by Carol Anderson
Few would dispute the importance of communication in developing successful financial planning relationships. However, there is often confusion and disagreement about what constitutes "good" communication and what methods, skills and content are the most effective in meeting the objectives of the planner and expectations of the client. Fortunately, there is now a growing body of research that helps to clarify best practices in planner-client communication.
Trends in Communication Options
Just knowing what their peers are doing can help planners think about their own communication practices and evaluate whether or not change is necessary. In March, the FPA Research Center surveyed 440 FPA members to learn more about "how" and "what" they communicate to their clients. For example, survey respondents were asked to indicate how often they used eight different ways of contacting their clients. The chart below shows this ranking based on the number of planners who indicated they "frequently" or "always" used each option.
The top three selections, by a wide margin, were telephone, e-mail and face-to-face meetings. I would venture to say that, of these options, e-mail would not have appeared near the top of this list a decade ago. However, because of the rapid growth of Internet access in American households, e-mail is now a common and widely accepted form of communication among all age groups.
Directly related to the rising use of e-mail is the declining use of "posted letter/mail." E-mail is simply quicker, easier and more cost effective for business purposes than snail mail. Another important factor is our nation's growing sensitivity to how commerce impacts the environment. Therefore, more and more individuals and businesses of all sizes are choosing electronic over paper-based communications as a way to reduce their collective carbon footprint.
Closely related to the discussion of paper versus electronic forms of communication is the use of client "newsletters (online or mailed)." A growing number of planners are choosing to distribute newsletters electronically by attaching the publication to an e-mail, posting it on their website or subscribing to a service, such as Constant Contact, that provides templates and processes for creating and delivering electronic newsletters.
However, a more important issue when planning a client newsletter is content. It is important that the publication is unique to the planner's practice and that articles are relevant to a majority of his or her client base. A particularly good example is produced by Robert J. Cole Jr., CLU, ChFC, CASL, CFP®, president of Financial Architects Inc. in Louisville, Ky. Cole hires a desktop publisher to design the layout using content he personally selects from two different vendors-one for financial/quantitative articles and one for life planning/qualitative articles. He then adds his own column for a personal story and important life lesson.
"Blog/forum/social media," "postcards" and "group functions" all ranked at the bottom of the list. However, I predict that the number of financial planners using blogs will grow dramatically in coming years. Blogs are not appropriate for providing financial advice, of course, but they can be a great way to increase client awareness of important issues and to educate clients on specific topics. Several planners are leading the way in this respect and are having great success. For two good examples, see Rick Kahler's blog at financialawakenings.com and Michael Kay's blog at www.psychology today.com/blog/financial-focus.
Reasons for Contacting Clients
The FPA Research Center also asked FPA members to indicate their five most frequent reasons for contacting clients. Not surprisingly, "review financial portfolio and goals" and "give recommendations/advice" ranked No. 1 and No. 2, as these objectives represent the main service of a financial planning engagement and are closely related to the core competencies of a financial planning practitioner.
Third in the ranking, "discuss finances related to life-changing events," is a topic that I believe offers a rich context for meaningful conversations with clients. In a climate where many planners are looking for ways to switch to fee-only and retainer compensation models, developing a practice focused on helping clients make successful life transitions is the perfect platform for justifying ongoing fees and establishing long-term relationships.
"Provide market/economic updates," is also related to providing accurate and timely financial advice. However, this topic will certainly be more interesting and meaningful to the client if delivered in the context of his or her own circumstances, life stage and goals. It is even more important to provide updates when the market is performing poorly than when the market is soaring.
"Just to stay in touch" also ranked among the top five reasons for contacting clients. This habit goes a long way in demonstrating a genuine interest in the client and a desire to nurture a relationship that is based on more than financial assets.
While "educate on particular topics" did not rank among the top five reasons for contacting clients, the number of planners selecting this response (46.6 percent) indicates that client education is viewed as a worthwhile and important communication objective. On the other hand, far fewer planners selected "ask for referrals" (11.1 percent), "inform about new financial products" (10.5 percent)" and "send out marketing products for yourself or company" (6.6 percent)-all of which I would consider to be more representative of a sales/transaction-based approach rather than a consultative approach to client communication.
These findings remind me of the conclusions drawn by a previous FPA study, Alternative Practice Benchmarks.1 Researchers wrote, " ... advisers who affiliate with FPA are not the typical 'garden variety' product pushers. In fact, they aren't product pushers at all. Instead, they take a holistic needs-based approach with their clients."
I believe this is an accurate observation and wholeheartedly agree that surveying FPA members provides the unique opportunity to identify best practices in planner-client communications.
Communication Options Frequently or Always Used
Newsletter (online or mailed) 39.6%
Posted letter/mail 23.4%
Blog/forum/social media 3.6%
Group function 1.6%
Top Reasons for Contacting Clients
Review financial portfolio and goals 87.1%
Give recommendations/advice 83.4%
Discuss finances related to life-changing events 78.0%
Just to stay in touch, no particular reason 69.1%
Provide market/economic updates 64.6%
Educate on a particular topic 46.6%
Ask for referrals 11.1%
Inform about new financial products 10.5%
Send out marketing products for yourself or company 6.6%
Source: FPA Research Center
Carol Anderson is president and CEO of Money Quotient in Poulsbo, Wash. Carol is a regular contributor to FPA's Practice Management Center Blog (PracticeManagementBlog.FPAnet.org).
1. FRC/FPA Adviser Study 2006: Alternative Practice Benchmarks Study. Denver: FPA Press.
What Do Clients Highly Value?
In reviewing the findings from the FPA Research Center's recent survey on
planner-client communications, I couldn't help but see connections to a communication study I helped design and conduct, Communication Issues in Life Planning: Defining Key Factors in Developing Successful Planner-Client Relationships (FPA Press, 2008). In this study, five areas were identified that clients highly value in regard to the delivery of financial information and advice:
- Communicate recommendations in terms clients understand
- Explain pros and cons of recommended investments
- Give as much financial information as desired
- Contact clients on a regular basis to see what changes in life may affect financial plan
- Keep clients informed, especially in down markets
In fact, all five of these communication practices demonstrated statistically significant correlations to higher levels of the following eight indicators of highly successful, long-term client relationships: client trust, client commitment, client retention, client satisfaction with planner-client relationship, client cooperation with financial planning recommendations, client openness in disclosing financial information, client openness in disclosing personal information and client referrals.
Communication Issues in Life Planning: Defining Key Factors in Developing Successful Planner-Client Relationships, a white paper by Carol Anderson and Deanna L. Sharpe, CFP®, Ph.D., sheds light on the benefits of a holistic, client-centered, values-based approach to developing successful client relationships. Learn more about how various aspects of communication can help develop trust and commitment in planner-client relationships.
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