The financial planning industry has made improvements in how it engages with prospective clients, getting better at making them feel like their interests are being put first and that they’re at the centre of the advice process, but the latest CoreData Shadow Shopping Survey shows there is still work to be done in articulating the true value of financial planning services.
CoreData sent out hundreds of individuals to book appointments and meet financial planners, engage in client meetings and, in some cases, attend a second meeting with the adviser. The results show that while only about 40 per cent of clients go on from an initial consultation to a second meeting, the conversion rate from second meeting to implementing advice is very high – underlining why it’s so important to engage a potential client successfully at the first meeting and get them back for a second.
The shoppers in this exercise are genuinely seeking financial advice, and they are presented with a range of different advice businesses to approach. They are not coached on what to ask or what to look for; nor are they briefed to encourage financial planners to follow any particular courses of action.
Sean Allen, director of CoreData’s Australian financial services business, says the shoppers are either individuals who have had a bad experience with a planner and are looking for a new one or people who have had a life change that has led them to believe they now need advice.
Allen says that when CoreData’s shoppers report back, the research firm assesses their responses quantitatively and qualitatively, including through focus groups. Responses are tested by examining the same issue in a number of different ways – essentially asking the same questions more than once and assessing the consistency of the responses.
The shoppers’ experiences dealing with financial planning practices large and small, representing licensees large and small, are mined and refined to create the nuggets of insight that make up the final report.
CoreData uses its ACQUIRE Index (Assurances, Compliance, Quality, Understanding, Intention Reaction, Environment, Acquire – click here to see illustration) to assess advisers’ performance in interactions with clients.
Good news and bad
“We’ve learned that the industry has improved its performance by a couple of points [out of 100] overall,” Allen says. “Any shift like that is a quantifiable shift.”
The results of the survey indicate that advisers are getting better at engaging clients through the so-called onboarding stage.
“The needs, wants and objectives are personalised, and individualised, through the process. They’re getting much better at tailoring the advice and the questioning so the client feels it’s more about them. It starts from the very first telephone conversation about setting up the appointment, and goes all the way through to delivering and implementing the advice.”
Allen says these year-on-year improvements are to be welcomed, but even as the industry lifts its game overall, clients’ expectations of advisers continue to rise, creating an ongoing challenge to improve. And there are still notable divergences in performance among different types of licensee and advice firms.
There also remains, Allen says, an “opaqueness” around the value of advice that the industry needs to address much better. He says the research shows advisers still tend to focus on what the service is likely to cost the client – fees and other costs seem to be disclosed quite freely – but do not explain clearly the value the client will receive in exchange.
“In the clients’ minds, they understand cost but still haven’t received value yet,” Allen explains. “They have to suspend disbelief in the period between the first and second interview before they understand what they’re going to get for their money.”
Allen says there is evidence from the research that if trust and knowledge aren’t both transferred quickly from adviser to client during the initial meeting, there is a marked decline in the likelihood of the client proceeding to receive and implement advice – something measured in the ACQUIRE Index’s Intention score.
“That initial ‘Is this about me, or is it about you?’ decision happens very early, and that can erode their Intention scores,” Allen says. “This time around, we’ve seen challenging Intention scores for some businesses, because of their inability to engage clients early.”
Allen says advisers who are able to share personal experiences “get strong engagement early”. Clients respond best to hearing about other people the adviser has been able to help, and strategies that the adviser has used to guide other clients.
He says it remains vitally important for a planner to impress upon a client their qualifications, experiences and credentials, but this should not get in the way of leaving the client feeling strongly that they’re the centre of the conversation.
CoreData also notes that the brand the adviser operates under is not enough on its own to get a client on board. While brand may play a part in clients choosing which advisers to meet in the first place, once they’re in the office, it’s the performance of the adviser and the rapport they develop with the client that matters most.
“We gave the shoppers a range of brands to go to,” Allen says. “We did shops with large institutional brands, and unknown self-employed brands. One [thing we learned] from this is that brand itself doesn’t get you engagement.
“Clients are very prepared to look past a brand, be it a large bank brand or a self-employed brand. What they’re much more interested in, and what’s much more influential to the outcome, is [answering the question] ‘Can I trust this person – is this advice about me, and personalised to my needs?’ A brand won’t get them across the line.
A bad experience is a bad experience.”
Bring the services guide to life
The research finds that one aspect of the advice process that can be improved is the use of the Financial Services Guide (FSG).
Allen says advisers who use the FSG as a compliance tool are employing only a fraction of its potential and are missing out on an opportunity to underline that the client is the focal point of all advice.
“The industry is still challenged by the disclosure requirements,” he says. “It’s [more than just whether the client received an FSG]. It’s about how you take the client through the information that’s in an FSG. They may have received a document but their awareness and understanding of the document is not where we’d expect it to be.”
Allen says the research suggests that advisers continue to regard an FSG as almost exclusively a compliance document, and something that they must, by law, provide to the client.
“Advisers are still yet to bring the FSG to life and make it important through the advice process,” he says.
Greater levels of engagement and trust emerge in situations where an adviser “positions the FSG as a really important document that you must understand and go through, and says ‘I’m going to walk you through it because there’s some really interesting stuff that you need to know about.’
“They’re not bringing it to life [for] the consumer,” he says. “They’re not saying, ‘Why
am I giving you this document? Because you need to know what’s in it. It’s an important document, and what it’s got in it is how my advice is appropriate for you, what products I’m allowed to give advice on, how I’m going to get paid and, god forbid, if anything should go wrong, whom you can contact for a solution. This is really important. You’ve got to keep it.’
“They just don’t do that. They just go: ‘Here’s your FSG.’ But this is a consumer document, not
an adviser document.”
Allen says the research identified issues that face advisers when a client’s needs focus on property or insurance. In a number of cases, advisers turned away clients because they were unable or unwilling to advise on property.
“And insurance is one of those things that some advisers do not see as a [client] acquisition-type product,” he explains. “It’s much easier to talk about where your super is and what your goals are, and to be goals-based around your assets, rather than goals-based around your protection.
“In those initial conversations, when you want to onboard a client, and you’re talking about goals and retirement, aspirations and investment, it’s much easier to talk about investment concepts than insurance-based concepts. It’s much more around wealth creation than wealth protection.”
Any shadow shopping research is only as good as the interactions between the shoppers and advisers. Advisers who know their performance will be analysed may behave differently. And shoppers who are too well briefed, scripted or formulaic in their approach are often a dead giveaway.
How the survey works
Allen says a strength of a good shadow shop is that it reflects as closely as possible the aggregate experiences of all individuals who approach financial planners for guidance and advice.
The CoreData shopping evaluation starts with how easy it is for an individual simply to book an appointment to see an adviser. It assesses how complicated the process is – whether it has to be done in person or over the phone, or can be booked online, for example. The research also takes note of how many people a client has to speak to, whether the adviser changes the appointment time and, in relation to one memorable example, whether the appointment is booked for a time when the bank branch is actually open for business.
Even this initial appointment process shows up some differences across practices and licensees, Allen says.
“The big banks may be able to fit you in a lot quicker than an independent will be able to, because most of the big banks now use an online triaging system,” Allen says. “So you’re spoilt for choice with the banks. Immediacy is greater than if you go to an IFA and there’s only one planner.
“On average, it might be three or four days to get into a big bank, it’s getting out to six to eight days in the self-employed environment.”
Next, the analysis looks at what preparation both adviser and prospect are required to do before the initial appointment – including information exchanged before the meeting, and what documentation the prospect may be asked to bring along on the day.
“There’s a big difference in businesses around how they start to engage a client, and what they expect from the first meeting,” Allen says. “Some businesses go all the way round and say these are the documents we want you to bring and these are the questions you should be starting to think about asking us when you come in. Other organisations don’t do any of that. Some businesses send information out on the business, position themselves as experts and start engaging. Businesses that don’t do that have to wait until the client walks in the door.”
A well-run initial interview sets the scene and creates expectations for every interaction between adviser and planner in the coming weeks, months and years.
“About 40 per cent of our shoppers go to a second interview,” Allen says. “It’s equal thirds, actually. What we’ve discovered is about a third, after the first interview, have the intent to go to a second interview; another third are undecided; and a final third have made the decision that it’s not for them. It’s pretty equal across the last couple of years. That trend
hasn’t really changed.”
After all the data collection and analysis, the 2017 CoreData Shadow Shopping Survey concludes that advisers are “getting much closer to the client”, Allen says. But this improvement has not created a bigger shift in the overall ACQUIRE scores because clients’ expectations are also rising and the two things – advisers’ performance and clients’ expectations – are relative.
“The expectations of clients are getting higher every year,” Allen says. “So we’re not outperforming the market, we’re just meeting the market and clients’ expectations. Clients are much more demanding of the experience they want now than they were three years ago.”
Individuals have access to enough information to start building for themselves an idea of how
a financial planner may be able to help them, and what to expect from interacting with one.
“And a number of clients are using that information,” Allen says. “They still need advisers to navigate that, without doubt, but the majority of clients we’re seeing, their access to information is lifting the requirements for advice that will meet their expectations.”
Breakout: Being shadow-shopped was an opportunity
As a self-employed financial planner, Rodel Claudio says shadow-shopping research is an invaluable source of feedback on his business and his value proposition. And it provides him with a reality check on how he believes clients perceive his services, compared with how he thinks they perceive them.
Claudio runs a shopfront practice under the MLC Advice banner in Lane Cove on Sydney’s lower north shore, and says his knew he’d been shadow shopped only after an MLC practice development manager called to present the results.
“That was a surprise to me,” Claudio says. “My [practice development manager] was quite positive. He did a high-level review and he pointed out where the key strengths were – communication and relationship building were key strengths, which I think he believed, and I concurred, is probably the most important part of our business.
“Those results were quite above [MLC’s] average and the industry average. Then he delved into the actual data and scoring across each of the [ACQUIRE criteria].”
Claudio says external assessment is valuable because, being self-employed, he doesn’t have the resources to check on progress and seek extensive client feedback himself.
“If I believe that I was doing well on something, but the [shadow shopping] result was something different, maybe there’s an issue there,” he says. “Maybe I’m not communicating as well as I could be, even though in my mind I think I’m doing a good job. So from that perspective, my perception versus someone else’s perception is entirely different.
“I like this – it’s an assessment of what really goes on in someone else’s mind when you’re talking to them. I can be in my own bubble thinking I’m the greatest…on earth
but, in reality, the presentation of this result brings home some truths.”
Claudio says he’ll use the results of the shadow shop to continue to develop his strengths and to work harder on areas where he didn’t perform as well.
“My strength is in relationship building – I’ll keep on going and I won’t be complacent on that – but, obviously, communication on certain formalities has to be addressed to make sure…we’re on the same page in terms of those other criteria,” he says.
The shadow-shopper interview took place over lunch – which Claudio bought – and
he believes that put the relationship on solid footing from the start.
“I used to work in Hong Kong for a bit, and we always had lunch meetings,” he says. “So I decided what the hell, and he was hungry as well, so we just went. It was lacking
in some of the formalities. But…I tried to make up for it in making it more fun and friendly, and I still hit home the main points.”
One criterion Claudio says he didn’t score as highly on as he’d have liked was taking the shadow-shopping client through his firm’s Financial Services Guide (FSG). He emails the guide to all prospective clients ahead of an initial interview, along with information about himself and his business, and takes a physical version of the FSG to the meeting
to go through in detail.
Claudio says he believes every Australian could benefit from having a financial plan, but his business focuses on young families and professionals with insurance, investment and superannuation needs.
“I try to do a lot of the qualification from lead to prospect over the phone, so we
have a vague idea that they’re right for us and we’re right for them, and then we can
have a really quality conversation in the face-to-face appointment,” he says.
He aims to convert roughly 80 per cent of his qualified prospects into clients and if he were “just trying to market with a scattergun approach” the rate would be much lower.
“The better we get at servicing that type of client, the more competitive [we are] and we can give better service,” he says. “Otherwise, it’s a hodge-podge of trying to guess what we can do for different clients. So we try to be a bit more specialised.”
TOPICS: CoreData, Shaddow Shopping Survey 2017