Innovation | Strategy | Leadership
Digital analyst and author Brian Solis: “Engagement is not a campaign, it’s a continuum where technology is merely an enabler for a greater vision, mission, and purpose.”
Amen!
via Why User Experience Is Critical To Customer Relationships | Fast Company.
Banks are in the business of taking and managing risks. Get that wrong and you go out of business, and there are many recent examples.
I have sometimes worked with advisors who view loans as just another product to sell. This type of advisor also tends to view anyone in the credit underwriting and approval process as being in the “business prevention department”. In these situations I try to explain how lending literally involves transferring some of the firm’s capital to a client, on which we expect a return of principal and a return on principal over time.
No matter how much profit the client makes as a result of a loan, a lender’s best case is getting a full return of principal, plus the contractual interest, and not a penny more.
$1 million loan x 2.00% spread = $20,000 of pre-tax, pre-provision revenue
The lender’s worst case is a complete loss of principal and expected interest, plus collection and litigation costs.
The firm that charges off that $1 million loan needs $50 million of new loans to get back to even.
And that excludes income taxes, labor or overhead costs needed to originate the loan, any loan loss reserves set aside, the cost of funds raised to lend out or any time-value of that money (i.e., liquidity issuance premium).
With that kind of mismatched upside/downside risk, it is necessary to view lending like the private fixed income investment that it truly is.
How advisors should think like fixed income investors:
Advisors that balance the needs of their clients with the long-term health of their firm win in the long run.
Yes, it’s already February the 14th, and you know what that means. Gentlemen, it’s the day to leave the office early to pick up some cellophane-wrapped flowers from the grocery store and grumble about the picked-over selection of torn cards and mismatched envelopes. Ladies, it’s the day to bask in the warm glow of your superior planning and thoughtfulness. I can neither confirm nor deny that these lighthearted stereotypes may possibly emanate from my own personal experiences…
It is also a great day to reach out to your clients.
By the way, so was January 13th. And January 26th. Or January 25th. Or last November 3rd.
Any day is a great day to reach out to your clients.
Whether you are self-employed or work for a large firm, whether you receive a direct commission or a flat salary, your book of clients is your practice. Your practice is only as valuable as the recurring revenue stream from your clients, and if you aren’t retaining your clients and adding new ones, you aren’t adding value.
Contact Increases Stickiness
I have seen scores of client research reports and I cannot recall one that didn’t show a positive correlation between advisor contact and client satisfaction and retention. To cite just a few recent examples:
What do I say?
Worried that you don’t have a concrete reason to call your clients? Many advisors are quite proficient at coming up with great excuses to avoid making proactive contact:
“I don’t have any news”
“The market has been too volatile/flat/unpredictable”
“I don’t want to upset the apple cart. If I call, it will just give them a chance to complain”
To some degree, it doesn’t much matter. In 2010 The Oechsli Institute discovered that less than half of financial advisors performed well at what they called Engagement Competencies, with only 46% scoring well with clients at “Caring more about me than just my investments”.
I once inherited a client that I could not seem to interest in meeting so I could get to know her and see if I could add any value. I made it a personal challenge to call her quarterly. I could never reach her, so I left her brief voicemail messages saying that I was just checking in to see if everything was going OK and to call me if I could help in any way. Within a year I got a call from her saying she needed my help. She and her husband were selling their business and they really weren’t sure what to do with the $3 million they were getting in cash.
The surveys are right. I was very satisfied to get that call.
Even Better? Ask Questions.
Ask questions to understand your clients’ pain points, their unmet needs, their unrealized goals. Find out what’s keeping them awake at night and offer a solution. The current economic and market landscape offers endless possibilities. Questions can lead to actually giving advice, where the real stickiness begins.
In 2011, another VIP Forum study, Building Business Owner Loyalty showed a lift in client loyalty anywhere from 8% to 19% by providing advice around key personal financial issues. (Number one? Personal retirement planning.)
Regardless of how it goes with your significant other today, make this a day to improve your client relationships and improve the value of your practice. Just skip the torn card and grocery store flowers wrapped in cellophane. Not that I have any direct experience in that area…
Me neither. Today’s coolest tablets won’t either if they don’t enrich the advisor-client relationship. Many firms have pursued technology for its own sake, and some firms still have deeply engaged, profitable clients despite a shocking lack of sophistication. The real magic happens when technology enhances and enables the advisor-client conversation to uncover unmet and unstated needs to delight the client.
The Value Curve to Tablet Banking by Shahab Choudhry, partner and co-founder of the app development firm Propelics, describes correctly, in my view, that the highest value apps are those that advisors use in their direct interactions with clients.