Establishing trust is fundamental to healthy long-term client relationships, but assessing the depth of that trust goes well beyond simple client ratings, and even beyond measures of how likely an existing client is to refer a new one.
Consumers have a greater number of ways now than ever before to rate the performance of financial planners, with at least two competing online rating services in operation. Consumer ratings are playing a growing role in helping consumers choose a financial planner.
Rebecca Sheils, a director of data and benchmarking company Beddoes Institute, says that accurate and meaningful measures of trust and how well financial planners service clients can only be made through broadly based and carefully constructed surveys and questions.
“The downside, if you’re just relying on people to put forward a rating, is that it may just be from one or two clients, or three or four, or 10 clients,” Sheils says.
“If you’re just doing a small sample of clients, that’s not going to be indicative or representative of everything that the adviser does across his or her clients.
“You can imagine if the client is just putting forward a rating, they may have just had a one-off experience that has motivated them to go onto a site and proactively provide that feedback.”
Sheils says she calls these “moment-of-truth” ratings.
“You can imagine if you’re a consumer and you’re using a service provider and you have something really, really positive or something really, really negative happen, then that’s something that can motivate you to go and provide feedback,” she says.
Accurate ratings must capture “the experience across all active clients that an adviser is servicing”, Sheils says. A robust survey will achieve a response rate of 30 or 40 per cent of an adviser’s clients, and the more the better.
“It means it’s reflective of what that adviser is doing across all of his or her clients,” she says.
Beddoes has revised the qualifying criteria for including advisers in its Most Trusted Adviser network. It has evolved from a measure based in large part on the well-known Net Promoter Score (NPS) to a proprietary measure called the Adviser Trust! Score (ATS).
Referral behaviour
Sheils says the NPS measures only an individual’s intention to refer, it is “not an actual referral behaviour question”.
“It does play a role [in the broader concept of trust], but it has about a one-third contribution to overall trust, and we were able to unpack a number of other elements that were important,” she says.
A high NPS and a trusted referral will get people though the door, but Sheils says it’s a broader range of issues that keeps them there, and keeps them happy.
“In order to measure trust, sure, someone’s intention to refer their adviser is partly indicative of a high-trust relationship, but there are other things that are also indicative and can be used in the mix to measure trust and the strength of trust an adviser has with his or her clients,” she says.
“That’s what the ATS does. Part of it – approximately one third – is the Net Promoter Score, but then there are a number of other questions, 10 questions altogether, that are combined into this adviser trust score, which is really an index of how strong your relationships are with your client.
“Some of the other things that are part of the ATS – without divulging all of the finer details of our IP [intellectual property] – are things around strength of relationship; share of wallet questions, which are a behavioural indicator of how much you trust your adviser; and then, of course, there are some really pertinent actual ‘trust’ questions in the mix as well.
“It’s an attitudinal measure. A lot of segmentation of clients is done using a behavioural approach – how much they have spent with an adviser historically and looking back retrospectively at behaviour. But a far better way to segment clients is based on attitude and to have that kind of forward looking measure.”
Trust matters in financial planning
Sheils says the issue of trust is of particular importance in financial planning because there is a high level of uncertainty associated with choosing an adviser, and the decision is often very significant for the client.
“I’ve worked across a multitude of sectors, and always in the loyalty sphere, and I’ve used that Net Promoter Score question in a variety of different settings, and the common thread that has come out of all of the past research and modelling work is that when you’ve got a significant purchasing decision, the NPS becomes a better predictor of business performance,” Sheils says.
She says a trusted referral plays a greater role in a consumer’s decision-making process when there’s a big decision to make – such as buying a new car – than when the decision is more mundane – such as buying toilet paper.
Even if a trusted individual provides a glowing reference, “you’re not really going to go out the very next minute and buy that brand of toilet paper, are you?” she says.
“It’s just an irrelevant product, really. But what we do know from all our research is when a consumer is thinking about seeking out an advice relationship, it’s a really significant decision. There’s usually a trigger in their life, whether that be, maybe, a marriage breakup, an inheritance, buying a house, starting a family. There’s usually a trigger that sets someone on that advice journey.
“When they’re actually in the process of finding an adviser, the whole trust element is absolutely critical. They are thinking about [entrusting] their livelihood, their financial savings, their financial future, to someone that they really don’t know. Obviously, at the beginning of an advice relationship you haven’t got that relationship capital yet, because you haven’t worked with that person for a period of time, and yet the gravitas of the decision to entrust everything you’ve worked for to someone you don’t know is rally significant. That’s why a trusted referral is incredibly important.
“We’re doing another white paper for TAL and the AFA that will come out in a couple of months, and the biggest theme we’re seeing, year-in and year-out, is the importance of a trusted referral in the decision making process to engage a financial adviser. There is nothing that comes close to the importance of that trusted referral when they’re engaging someone.”
