4 Ways to Improve the Advisor-Client Relationship

February 13, 2020 - Sanjeeb K. Rajput

The client’s best interests are your best interests, and the client needs to know that you know. This is the key to improving any client-advisor relationship.

Client-Advisor Relationship

Can you imagine if restaurants promoted themselves on the basis that they don’t spit in their customers’ food?

When you think about it, investment firms promote themselves in a similar way.

Can you recall seeing or hearing their advertisements? What is typically their selling point? The fact that they put your financial interests first, implying that their competitors do not have your interests in mind, which is true in some cases.

According to an Ernst and Young survey of over 2,000 wealth management clients from around the world, almost half of respondents (46%) are unhappy with the fees they pay, and they don’t trust they are being charged fairly, with dissatisfaction especially high (66%) among ultra-high net worth clients. 

With so much distrust and displeasure, it is a selling point for firms to mention how they do look out for their clients’ interests, and that statement implies that there’s a problem with advisors who don’t keep their clients’ interests in mind.  

Just as restaurant customers already expect the server not to spit in their food, wealth management clients should already expect their advisor to look after their financial interests as if they were the advisor’s own. 

Kudos to the advisory firms that have earned the trust and adoration of their clients, but the industry as a whole has a lot of work to do.

How to Improve the Client-Advisor Relationship

Show You are Committed to the Return on Investment

Advisors can earn money in a variety of ways, and the way they generate revenue should reflect the clients’ interests. 

If you charge a flat fee, your performance shouldn’t be any less just because you won’t earn more, no matter how high of a return for the client. If a flat fee was part of the contract, then live up to your end of the agreement by keeping the client’s interests at heart. 

If you collect fees based off the total percentage of assets managed, don’t just think about ways to bring in more outside assets into the portfolio. Think more about asset growth through better performance. 

Generating revenue by attracting new assets and collecting a 1% or 2% management fee is fine, but good asset gathering becomes more important than good investing, then advisors’ priorities are in the wrong place. 

Don’t Sell Products You Want Them to Buy; Sell Products They Need to Buy

Everyone needs to earn a living. Your services cannot be free, and if you are selling products on behalf of an institution that gives you a nice commission, there’s nothing with that, so long as what you sell benefits your clients first. 

If the products will help the client reach their savings and retirement goals that much faster, then that’s something your clients need. If you’ve sold a product that has already generated a great ROI, then you’ve earned the right to a share of the pie. 

But when you encourage the clients to take on something that aligns more with your interests than theirs, they will have their suspicions. Whether it’s your lack of ability to convince them they need what you’re selling, or by seeing the low performance and high fees, your clients will be like one of the 46% of dissatisfied respondents in the aforementioned Ernst and Young report. 

Let the Client Know How You Allocate Your Time

If you feel comfortable doing so, you should. If not, then put yourself in a position to where you would be comfortable. 

To promote trust and transparency, the client should know that you’re putting all your effort into managing their portfolio. 

The question is, are you really spending as much time as you should be on their portfolio? 
 
Not all advisors can proudly and openly tell their clients how they spend their time each day, mainly because so much of it is consumed by administrative work… or because it is spent out on the golf course! Needless to say, time spent focusing on investing becomes very limited. 

Fortunately, the behind-the-scenes work can be automated and/or outsourced, saving time and money. Additionally, a turnkey asset management platform could increase help efficiency by handling all components related to managing clients’ portfolios, data and reporting.

By spending less time on the admin and operational work, and more time on researching and investing, it’s a win-win for both parties. The client will be satisfied with the results and knowing how much you care about their success, and you as the advisor will be satisfied because you are focusing on revenue-generating activity

Be Prepared to Justify Your Fees

If you have done a great job with the portfolio’s performance, and if you have always made time available for the client whenever they wanted it, then you’re can rationalize the charges, and the satisfied client won’t disagree. 

If performance is poor, however, then clients will become more irate and demanding to pay a lower fee. 

As fee compression is taking it tolls on firms, and as clients are increasingly accustomed to paying less, the pressure to perform is greater than ever. 

To justify your fees, you need to perform well. 

As mentioned earlier, if you’re currently bogged down with admin and operational work, there’s an opportunity to outsource or automate some tasks. 

In turn, you’d have more time to focus on researching and investing, thus you’ll likely deliver bring in higher returns. 

Let the Clients Know You Care

At the end of the day, the clients’ interests are your interests.  

They need to know you are giving it your 110%, and hopefully those efforts are realized with higher returns for the investment portfolio, thus reinforcing your clients’ trust in you. 

Make sure your fees are justified and aligned with the clients’ interests. Do not sell anything to them that they don’t need; never profit at the clients’ expense. 

Do everything right, and you’ll feel great going in to every meeting with the client.