by John Comer, CFP®
Client communication is evolving in financial advisers' practices. The FPA Research Center has conducted a planner-client communications study in each of the last three years, and that study uncovers the evolution, moving away from traditional communication methods of posted letters and mail toward more methods that rely on online and social media technology. The 2011 survey was conducted online with 406 advisers to identify common client communication methods as well as best practices for planner-client communications.
The survey revealed that two-thirds of advisers have a communication plan. Almost one-quarter of advisers (24 percent) update their communication plans at least monthly and almost three-quarters (73 percent) update their communication plans at least annually.
Some of the changes in advisers' communication plans include reducing the use of posted letters and mail, and group events, while increasing their use of social media, particularly LinkedIn.
This years' survey also reports an increase in client acquisition and retention. Almost 14 percent more advisers (77 percent total) report gaining a client in the past 12 months and more than 8 percent fewer advisers (12 percent total) report losing a client in the past 12 months compared to 2009. Perhaps some of the improvement in client acquisition and retention can be attributed to the strong showing of softer reasons for communicating with clients. Many advisers report communicating with clients to discuss life-changing events, to educate the client or just to stay in touch.
Communication Methods Used
In 2011, the most popular methods of communicating with clients remain email, face-to-face, posted letter/mail and newsletters.
Changes in the top four methods were within the margin of error for the survey except for a decrease in posted letter/mail. Use of posted mail declined 8 percent from last year and nearly 16 percent from the 2009 survey. Advisers should be reducing their use of posted mail to save money and speed receipt of routine communications. However, advisers should continue to use posted mail for personal notes to individual clients.
Group events declined only 2 percent since last year but dropped almost 17 percent since 2009. This decline is despite innovative advisers introducing new group activities. Looking for a timely and efficient way to connect with clients during the financial meltdown, many advisers began offering group telephone calls and meetings to update many clients at the same time.
Social media is growing in popularity. Leading the pack is LinkedIn with just over 19 percent of advisers participating. However, usage is still somewhat tentative; only 4 percent of advisers surveyed use LinkedIn always or frequently and 15 percent use it sometimes. As advisers continue to understand how social media can help them and as regulators provide more guidance, social media use will grow.
Time Communicating With Clients
Although one-quarter of advisers report an increase in the amount of time they spend communicating with clients over the last year and only 6 percent are spending less time, the number of hours reported in a different question remained the same.
The amount of time you spend with clients and prospects is key to your growth. How much time do advisers spend communicating with clients?
- Less than five hours per week: 12 percent
- Five to nine hours per week: 27 percent
- 10 to 14 hours per week: 21 percent
- 15 to 19 hours per week: 15 percent
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20 or more hours per week: 25 percent
Reasons to Communicate
Advisers were asked to list their top five reasons for communicating with clients. Basic business reasons dominate the list:
- Review financial portfolio and goals: 88 percent (of advisers)
- Give recommendations/advice: 79 percent
- Discuss finances related to life changing events: 79 percent
- Just to stay in touch: 68 percent
- Provide market/economic updates: 67 percent
Although educating the client on a particular topic was only among the top five topics for 50 percent of advisers, 86 percent of advisers agree or strongly agree that they often provide clients information to improve their financial literacy. Your clients will appreciate it when you help them understand and use the Rule of 72 or when you help them make financial decisions aligned with their values. When you are able to provide tools or processes that can help your clients, you are able to build the relationship and increase the assets they hold with you.
Also, your clients will appreciate it when you help them adjust their financial plan to changes in their personal situation, to changes in the economic/tax environment and to changes in the tools available to help them reach their goals. Eighty-seven percent of advisers communicate with their clients most often to review the client's financial portfolio and goals. By tying these reviews to changes that may require adjustment of the financial plan and personalizing the communication, advisers can help clients make adjustments needed based on life-changing events, economic updates and new financial products.
Proactively contacting clients about life-changing events and preparing your clients for the impact is something 78 percent of advisers are doing. In their FPA Press white paper, Best Practices in Planner-Client Communication, co-authors Carol Anderson and Deanna Sharpe say life-event discussions offer "a rich context for meaningful conversations with clients."
Adapting Communication to Client Segments
Approaching your clients about life-changing events is easier if you have segmented your client base. Almost two-thirds of advisers (63 percent) change some aspect of communication based on client segmentation. One-third alter both the message and the delivery method depending on the segment, 20 percent alter the content and 10 percent alter the delivery method. About one-third use the same communication and the same method for all clients.
Clients can be segmented based on a wide variety of characteristics. Here is how FPA advisers segment their clients for communications purposes:
- Client communication preferences: 78 percent
- Type of planning engagement: 72 percent
- Client age: 62 percent
- Goals: 56 percent
- Net worth: 49 percent
- Income: 24 percent
- Other: 6 percent
Certainly, if you have asked your clients for their communication preferences, you should honor those preferences. In using segmentation you may find the type of planning engagement, client age, net worth and income a proxy for client profitability or a clue to determine the communication topics the client would enjoy. Segmenting by goals could easily help you determine the type of topics your clients would find interesting-goals might even provide clues to the types of advice the clients need.
Key Takeaways
Since most advisers gained clients in the 2011 survey, you may want to review your practice's results to make sure you are taking advantage of the positive environment. Make sure you are using the personal communication methods other advisers use as staples, and consider experimenting with social media. Don't forget that social media, particularly LinkedIn, can be used for one-on-one communication to help you reinforce that personal connection.
Communication can be more effective if it is segmented and addressed to the clients that will get the most out of the message. Proactively addressing life-changing events with your clients, providing financial education on a topic relevant to your clients and just reaching out to get in touch are being used by other advisers to build their relationships. Consider supplementing your regular review meetings with these additional communication reasons.
One of the best ways to build relationships and grow your client base is to communicate with your clients. Go talk to your clients.
John Comer, CFP®, helps financial advisers refine their client experience, communicate their individuality and execute their marketing strategy. For more information, visit www.jcomerconsulting.com.
