Practical analysis for investment professionals
18 April 2012

What Do Clients Want? Five Tips for Better Adviser-Client Relationships

Not long ago, I was flipping through the March issue of Trusts & Estates when an advertisement caught my eye.

“Before you select a wealth management firm,” it said. “Give them this test.”

Q: What percentage of the firm’s revenue is generated by its wealth management business?

Q: Is the firm privately or publicly held?

Q: Do the owners and employees of the firm invest their own wealth alongside that of clients?

Q: Are the firm’s client relationship managers paid for sales or service?

Q: Are the firm’s portfolio managers paid based on assets under management or on long-term performance?

Of course, it was a self-selecting questionnaire but it got me thinking about the one question it didn’t ask, and the one that I perhaps find most interesting: Do the firm’s advisers understand what clients really want?

We often hear the phrase “trusted adviser,” but is “trust” at the heart of it? In a blog post on the first generation of wealth and its phases, Jim Taylor, a vice chairman at Harrison Group, a strategic marketing consulting and research services firm, said a lot of clients blamed their advisers for what happened in 2008. While that insight is nothing new, the interesting part is what Taylor then told Dow Jones Newswires:

And though advisers have done a lot to salvage their reputations since then, adviser-client relationships aren’t as personal as they were, and they’re not likely to be that away again. It’s about reliability these days, not trust. The trust is gone. What’s wanted from advisers is knowledge and insight and reliability — and the sense, you know, ‘If there’s a problem, don’t hesitate to call me and tell me about it.’

(By way of background, Harrison Group partners with American Express Publishing on “The Survey of Affluence and Wealth in America,” an annual survey of affluence and wealth in the U.S. The results of its first quarter 2012 findings should be released in May.)

Deena Katz, an associate professor in the Personal Financial Planning department at Texas Tech University and chairman of Evensky & Katz Wealth Management in Coral Gables, Florida, said advisers only lose trust when they promise things they can’t control.

“If you are an adviser who is just looking at your clients’ investments, I think you give the impression that you can control the market; that you can predict the way things are going, and because of that people get the idea that you let them down because things didn’t happen the way you said it would,” she told the Enterprising Investor. “But on the other hand, many advisers today are looking holistically at their clients’ lives and not just at their investment situation. When the focus is away from performance and on people, clients do trust you, because you’re not promising something you can’t deliver, you’re not promising performance that you ultimately have no control over.”

Katz said that what clients want from their advisers is consistency (akin to what Taylor calls “reliability”).

“They want to be able to rely on what you say to them, to make some plans into the future. But if you are saying things you can’t possibly deliver, that’s where the trust issue comes in,” she said. “I think clients want us to be honest with them and they want us to help them understand the context of the economic world and how it affects their lives.”

The wealth manager’s biggest job, she said, is to manage client expectations. “That means putting everything into context; synthesizing all the information that is coming at them and helping them understand where they are in the mix and what we need to do to keep them on that path. We help them stay the course when they need to.”

A big part of managing expectations is closing what Katz called “the value gap” as clients often fail to see value in what the adviser is doing, given the long time horizon.

Here are Katz’s tips on how to close the gap and improve relationships with your clients:

  • Follow up in writing. After every client discussion, send a letter outlining what you talked about. And at least every quarter, send a personal letter. “Put things in writing because people forget. In the letter say ‘Here are the things we have done over the last quarter to get you where you need to go.’ That way even if it is work you do behind the scenes, you are helping clients understand your value to them.”
  • Don’t be afraid to deliver bad news. “A lot of wealth mangers come to this industry from some kind of a sales situation and were taught you don’t deliver any bad news ever, and that’s unrealistic. We need to say, for example, ‘We don’t like what’s happening in the markets these days, but here’s how we are looking at it and here are some of the things we are doing to buffer the situation for you.’ If we are honest with our clients they can’t fault us for misleading them.”
  • Be in constant communication, especially in volatile times. “Ask your clients: ‘How would you like us to contact you? E-mail? A phone call? How would you like us to bring you up to date with what is going on and to put context around your own life?’” (For ideas on how to manage clients using communication tactics, see MarketPsych’s article on strategic emotional communication in the CFA Institute’s Private Wealth Management newsletter or tune in to a webinar with Dr. Richard L. Peterson, a managing partner of MarketPsych.)
  • Listen to your client. “We need to let clients know that we hear them, that we understand them, that we know what they are asking for and that we will respond. Instead of managing clients by talking at them, we need to manage them by letting them talk to us.” If you don’t have good listening skills, Katz added, take a course. (To learn about client engagement as a driver of growth, view Julia Littlechild’s video presentation at the recent CFA Institute Wealth Management 2012 conference in Miami.)
  • Keep it simple and relevant. “Clients don’t need to know how to make a watch; they just need to know what time it is. You need to be able to synthesize a lot of complex information so they understand.”

For more CFA Institute resources on this topic, take a look at Using Behavioral Finance to Improve the Adviser-Client Relationship published by the Research Foundation in December 2010 and the report “Bridging the Trust Divide: The Financial Advisor-Client Relationship,” which examines the role of ethics, expertise, and empathy in developing a strong relationship.


Complicated business question illustration from Shutterstock.

About the Author(s)
Lauren Foster

Lauren Foster is a content director on the professional learning team at CFA Institute and host of the Take 15 Podcast. She is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Lauren spent nearly a decade on staff at the Financial Times as a reporter and editor based in the New York bureau, followed by freelance writing for Barron’s and the FT. Lauren holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

3 thoughts on “What Do Clients Want? Five Tips for Better Adviser-Client Relationships”

  1. This is really a very interesting article, I liked all the points. I always advocate having transparency with clients. I am a facility management service provider and if I can’t establish a trust with my clients how can I provide them business.

  2. Shimbala John says:

    Excellent guiding notes! This applies and is key in client relationship management. Glad you have shared this with the business community.

  3. Lauren,
    Great article, which I have forwarded along to many across my firm. I really appreciate how you took some self-selecting questions and dug down to the “latent variables” of trust, communication, and finding a solution for a client. These qualities may or may not be true for a firm that gets all “no” or all “yes” responses.

    The real strength of a “trusted adviser” despite the number of the superficial questions that can be marked with a “yes” check mark to the five you cite is, The next time you are faced by a question and a perceived need from a client or prospect, and you look for a real solution inside or outside of your platform for the client(s)’ needs, do you face an easy or difficult decision? Is it something you have and do well, perhaps as well or better than the competition? Or do you not solve the real problem, but sell what you have? If you can’t truly find a viable solution that you can deliver at all, would you refer a solution that makes sense (despite making a referral away from your firm)? Depending on the answers above, should you really be so “trusted” by your clients?

    Perhaps another article on the ethics of saying, “No, we don’t or can’t do that, but call this person because, in my opinion, it is your bet choice.” might be interesting? A bit of a combination of listening to the client and delivering bad news… managing expectations: aka, “What I hear you need is this, but a) I don’t think that exists, or b) we can’t offer it, so you should call xyz.” Sometimes a tough to deliver answer of what you cannot do builds trust in the future, and is rewarded by more business on what you can deliver. Plus, it keeps you from over-promising and under-delivering – a certain combination that erodes trust.

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