Four new imperatives for effective client communication
The investment landscape has altered fundamentally since last fall.
One of the important changes is a basic shift in what investors look for in terms of communication from their advisors.
In my October column in Investment Executive, I outlined four new imperatives for client communication that advisors ignore at their peril.
Since last fall, I have talked to more than 500 investors in round-table focus groups and one-on-one interviews about their response to the market downturn.
Some of the things that investors seek from their financial advisors have stayed constant . Investors still look for advisors who listen, demonstrate they care, put their clients’ needs first and provide advice tailored to each investor’s needs along with the ability to recommend solutions that choose from the widest range of offerings.
At the same time, a fundamental shift has occurred in some other things that investors look for from their financial advisors – and four new imperatives have emerged.
Imperative one: Demonstrate empathy
In many cases, the first priority for financial advisors is to establish a bond of empathy and to tap into client feelings – often, clients are unable to listen to their advisor until they first feel listened to.
If an advisor hasn’t had an indepth conversation about how a client feels, one of the better ways to start a meeting is to say something like: “Many investors have lost sleep because of the market events last fall. Tell me, how have you been affected by the market over the past while?”
Imperative two: Provide guidance and direction… with an outlook of balanced optimism
While almost no one is happy with what’s happened to their portfolios in the past, most investors aren’t blaming their advisors for this – they see everyone they know in the same boat.
What is causing dissatisfaction among many investors is what’s happening today. Many clients say that their advisor is overly passive and not providing direction on what they should be doing going forward. Today, investors are looking for guidance on how to move forward – and if they don’t get it from their existing advisor, they’ll look elsewhere. Even given the uncertainty of today’s environment, advisors need to sit down and talk to clients about the different scenarios for the period ahead and the implications for their portfolios.
Imperative three: Incorporate fresh perspectives
A common complaint among investors is that their portfolios are unchanged since the market meltdown began last fall – a comment I hear a lot is “If my portfolio made sense then, given everything that’s changed, I don’t see how it can be right now.”
In cases where investors are in mutual funds or managed money, of course, their portfolios have been actively managed – and it’s incumbent on the advisor to help clients understand how their investments have changed.
In other instances, it might make sense to introduce a new element into client portfolios, such as investment grade corporate bonds. Clearly, any recommendation has to be appropriate and you never want to make change for the sake of change – but failing to recommend appropriate changes runs the risk that clients will see their advisor as taking them for granted.
Imperative four: Ramp up communication
The final new imperative for advisors relates to the demand for communication.
The events of last fall have dramatically heightened demand for frequency of contact – whatever level of contact clients wanted a year ago, it’s almost certainly higher today.
And it’s not just demand for quantity that has increased – many investors are looking for more substantive commentary on prospects for the market and for their portfolio.
Many advisors can’t meet this demand simply by increasing the number of meetings and phone calls. New communication vehicles need to be be used to supplement the traditional personal contact – emailing articles, conference calls and group sandwich lunches in a boardroom to name just three.
The events of last fall have caused investment managers to re-examine their practices and adopt new approaches – in a similar vein, to be effective investment advisors need to fundamentally rethink their approach to client communication, bearing these four new imperatives in mind.
To read the full article, look at the October issue of Investment Executive.
And to watch a video summarizing these changes, click http://tv.investmentexecutive.com/video-8273-What-clients-look-for-in-an-advisor-today
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