Getting your client reviews in order
Several years ago, I was running a coaching session for a group of successful advisors. Picture me (age 36 at the time) speaking to a room of seasoned advisors, most of them age 50+. Part of the agenda involved a discussion on client reviews and I took a moment to share with the group my frustration with our industry and how much time/energy advisors exert discussing/defending performance and fees to their clients.
One of the grizzled veterans in the audience (we’ll call him Bill) didn’t care much for my opinion on the subject. His face began to turn darker shades of red, clearly signaling that I had struck a chord – and not in a positive way.
Bill proceeded to explain to me (and the group) that it’s not advisors creating the focus on performance and fees. The true culprits are the financial publications, papers, advertisements, television media, radio broadcasts, advertisements, etc.
After a couple of minutes Bill ran out of steam on the topic and sat down (he literally had stood up to deliver his message). Heads were nodding across the room as if to say, “That’s right, Bill. You tell him.”
Maybe your head is nodding as you are reading this – and why not? Reporters, bloggers, columnists and talking heads need a constant stream of content and market movements and what it might mean to your investment is obvious low hanging fruit.
So here’s the question I asked of Bill and I will ask you: “When your clients come into your office for a review, what is the first piece of paper that you show them?” If you’re like most advisors you’ll answer the question the same way that Bill and everyone in that conference room a few years ago answered it: “account statements and/or performance reports.”
It turns out, there are three significant problems with this approach.
- When you choose to begin a client review with an account statement or performance report, you are essentially communicating to the client “this is what is most important.” It is taking precedence over a number of other things that you could (and likely need to) talk about. Your clients naturally draw this conclusion given that it is the first topic you want to discuss in the precious amount of time you have to spend together with them. If you start with performance, you are unconsciously feeding the very mindset that is so frustrating to most advisors.
- Many of your clients can’t properly contextualize a performance number. For example, you may tell them that they were up 6% for the year or down 6%. Either way, the conclusion they draw is that their account balance changed by that amount. They have no way to determine the true impact of that return on their overall plan. Clients may begin asking themselves, “Was 6% sufficient to keep me on track or did I make up any ground? Was losing 6% too much? How did it impact the sustainability of my income? How severely did it diminish my ability to retire when I want to?” They need context. They want the bigger picture. A performance number or account value doesn’t necessarily provide it.
- If you pin your value to a performance number or their account growth, what happens when the account does not perform or the growth isn’t there? Clients may begin to question your value and wonder if someone else could do better -even in periods where performance is positive.
So, how can you fix this? Reconstruct your reviews. Consider building a client review with the following components, in this order.
- Review the client’s key goals. Take 2-3 minutes to restate their goals and ask if anything has happened since the last time you met that might have impacted their thinking about their goals. Doing this anchors the purpose of the meeting and the subsequent conversations to their goals.
- Highlight where you are at in your advice process. Many advisors who work with Russell have found our Client Engagement Road Map to be a valuable tool to provide clients with an overview of the services and advice the advisor is providing. Using the Client Engagement Road Map helps you to do great work for your clients and to make sure you get credit for it.
- Show them progress towards their goals. Use your planning tool or some form of goals-based reporting to show them where they are in relationship to where they should be. Using an account balance is acceptable as long as you can show it in comparison to the asset value they should have to be on track. Providing this information has two benefits. First, it could be the only data point that can help provide clients true peace-of-mind. Second, the deviation from the goal leads to productive conversation about if/how to modify their plan.
- Discuss other planning topics or to-do items that need to be completed as part of your planning and advice process. If you are using a Client Engagement Road Map (#2 above) then you have already planned in advance the topics you need to discuss.
- Supply some education or collateral to support the planning topics you are highlighting. If you are having a conversation about saving for kids’ education, supply them with a brief overview of their options and your recommendation. Providing the right education to support your recommendation will help with its adoption.
- Provide a high-level market overview. Call out the high points of what has happened and use them as a back drop to discuss their specific account performance. Consider using Russell’s Quarterly Economic and Market Review for this discussion (you can contact Russell at 1-800-787-7354 for more information about this piece).
- And finally, if necessary, discuss specific account/manager/fund performance.
I have learned that advisors who use this agenda, in this order, find that their clients are often far less interested in specific account performance. This is a result of the client’s confidence in their advisor’s understanding of their goals (#1), the advisor’s advice process (#2), and ability to demonstrate progress towards the client’s goals (#3). It is also clear that providing proper market context (#6) aids in the client’s understanding and acceptance of specific performance results (#7).
As you start the New Year, you might consider getting your reviews in order. I believe you will find the conversation may yield new opportunities and a new level of satisfaction with your planning and advice process.
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