That’s the call from Brett Davidson of FP Advance as he reminds advisers to focus attention on what really matters to clients – and it’s not all the technical talk about investment markets!
What is the core of any financial planning business? Clearly it’s the review process. The biggest contributor to annual income and your future business sale value is the recurring revenue that comes from keeping the clients you already have.
One of the challenges for growing financial planning firms is keeping the review process under control. Without a clear focus on simplicity it’s easy for annual reviews to be over-engineered; basically, just doing too much. This has major negative implications for service delivery, staff happiness, client referral rates and overall business profitability.
I recall a survey carried out by Business Health, an Australian firm I used to work closely with. They had surveyed over 60,000 clients of advisers across the globe in all the major financial services markets (US, UK, Australia, South Africa etc).
Clients said that they rated the idea of an annual review as 10/10. That is, they saw it as high value and really wanted to be looked after and kept on track.
However, when asked about the reviews they received from their existing advisers they rated them 3/10.
Why the discrepancy?
The bottom line was that what they received didn’t really deal with their core needs at review time. Most advisers (like now) were still spending way too much time talking about investment stuff.
It’s my belief that clients are too polite to say anything, but most are bored witless by advisers talking about markets and economic issues. For many clients it also makes them feel stupid, which is not a great outcome if you’re their adviser.
There are only two things that you need to do at an annual review meeting with a client:
- Show them that everything is going to be alright (and if it’s not, tell them what to do about it).
- Politely remind them what you’ve done for them lately.
Does your existing review process achieve these two objectives?
The first point is more important by a factor of ten. If all you did was show people that everything will be alright, they’ll be over the moon.
How do you do that?
The simplest way is using a cash flow model as the core of your review meetings; simply updating the client’s situation with the latest information and ‘showing’ them (with the emphasis on showing, not ‘telling’), that they are going to be ok for the long run.
When you do this, a lot of other stuff disappears from your review process, because it’s just not required anymore. You’ve dealt with the clients core need right up front. You can take care of any other tweaks or strategic issues as well, like re-balancing, dealing with tax or pension issues etc. However, the client will walk away remembering that ‘everything is going to be alright’, not the minutiae.
The second point, politely remind me what you’ve done for me lately, is really important for you. Especially if you’re charging a premium price for the work that you do.
It’s a great idea to go through the work that you’ve done for a client over the previous 12 months and identify any wins or savings you’ve made for them and to express the value in cash (i.e. in pounds, not percent).
For example, a client with £500,000 invested with you has been moved from an active portfolio to a low-cost passive portfolio, because you believe this will deliver better long-term returns for the client. If you’ve saved the client annual fees in the order of 0.75% p.a., you can quantify that as a cash saving of £3,750 p.a.
You may have also done some fancy CGT work to use up some of the clients CGT allowance, and you can quantify the tax saving there as £1,000.
When you start to look at where you’ve added value in cash, you’ll be surprised how it all adds up. By showing the client these wins and translating from percent into a cash figure, you make it easy for them to appreciate some of the less obvious work that you do each year for your big fat premium-priced fee.
The secret to a simplified and client friendly review process is to focus on showing the client that everything will be alright and politely reminding them what you’ve done for them lately (in cash). If you can do that, you’ll have happier clients, happier staff, increased referral flow and a more profitable business.
A Quick Client Case Study – Chamberlyns
A couple of years ago I was working with Michael and Geoff at Chamberlyns, a fabulous financial planning firm near Luton.
Like a lot of good firms, they were very focused on ensuring they were delivering the best possible outcomes for their clients. However, along the way that had developed into an awful lot of preparation work for the paraplanning and administration support team.
After a lot of ‘think work’ we came up with a revised approach in an attempt to simplify things for the clients (always a good idea) and to reduce the workload for the team.
The starting point was that for most clients, most years, nothing much changes; life is ticking along nicely and there are no major issues to address. So for these clients it seems crazy to be writing to them pre-review meeting asking them to complete a new expenditure questionnaire and asking “What has changed?”
Chamberlyns called these clients ‘Simple’ clients, in that their situation is straightforward. These types of clients probably make up around 50% to 60% of the client base for most firms.
The next group of clients Chamberlyns called ‘Simple with some issues’, in that they were much like the previous group, but might have a couple of simple things to deal with when they turn up at review time. These types of clients probably make up another 20% to 30% of clients.
For these first two groups, Chamberlyns decided to do very little pre-meeting preparation work. They prepared an investment printout and a return calculation (and had good data in their back office, so these were relatively easy tasks).
They didn’t ask the clients to do any preparation and stopped sending any pre-meeting update requests, they just booked in a meeting and said, “Come with whatever’s on your mind”. This removed a huge amount of unnecessary work from annual reviews for both clients and the back office team.
At the review meeting, last year’s cash flow model was brought up on screen and the paraplanner updated any new financial information live on screen with the client. The adviser lead any discussion around the client’s situation as they “Showed them that everything was still going to be alright (and if it wasn’t, told them what to do about it).”
The final group of clients (the remaining 10%), which were the best and most complex clients within Chamberlyns were (funnily enough) called ‘Complex’ clients. For this group the old pre-review process remained in place, where they were written to in advance requesting all their updated information. The thinking was that for the very top clients, with more complexity, it was not practical to turn up to an annual review meeting without being totally prepared in advance.
However, because these clients were the best clients in the business and paying the most money, it made sense commercially to spend a lot more preparation time on this group. That was now possible, because the team were not spending so much time on the other 90% of clients within the firm.
