By Marcus Roth, Simplicity Lone Beacon’s Senior Director of Data, Automation & Content.
An older friend of mine recently shared an insightful experience about switching financial advisors. This interaction sparked the idea for three separate articles I felt were worthy of publication.
Interestingly, the decision was not propelled by the performance of his portfolio, but rather by a perceived lack of professionalism and integrity within the advisory. This story carries crucial lessons for financial advisors and their businesses, particularly when it comes to handling relationships with clients.
My friend initially selected a small advisory firm, anticipating a personal and professional relationship with the advisor handling his funds. He was essentially trying to avoid managing his funds independently, hoping to enjoy the unique attention that smaller firms often offer. Unfortunately, the advisory’s actions seemed to negate his expectations.
Initially the principal advisor of the firm was managing my friend’s portfolio personally for a year or two. Then, disaster struck, the advisor relegated the portfolio management to two sub-advisors. This shift resulted in a perceived decline in service quality and communication regarding his funds. Evidently, the advisory’s attempt to scale and manage more assets resulted in treating my friend as merely an asset, thus deviating from the personalized service that attracted him to their firm initially.
If he had wanted limited communication and to be a cog in the financial machine, he could have invested his money with one of the large do-it-yourself investment firms or robo-advisors. Such firms offer more control with no fees, which would have been more in line with his new experience at the advisory.
Uniquely from my perspective, I can take this real-world anecdote and apply some empirical data on the scenario to compliment it. At Simplicity Lone Beacon, we have the privilege of being able to conduct surveys to the prospects and clients of the most successful independent financial advisors in the US. On these customer satisfaction surveys, taken by firms across the US, the leading reason for negative advisor satisfaction scores is the low frequency of communication from the firm to the client.
The reason for a perceived low communication ratio, true or not, is often sparked by a consumer building a relationship with an individual advisor and then that advisor retiring or selling their book of business and transferring that relationship to another advisor within the firm.
When transferring clients to new sub-advisors, it’s critical to understand that this process is fundamentally different from allocating assets to different funds. Advisors must remember that their clients are not just numbers on a spreadsheet; they chose your firm for specific reasons, and will likely become dissatisfied if those expectations are not met.
In such transitions, the number one priority should be reestablishing and fostering a connection between the new sub-advisor and the existing client. This may mean scheduling one or two additional meetings a year, at least. Essentially, advisors must resell themselves to the client, or risk consequences of a disconnect.
About the Author: Marcus Roth is Simplicity Lone Beacon’s Senior Director of Data, Automation & Content. Marcus has a unique experience in B2B and B2C start-up companies ranging from enterprise-level market research of Artificial Intelligence to self-defense eCommerce products. His experience in AI market research brought him, and his research, to INTERPOL, The United Nations and Harvard University.
