highly likely” to recommend their adviser has dropped from 45 per cent to 40 per cent in the last year, where the relationship length is two to five years, and from 46 per cent to 35 per cent, where the relationship length is more than five years.
Nielsen surveyed more than 700 consumers and more than 250 advisers in June and July to better understand consumer perceptions of financial advice. According to the research, client satisfaction levels have also fallen, from 58 per cent in 2007 to 52 per cent this year.
Ross Barnwell, ING Australia executive director of sales and marketing, says the results highlight the need for advisers to be even more vigilant with client relations during tough times.
“This year clients are less impressed with their advisers’ track record for recommending good investments and want the adviser to take clear responsibility for their actions,” he says.
“We’ve come off the back of 10 strong years of investment growth and clients are telling their advisers that now is the time to prove your expertise.”
The research confirmed long-term relationships and frequency of contact are the keys to obtaining client referrals. Of those who see an adviser more often than every three months, 38 per cent were “highly likely” to recommend their adviser, but this fell to 15 per cent for those who see an adviser less than once a year.
Sue Viskovic, managing director of Elixir Consulting in Perth, says while people will always have a negative sentiment in a bear market, there are certain things that planners can do to ensure their client relationships endure in the long term.
“We talk about the value of advice and a big part of that is advisers are there to provide their clients a voice of reason in times like this; they are there to make sure they don’t make poor decisions, but the only way they can do that is by communicating with them and staying in touch,” she says.
“There used to be a fairly widely held belief in the industry that if you educate your clients well they won’t worry in a market downturn. I think that’s not the case. Yes, education is a really important part of the client/adviser relationship, but to educate them in a good market doesn’t necessarily mean they’re going to remember that when they see their super statements come through the mail. The advisers need to continue to talk to [clients], not because they’re putting out fires, but because they need to listen to their anxieties, fears and concerns, provide encouragement, and let [clients] know they’re in their corner.”
Barnwell agrees regular contact is vital, whether the individual has been a client for two years or 10 years.
“From one to two years [relationship with the adviser] you see a doubling of that potential for referral, which is a natural aspect of building a trusted relationship,” he says.
“It was surprising to see that drop off over that extended period [more than five years], which warns advisers not to be complacent; they need to build a regular contact mechanism with their clients, and the markets have highlighted that while length of relationship is positive, you can’t take it for granted.”
Planners can increase the likelihood that clients will recommend them to their friends and family by keeping their promises, Viskovic adds.
“Many advisers don’t have the systems in place to ensure they actually deliver on what they’re promising, particularly when they’re very busy and dealing with client enquiries,” she says.
“From a pure business and practice development perspective, you need to make sure you have the ability to manage your database. If an adviser has a poor CRM [client relationship management] system, how do they know the last time they spoke to their clients?”