The top 5 services consumers expect
Recently, I interviewed Wealthnetic’s President, Brent Enders, regarding the top five services clients are expecting from their financial advisors. Brent shares each of them and reveals why you might be jeopardizing your business if you are not offering these services. Following is a transcript of our conversation:
Mike Walters: Brent, you have an interesting study which reveals why people either keep an advisor or why they fire an advisor.
Brent Enders: Yes. It’s something we stumbled across a couple weeks ago, and I thought it was pretty interesting. And as we started to research it and then get the word out to our advisors, we thought it’d be helpful to share. It’s really a survey of various services that advisors provide to their clients. They polled clients and asked them, “If your advisor is or isn’t providing these certain services, what’s the likelihood that you would either fire that advisor or keep that advisor,” depending on whether or not it was important to them. So I thought I'd go through the top five because they’re really significant, and they stuck out to us when we first saw the responses.
It’s something that we’ve been talking to our advisors about — to make certain that they’re providing these kind of things. The first one that stuck out is that they were quizzed whether or not asset allocation being provided to them by their advisor was important. Eighty-three percent of the consumers polled said, “If my advisor is doing that, doing it well, and I am 100 percent happy with it, then I'm not likely to fire that advisor.” That was one of the most important services.
MW: Basically, 83 percent of the people are saying if they’re getting that kind of investment advice — and it's good advice — from their advisor, then they will keep him. And if they don't, they are likely to consider firing that advisor.
BE: Exactly. The second one is helping to develop what we consider to be the full-blown financial plan. So, they’re not specializing with their customers in one particular area. They’re not just the investment guy or just the insurance guy or just the tax planner. Seventy-eight percent of the consumers said, “If they help me develop a financial plan, retirement plan, income plan, and a tax and estate plan — helping me with all of the above — then I'm keeping my advisor.” Whereas, if they’re not getting the full-blown offering, they’re more likely to terminate the relationship. That one’s significant and we’ve been talking about that for years. MW: So we’ve got investment advice and allocation, along with all the various financial planning components?
BE: Yes, full-blown planning. The third one on the list is, “being able to produce a consolidated statement for all of my assets.” Interestingly enough, this also includes assets held away from that particular advisor. So if they’re working with multiple advisors, or part of their assets are, for example, a 401(k) plan and that particular advisor isn't in the 401(k) business and doesn’t have his arms around those assets for that client, they still expect a consolidated statement for all of their assets. But I think there’s two important things in there. One, the sheer fact that they expect you to be providing them a consolidated view. But they also expect you to be able to do it on assets that you don’t even have or aren't even managing. That’s tricky.
Seventy-one percent of the consumers said, “That is very important to me, and if my person can provide that, then I’m pleased. If they can’t, I’m highly likely to leave.” That was kind of an eye-opener.
On the held-away assets, by the way, I found some data the other day. Ninety-five percent of advisors said that they are asked to provide investment advice on assets that are not managed by them. That’s significant. So, it’s not something that just happens every once in a while; it’s clearly happening quite frequently. Yet, over 70 percent of advisors said they don’t have a way to do it.
MW: And you need to do it correctly. You don’t want to give the milk away for free, as they say. But at the same time, it can be a great lead-in to ultimately secure those assets for your management.
BE: Sure. But you've got most of the consumers asking for it, saying, “If my advisor can’t, I’m liable to leave.” Ninety-five percent of advisors acknowledge that they get asked to do this, but 70 percent say they don't have a way to do it. That’s a huge problem, which leads to the fourth expectation, which is tied to the consolidated statements: performance reporting. And again, not only performance reporting on all the assets that the advisor manages, but all the held-away assets’ performance and pulling them all together.
The biggest ones are certainly the qualified plans, corporate plans, 401(k)s and the like, but even things like annuities and other products sold to them by a prior agent or advisor that most advisors might not consider trying to manage — but they expect it.
MW: Well, that’s pretty good advice, you know. It’s kind of like putting up the guardrails and staying between them. I know that I need to be providing investment advice along with allocation advice on those investments. I know that I need to be providing full financial plans in all areas of their life: estate planning, investment planning, tax planning, income planning. I know that I need to provide both consolidated statements as well as performance reporting. And I know that I need to be giving advice beyond my realm, if you will; beyond the assets that I personally manage, into other held-away assets. If I do that correctly, that’s also how I’m ultimately going to gain those assets. And that's how we ultimately become successful.
BE: Right. They expect it all, but yet the advisor’s challenge is: How do I put my arms around all of it and provide it? Because if they don’t have a package or a platform, it’s pretty difficult.