By Sean Kerrigan, Beacon Consulting Group

Customers face a wide array of choices when selecting a personal financial advisor. To retain and attract clients, you need to know what clients value in a financial advisor. Studies conducted by Financial Advisor magazine indicate that affluent investors value the quality of their relationship with their advisors more than portfolio performance.

Poor client management drives away clients

Too often, advisors concentrate on developing investment strategies and neglect managing their relationships with clients. This is a risky practice. In fact, the failure to meet customer service expectations is the most common reason that clients give for leaving a financial advisor. Conversely, satisfied clients are four times more likely to refer new business to their financial advisor.

By providing excellent customer service, you can:

• Differentiate yourself from your competitors.
• Build customer trust and loyalty.
• Grow your business.

Proactively managing client relationships lays the groundwork for long-term relationships with your clients, especially as returns on portfolios fluctuate with the markets. Lasting relationships with clients can be the foundation of your practice.

Clients want an advisor who knows their needs and interacts with them on a personal level. They want to give their business to someone who understands and respects them. You can earn your clients' trust and confidence by focusing on your relationship with them. Building this two-way relationship involves getting to know your clients and communicating with them.

Getting to know your clients

Before you can advise your clients on their finances, you must get to know them. After you develop an initial emotional connection with a client, you can follow up with demonstrated financial performance. Getting to know a client is the first step in building a long-term relationship that is mutually rewarding.

Discover expectations

The initial consultation with a client is an information-gathering phase. You probably already know how to elicit basic information from clients and prospects. What you might not know is how to determine what the client's emotional and financial expectations are.

To understand your client's expectations, you need to know what is important to the client. Identifying the following about your clients helps you know and understand them:

• Financial objectives
• Personal goals and concerns
• Time horizons
• Risk tolerances

Acknowledge expectations

Asking your client the right questions shows that you care about your client's unique situation. Unfortunately, many advisors are quick to offer advice before taking the time to thoroughly understand a client's investment goals and objectives.

By spending the time early on to attentively listen to and acknowledge a client's personal goals, concerns, and long-term financial objectives, you can develop a more effective plan to meet a client's specific needs. If clients feel their expectations are being met, they will have confidence and trust in you. This emotional connection is critical to a long-term relationship.

Share yourself

The initial consultation is when you present yourself to your prospective clients. You need to give clients the chance to get to know who you are and develop a rapport. Focus on establishing a connection with your client. In addition to sharing your experience and expertise, let the client know you in a more personal way. This will enhance the relationship and gain your client's trust.

Communicating with your clients

Regular communication with established clients is essential. By routinely contacting your clients, you can proactively address changes in each client's personal situation and introduce new products and services. In addition, the more often you speak with clients, the more opportunities you have to resolve issues that arise.

Ongoing interaction strengthens your relationship with each client. Periodic consultations, routine phone calls, and regular mailings are effective methods for communicating with clients.

In-person consultations

By meeting with your clients face to face, you can provide top-notch customer service. Critical components of consultations include:

• Account overviews
• Investment plan and performance reviews in context to relevant benchmarks
• Updates on current market and economic activity

Successful periodic consultations ensure that your portfolio recommendations are up to date and incorporate all relevant client information, including time horizons, risk tolerances, financial goals, and contingency planning for unforeseen events.

The formal annual performance review is an essential part of any communication plan. This meeting provides you with a scheduled opportunity to discuss the previous year's investment performance and give your client your personal attention.

Phone calls

By setting a schedule for periodic status calls, you can ensure that you regularly allocate time to do the following:

• Answer the client's questions
• Assess the client's comfort level with his or her current investment strategy
• Identify significant changes in the client's financial situation

New asset-building opportunities often arise from these calls as well.

Mailings

By sending out regular mailings, such as a newsletter, you can reinforce the principles that you discuss with your clients in meetings and phone conversations. In addition, a quarterly newsletter can keep clients up to date on current economic events and their effect on financial markets as well as the client's portfolio.

Relationships provide the key to business growth

Relationships with clients are the cornerstone of any strong financial advisory business. By effectively managing client relationships, you can provide clients with the customer service that they value. Keeping your clients satisfied leads to loyal customers — ones who stay with you through market ups and downs and reward you with referrals.

More information

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About the author   Sean Kerrigan is a managing associate with Beacon Consulting Group, in Boston, Massachusetts. Beacon specializes in providing operational and strategic consulting services to the investment management industry.