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Why a disengaged client may be worse than a lost client
No one wants to lose a client but having a disengaged client can be just as damaging to your practice, according to Morningstar global head of behavioural insights, Ryan Murphy.
Like the statistics of bank clients changing banks, only around 6% of households eventually feel the need to fire their adviser but that doesn’t mean that 94% of clients are really engaged.
A disengaged client is likely to be with you just from habit, they might not be taking your advice, or coming to you with new financial issues, they may be just waiting for a change in circumstances to make a move.
“This can have lots of bad consequences. Disengaged clients take up your precious resource, time, attention and effort. And these clients are not out there advocating for you and your practice,” he said.
And, for most advisers, word of mouth and clients advocating for you is a major source of business growth.
In addition, not having good communication with clients can lead to omissions and potential bad outcomes, Murphy said.
What clients hate about you
Interviewing around 400 households with advisers, the Morningstar research asked about 15 potential adviser behaviours that may inadvertently cause irritation and lead to disengaged clients.
The most annoying behaviours of advisers were found to be:
- Did not provide a breakdown of fees
- Took more than a week for tasks to be completed
- Used financial jargon
- Recommended investments without considering values
- Suggested investment options without going into details of what they were and why they were recommending them
- Asked clients to complete long forms
- Did not provide holistic advice (for example, only focused on investment management).
The research found that almost three-quarters of clients surveyed expressed some degree of annoyance with the list of adviser behaviours.
The more a person disliked the behaviour, the less likely a client will recommend their adviser to others, continue working with their adviser, trust their adviser and keep money with their adviser.
How you can re-engage with a disengaged client
Consider a checklist to use before and after meetings to make sure you’re not doing the sorts of things that might cause irritation that disengages your clients.
And then look at a client feedback form.
Murphy suggests starting with the five top behaviours that are annoying clients and look at how to ensure you are avoiding these.
“Sometimes there’s a little bit of an adverse reaction to this and being like, well, I’m an expert, you couldn’t possibly boil down what I do to a checklist,” he said.
“I would remind you that surgeons are highly trained, highly compensated, and literally hold life and death in their hands, and they use checklists. Airline pilots, same sort of thing. These are people who have a strong personal incentive to make sure the flight goes safely and use checklists extensively.”
Checklists can really help ensure you are avoiding the greatest annoyances of clients.
- Did you use any financial jargon? It’s one place in which AI can be particularly useful, because you can put in blocks of text feedback that you might give to a client, and you can ask the AI to read it back to you and explain it like you were 10 years old.
- Have a conversation about your commitment to the best interest standard. While all advisers are required to adhere to the standard it doesn’t mean that clients know what it means. It might be worth having a conversation to talk is the Best Interests Duty. At this point it’s also worth having a frank conversation about how you are compensated and that your recommendations are not compromised by ulterior motives.
- Did you address your client’s current goals in the plan and in the discussion? You need to ensure the clients know you understand what they are trying to accomplish and make sure they’re on track to get there.
- Explain your decision-making process to the client. You might say something like – I see you have very ambitious goals, and to reach those goals, you need to have a very ambitious portfolio. Ambitious portfolios have exposure to the following things. By flipping the script, you’re starting with where they are, what their goals are, and then explaining why that has a consequence for the recommendations.
- Talk openly with clients about timing expectations. People were irritated that things were taking too long. It’s not because you’re working too slowly. It’s just a misalignment of expectations. Clients simply don’t know how long these things should take. So be very clear with clients on realistic timelines for the work you are doing and perhaps schedule a check-in meanwhile to let them know how you’re progressing.
Importantly, you need to make sure you’re on track but instead of sending out a “survey”, Murphy suggests that people have had enough of surveys so position it not as a survey but as an important part of the advice process.
Let clients know that you are sending them a set of questions which is a continuation of the meeting they have just had with you, he said.
“Tell clients that the first hour of the meeting is the meeting itself but then in two days’ time you are going to send them a text or email with a link which you’ll need them to answer to complete their first meeting,” Murphy says.
Make the questions succinct, direct and able to fit on one page. And this will confirm they have understood what you said and that there is no complex jargon, that you are working towards their goals and that they understand your fees and the timeline of the advice.
This will cover the areas that cause clients the most irritation with advisers and disengage them from the advice process. Keeping on top of it will ensure you are not likely to be disengaging your clients.
