Fidelity's latest Millionaire Outlook Study looked at what drives investors to recommend their advisors, highlighting "straightforward steps" to a happier client.
A fifth of millionaires are so underwhelmed by the quality of the relationship they have with their advisor that they may “break up” with them - an outcome that is easily avoidable, according to Fidelity Investments’ eighth Millionaire Outlook Study.
The US study of nearly 1,300 wealthy investors calculated a “net promoter score” to measure the likelihood that millionaire clients will recommend their advisors. Although it emerged that 55 per cent of millionaires are “promoters,” meaning they are likely to recommend their advisors to others, 45 per cent would not, with one in five in fact claiming to be “detractors” - unhappy enough that they may leave their advisor or discourage others from working with them. (Worth nothing here is that are often many reasons why a client wouldn't recommend their advisor beyond dissatisfaction, such as because money continues to be an issue that certain generations of investors still don't openly discuss - see more here).
Also, “when looking at the 45 per cent of millionaires who would not recommend their advisors, it’s not so much about what advisors are doing wrong, it’s more about what they’re not doing enough of,” Bob Oros, head of the RIA segment at Fidelity Clearing & Custody Solutions, told Family Wealth Report.
“Advisors of promoters are leading with goals-based planning, then making that planning the foundation of a deep, personal relationship. It’s not just about the portfolio, it’s about the person,” Oros said.
For example, it also emerged that seven in ten promoters said their advisors involve other family members in the financial planning process, while 86 per cent of “loyal” millionaires said their advisors include their spouse/partner in conversations, and over half include children. Importantly, Fidelity said, three in four promoters were contacted by phone or in person by their advisors during recent market volatility, versus just half of detractors.
Unsurprisingly, the opportunity to provide feedback also came through as a strong indication of a client's propensity to refer their advisor. Over three-quarters (79 per cent) of those who recommend their advisor have been asked for their views over the past year, while 45 per cent of detractors have never been asked for feedback.
The issue is particularly important today as we have entered a “referral economy,” Oros said, where consumers “thrive on sharing the people and things we value with those in our social and professional networks.”
“Today...individuals have the power to reach hundreds or even thousands of people with one negative review,” he said. As mentioned above, nearly half (45 per cent) of detractors have never been asked for feedback by their advisor. “Advisors need to ask themselves: would I even know if my clients are unhappy?”
“Advisors should be actively communicating with clients to stay top of mind,” Oros added. “Only half (57 per cent) of detractors say they interact with their advisor more than three times a year, versus 82 per cent of promoters. Regular contact can help keep the firm top of mind and enable advisors to share new information about how he or she is helping clients with different types of problems.”
Fidelity also found that “promoters” tend to have the majority of their assets with one advisor, at 71 per cent, while “detractors” have around half (48 per cent) of their assets with their primary financial advisor.
However, “having the majority share of wallet does not guarantee you are having the right conversations, only that you have more assets,” Oros said. “It still comes down to goal-based planning, depth of relationship and engaging clients on their terms, not yours as the advisor. I believe it is a virtuous circle – start with these three tenants and the assets will naturally follow.”
Although referrals are commonly regarded as one of the strongest tools in an advisor’s marketing arsenal, “there is no exact science to winning client referrals,” said Alfred West, chairman and chief executive of SEI, when speaking about the Futurewealth findings previously. “Client behavior and confidence in advisors varies based on personality, age, and location, and, thus, is unpredictable. However, by taking action wealth managers increase their likelihood of organically growing their business.”
Fidelity's study was conducted from January 5-22 and involved 1,287 online interviews.