Handling financial planning clients during periods of market volatility

How do you keep financial planning clients engaged for the long-term in an age of instant gratification and continuing market volatility?

The answer may lie in the client review process, according to Sue Viskovic and Lana Clark.

We live in a world of instant gratification.

Wondering what the final score was at the game? Google it, or subscribe to have it texted to you within 60 seconds of the final siren.

Need a map? Click on the application on your phone and you’ll get directions, a traffic update and estimated time of arrival.

We’re not just referring to Generation Y here: when was the last time you checked your bank balance in the branch, or looked at the balance in your passbook?

Of course, you check your bank balances and transactions online – in most cases you don’t even need to wait until you get to a computer, you can do it from your mobile phone. 

Wealth creation, on the other hand, doesn’t occur immediately. The tremendous positive impact that a great financial adviser can have on the health of their clients’ wealth and lifestyle is best demonstrated over time.

Initial financial plans can save clients a great deal in tax, fees, income and benefits, and yet the true benefits of quality financial advice are only fully realised over the long term.

The impact of investment returns, long-term tax savings, the avoidance of making poor decisions, a quality risk management plan and the discipline of investing regularly and consistently compounds over time, and is best demonstrated five, 10, even 20 years into a financial advice relationship.

That is, of course, if the client has maintained the services of their financial adviser, and allowed them to keep their financial plan and actions up-to-date with the changes that continuously occur in the legislative and economic environments, as well as the personal life of the client.

How, then, do you keep your clients engaged for the long term when they can obtain such fast results in other aspects of their daily life?

It is imperative that a financial adviser can demonstrate the value of this long-term relationship through a consistent and meaningful ongoing service, so that the client recognises the importance of its existence and continues to opt-in year after year, despite market volatility, media scrutiny, and short-term negative returns in their portfolio.

Clients make these decisions based on a variety of factors, including the tangible results that are demonstrated in their net wealth and lifestyle, and importantly, the emotional benefits they receive from the knowledge that they have an expert they can trust who is looking after their affairs and assisting them to make educated decisions about their financial affairs.

Over 25,000 clients of financial planning firms in Australia have completed the Business Health Catscan client satisfaction survey; and surprisingly, clients continually rate the review service delivered by their financial advisers as by far the worst-performing area.

Compare this feedback with the fact that over 80 per cent of the participating practices state that they have a regular and documented review process in place.

Clearly, clients value having a ‘review’ with their financial adviser, and yet the quality of that review is paramount. It’s not enough to simply provide a report and/or discussion on portfolio performance.

Successful financial advice firms who will continue to have long-term relationships with their clients in the future will need to provide a review service that is powerful and meaningful for their clients. 

Whilst an ongoing service package contains more than just a review meeting, this article focuses on this very important inclusion in your client’s annual calendar.

Let’s consider why a client engaged their financial planner in the first place.

We often find that great financial planners take their abilities for granted.

Their years of education, knowledge and experience allow them to understand financial concepts, rules and strategies, and they often forget that these skills are not common in the greater population.

How often have you heard statements like “I’m not good with numbers”, “I hate money”, and “I was never good at maths/economics”?

Essentially, clients come to you because they wish to outsource their financial planning to an expert; for many of them money is ‘boring’, planning is ‘boring’.

Of course, there are also those who have the ability to plan for themselves, but choose to outsource it anyway, so as to allow them to focus on what they do best, or enjoy more – this discussion is equally relevant for them too!

Across the profession, we use the term ‘client review’ when referring to a meeting held after the initial on-boarding process with a client. Let’s think for a moment how a client looks at that term.

If the financial analysis is ‘boring’, how exciting does a ‘review’ sound? Sure, they want to know what has been happening with their money – but do they really want to ‘review’ the economy, investment markets and legislation, or is that what they pay you for?

Does a client really care that much about the performance of their investments, or are they more interested in whether their portfolio and financial actions will still allow them to achieve the current and future lifestyle they want?

Yes, historical returns will be a factor but, consider this: should a review be about the client and nothing but the client?

In times of market volatility, financial advisers too often focus on our fears instead of getting back to the relationship we've already built and continue to build on it by understanding the client, their family and what they want to achieve; we somehow forget that a product and its performance is a means to an end.

Many financial advisers use a client review in a retrospective manner – taking a look at the client’s investments and superannuation, with a focus on the performance of funds.

Realistically it should be about restoring perspective, reviewing the client's circumstances and understanding what changes should be put in place in response to any changed circumstances, and how the client is feeling about their situation.

Right about now you're asking if a client review is not an investment update.

What is it? Simply, it's a chance to celebrate, re-evaluate and update!

It's a chance for you to really let your client know that you understand them and where they are headed; model where they are placed on the journey towards their goal(s), and review what you can all do separately and together to have a further impact on their future.

So would it be more appropriate, and perhaps even more engaging to a client, to change the name of a ‘client review meeting’ to a ‘strategic update meeting’, a ‘forward planning meeting’, or even an ‘on-track meeting’?

Review your reviews

Take the time with your staff to revisit the process you use to conduct reviews in your business. If you are not convinced that your clients truly value this service, if you’re not convinced that the way you conduct your reviews results in better financial outcomes for both you and your clients, take action.

Ideally, ask your most valued clients what they would like to experience, and embed a rock-solid process in your business that fits with your client value proposition and will allow you to hold onto your clients for the long-term.