Month: June 2012

Clients Concerns about Change

Advisors are faced with many issues these days such as increased due diligence on investment products, finding alpha producing investments at a time of slow economic growth, adapting to an ever changing regulatory environment and improving back office efficiencies, all while providing holistic financial advice to clients. For most clients this is simply background noise. They assume advisors have mastered these challenges; otherwise there are plenty of other fish in the sea.

Decades of research on helping people change self-destructive behaviors shows that only 20% of them are in the “action phase” of dealing with their particular issue. Everyone else is in various stages of ambivalence toward making changes. Resistance is a normal response to feeling misunderstood, poked or pushed. A key to helping clients change is to talk about the advantages of change. An advisors job is to give advice and when clients resist they must work to convince the clients of the merit of the changes. Clients make their own decisions, no matter how worthy the advice.

Client resistance is an inevitable part of the wealth management and planning process. As such, clients are becoming much more discerning when choosing an advisor.  This was underlined by a U.S. survey which found that nearly half of affluent investors interviewed two or more financial advisors and more than a third interviewed at least three. Once clients had settled on a new advisor it turned out that the top reason cited for selecting their new advisor was that they took time to get to know them and their needs.  Other top reasons cited were accessibility, referrals and a good personality. Slightly further down the list was a solid track record of investment returns.

The survey of about 1,000 individuals with $250,000 or more in investable assets also found that rising college expenses, significant health care costs and the need for retirement income top the list of financial concerns. Younger adults are far more concerned about their financial futures than older investors and finding the right financial advisor was a critical concern. The survey also found that more than half of the affluent population does not expect much of an inheritance to help fund their retirement and about a quarter of those surveyed do not anticipate any inheritance at all. Therefore three quarters of these affluent clients are saving and investing for retirement as though they are not going to receive much or any inheritance. Advisors who fully appreciate these concerns are better able to resolve client issues.

Another interesting item was the frequency of contact that affluent investors got from their advisors.  Close to 80% of affluent investors speak with their financial advisor at least quarterly and men tended to do so slightly more frequently than women. Women are more loyal to their advisors, though, with 71% staying with an advisor for six or more years versus 43% for men.  More frequent contact that emphasizes the long term does help clients to weather market volatility and lessen concerns of short term market movements. Of course clients need to react appropriately based on their current situation and the big picture.