When I was in school, I heard the same comment over and over again at report card time. “Her marks are very good, but she could do better.”

My answer was always the same. “Why?” If I was doing well, why would I try and do better? 

It was many years later that I realized my well-meaning teachers were trying to say something else. They were trying to tell me that I needed to put more effort into my work because things would get harder as I got older.  And they were trying to tell me that the marks that were tracked on my report card weren’t necessarily the marks that mattered in the long run.

So while this great industry receives strong grades on traditional success metrics, I believe that we “can do better”. Why? Because it's getting harder to stand out and the metrics we track don't tell the whole story.

But let’s start with the good news….

Industry Report Card: Looking Back

As an industry we’ve come to rely on a set of metrics that help us understand if we're delivering on our promises to clients. In 2023 advisors achieved high marks across the board and have done so over time.

We know that achieving high marks on these metrics is connected to meeting or exceeding expectations on the things that clients say are most important. In a nutshell, the things that clients identified as most important related to the character of the advisor or the level of responsiveness. And advisors did well in delivering on what are surely table stakes in any professional relationship.

• My advisor is knowledgeable.
• My financial advisor is trustworthy.
• My account is handled with few errors.
• My advisor has high ethical standards.
• My advisor responds to my questions quickly and completely.

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A Caution

Not to detract from all the positive news, but it’s also important to recognize the filters we humans use to interpret data. If you look closely there are risks and opportunities.

1. We rely (too much) on averages.

If you focus on the overall loyalty numbers you could miss the fact that certain segments of clients are less loyal and may need targeted attention. Clients between 35 – 54 (arguably a very important segment for advisors) are less loyal than those 65 and older. And older clients skew the average, simply because advisors work with more of them.

2. We focus on lagging indicators rather than leading indicators

It’s tempting to focus on traditional indicators of success, such as satisfaction or loyalty, then pause to feel good and move on. The reality is, however, that these traditional metrics are measured to answer this question. How is the advisor doing?

As such, advisor performance is a lagging indicator. It tells us how well the advisor did in delivering on his or her service promises in the last year.

Looking forward, we need to ask a different question. How are clients doing?

Client feelings and needs are leading indicators. They tell us if cracks might emerge based on the real needs of clients.

It’s Not Me, It’s You

The need to focus on client needs, feelings and concerns is most obvious when we look at Client Confidence. Absolute Engagement created and tracks a Confidence Index at the industry level as well as for advisory firms and individual clients. 

The AE Confidence Index provides a meaningful snapshot of how clients are feeling about their financial futures and is tightly correlated with core metrics such as satisfaction, loyalty and NPS. When we look at the biggest satisfaction gaps (the difference between the importance of something and the extent to which a client agrees it’s in place) it’s clear that confidence is an issue. Four of the six biggest gaps were factors that focus on how clients are feeling rather than the service they are receiving.

Fully a third of clients fall into the ‘low’ or ‘moderate’ confidence segments which means that about a third of clients may be at risk.

Taking Action

The data makes it clear that we need to dig deeper and measure the things that reflect how we’ve done, as well as shine a light on where we’re going. While it’s tempting to simplify analytics, such simplicity often comes with a cost. That said, advisory firms can, with relative ease, put a process in place to easily and consistently capture insights on how clients are feeling as well as how advisors are delivering. The most progressive will use that data to personalize a more engaging experience, but more on that another time.

The good news is that advisors can have a meaningful impact on clients who may not be feeling confident in their future, through their conversations and communications. And they can personalize the experience for those younger clients who may be at risk. 

It all starts with better data.

Thanks for stopping by,

Julie

P.S. To learn more about how the Engagement Engine is helping advisors to effortlessly connect, at a deeper level, with prospects and clients, click here.

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