Participants:
Steve Wershing
Julie Littlechild
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Welcome to Becoming Referable, the podcast that shows you how to become the kind of advisor people can’t stop talking about. I’m Steve Wershing. On this episode, we review my co-host, Julie Littlechild’s newly released research on investor sentiment. One of the first studies to be released, gauging the effects of the pandemic on your clients. Julie Littlechild has worked with and studied advisors and their clients for 25 years. She launched and ran one of the industry’s leading research firms, focused on client engagement. She founded and now runs Absolute Engagement, a firm utilizing direct input from clients to drive engagement and growth. She writes a popular blog, wrote a book, also called Absolute Engagement, and maybe most significantly is my co-host on the podcast, Becoming Referable.
Julie’s been studying investors and their relationships with advisors since 2008, with the release of her first version of the study, The Economics of Loyalty. She’s updated the research almost every year. Last year’s study was based on data that was collected just before the pandemic started. And so, this year’s study provides fresh insights about client concerns and expectations of their advisor. We discuss how clients’ outlook has changed. We review how clients feel about how well their advisors supported them through the pandemic. And we dig into some specifics and ways that expectations have changed, including things like the frequency of meetings and how they feel about virtual meetings.
We frequently talk on the show about the importance of staying in touch with what clients need and want, and how they periodically change and how this past year has changed many of those expectations like never before. I know you’ll get a lot out of this episode. So, here now, is my conversation with my co-host Julie Littlechild. Well, Julie, I’m very excited for this conversation today, because I know you have been very busy in your firm. For those of you who don’t know this, one of Julie’s claim to fame is that she does investor research and has come out with a series of studies all the way back to 2008, asking investors and clients about their perceptions of what we for them. And you have just wrapped up a new version of that, an updated version of that study, is that right?
Yeah, that’s right. So, yeah, we’ve been doing this almost every year and it’s been particularly pertinent over the last couple of years. I don’t know if you recall, I’m sure we talked at the time, last year, we did our investor research. It went into field on March 10th and we had really no clue about what was about to happen. Maybe I wasn’t paying attention, but I certainly really did not. And so, it was in field from the 10th to 24th and it ended up being this rare gift in retrospect, where you thought, wow, we get to look at this very unique period in time. And so, obviously, was keen to look at this year. This year, looking back, we were able to ask some very targeted questions about the pandemic, since now we knew what actually did happen. So, it’s been an interesting time to talk to investors, for sure.
Yeah. So, last year’s version, how long was that in the field? How much time did people have to answer the questions so that they might have been affected by the concerns about what was coming?
Well, we always go, it didn’t feel for about two weeks and that’s the same every year. But what was really interesting last year is, that I’ve never done this before, but we cut the data based on when they responded.
Oh, interesting.
And so, we had these three groups, it was like March 10th, 11th, and so on and so forth. And you could see differences within the two weeks. And that, to me, was in and of itself, maybe one of the more compelling findings. And I think we see this theme working its way through this year as well, that needs and expectations and concerns are fluid. And so, the fact that we could see data changing over that period of time was just an indicator in my mind, and I know you’ll agree with me on this, that we need to keep our finger on the pulse of how clients are feeling.
Sure. Especially during a worldwide pandemic. So, keep that in mind, listeners, if there’s a global pandemic, make sure you keep in touch with your clients. So, let’s take a look at what you learned this year. So, let’s just start with the easy upfront stuff. What kind of financial impact did people express since the pandemic?
Yeah, so, just for context and we’ll get into this, we really focused on client experience a lot, as you can imagine, like what has changed, what has developed, how are people feeling. And you’re right, one of the simple questions we asked was just what has the financial impact been. And what we saw there was actually a very normal distribution in a way. So, about 45% said, “No impact at all.” 29% said it was actually somewhat to strongly positive, and we know there’s a group of individuals who’ve benefited. And then 26% said it had been somewhat or strongly negative. So, I don’t know that the biggest finding in a way was around financial impact. It just impacted people in different ways that they were worried about other things, I suppose.
Yeah. Well, based on what we’ve been hearing from out in the field, I wouldn’t have expected people to be talking about a big financial impact, but that’s a logical place to start. So, people have a fairly muted response, I mean a fairly easily expected response on the financial stuff. So, one of the things that you asked about as well is what’s their outlook. So, if they had a fairly muted response on the financial impact, is that what you found about the outlook as well?
Well, there, when we began to say a little more broadly, how has the pandemic impacted how you think about your financial future? It’s a very different question, but there, and again, maybe expected, but good to see the numbers. They said, “Yes, to a much higher degree.” So, about 69% of clients said it was either a neutral change, but some change or right up to a significant impact. Only 31% of clients rated a one or two on that question, which was quite low. So, they were telling us that, “Yeah, irrespective of whether the financial impact was positive, negative, or neutral, this experience has changed how I think about my financial future.”
Yeah. And the data that I get is yeah, anecdotal, because I deal with those tiny little groups of advisory boards, but that’s kind of like what we were hearing too. We’re hearing a lot of people talk about looking at the future in a different way. And it’s interesting because when we ask about that, we find that a lot of people are thinking differently about the future, but how they’re thinking differently is very different from plan base to client base. What kinds of things did you find on the survey about how people are thinking differently about the future?
Yeah, well actually, and you just made a really important point I think, which is that the way in which people have impacted is so significantly different. Almost to the point of, we can’t necessarily say on average, here’s how clients are responding, on average, here’s what they’re interested in. And to me, again, the underlying theme there is that we can’t make assumptions that we’ve got clients who are experiencing things in very different ways. And all of this in my mind just reinforces our need to not make assumptions and to talk to clients. I can tell you that when we asked how they’re preparing differently for their future, given that things had changed, the highest percentage, which was still only about 27% in this case said they’re going to spend less overall. And almost as many said, they’re going to update their plan or update their will.
So, the reality is that for many of these clients, these things were already taken care of, or we hope, because everyone in our sample worked with a financial advisor. So, I think we have to have that context here. But again, I mean, the responses ranged from spending less to reviewing my beneficiaries, to giving more to charity, to increasing insurance. But what we do know is that a majority of them said something was going to change. And those some things were all related to their plan and their future.
Yeah, that’s really interesting. And I’ll just reiterate that point that you just made because I see that really, really clearly that if you are an advisor and you have some consistency in your client base, if your clients are of a specific age range or in a specific professional area or something like that, that it’s really important that you get them together. And either survey them or bring them together as a board and even make it a standard question on your review meetings or something like that, because there are going to be individual differences as well. But a lot of people are not thinking about the future as drastically different, but a fair number of them are thinking differently about the future, and you’ll want to know that as an advisor.
And maybe help them do that.
That’s a good point, sure, yeah.
Maybe help them think that through and articulate how things might change.
Yep. Yep, interesting. So, also, in the report, you talk about what you call the real impact of the global pandemic. And so, what do you mean by that and what kinds of things did you find out by asking that question?
Well, I think this just gets to the humanity of what we’ve all experienced over the last 18 months or so. And so, was the financial impact, it was muted. How are people responding on some of those planning elements? Yep, they’re taking some actions for sure, but 62% of respondents said that their behaviors or their feelings have changed. And to me, this is the rich area of inquiry now to dig a little deeper. So, for example, a quarter of clients said what’s important to me has changed. 20% said, “I’m worrying more about my financial future.” 19%, “I want to do things differently in retirement.” And to me, this is really getting to the heart of not only what has changed, but I think how advisors can help, because all of these things have an impact on how they invest and how they plan. So, if we’re not having those conversations, it’s incredibly important that we do.
Yeah. Excellent. Yeah, I totally agree. So, let’s get to what our listeners really care about, which is what do clients think of them. So, you asked a few questions about how clients’ perceptions of how advisors did during the pandemic. What were some of the responses there? What did you see?
So, we also asked clients just to put this question that you asked in a bit of content, what are they worried about? What are their advisors talking to them about? And I think that’s important context here. And one of the things that we found is that clients, this might be a blinding flash of the obvious, but they’re still vulnerable. There’s still uncertainty. So, the number one concern, personal and family health, that is the topic that came up last year. But 72%, big number, said they’re somewhat or very concerned. They said they’re concerned about market uncertainty. So, even though they haven’t necessarily seen it in the way that they thought, it’s still a concern.
Interesting.
They’re concerned about helping their kids make good financial decisions, job security for their children. All of these and more actually were rated really high. So, we’ve got this context of worry, this context of I’m thinking differently and what’s important to me has changed. And then also, what I found really interesting is that only 35% of them said their advisor had asked them how the pandemic had changed how they think about the future. And I thought, wow, because to me, I think that should be a 100%.
Sure, yeah.
Now look, granted, they may have forgotten. It may have been a conversation. I think we have to take all of that into account.
Or they may not have asked it that way.
Exactly, exactly. So, I’ve got to give the industry credit because I know how hard everyone has been working, but I did think that, that was still relatively low. Now, the context though, is that they were actually pretty happy with how advisor supported them. So, 62% said they were very satisfied with the support that their advisor provided, another 25%, somewhat satisfied. So, very little dissatisfaction there, which I think again, as an industry, pat ourselves on the back and I’ll pat them on the back in this case. So, we got really good marks on that. But this kind of data, given the context of what we just shared and given that so few said their advisor had talked to them about some of these issues. It does make me think about the fact that often how clients rate their advisory relationship is so informed by expectations.
So, if I don’t see this as the role of my advisor to maybe delve into some of these issues, I’m not going to be dissatisfied that it didn’t happen. It’s a bit like saying, “Can you rate your neighbors?” And I say, “Oh my goodness, they’re awesome people, they’re wonderful,” because I have no expectations. But if I found they come and shovel my driveway, now I didn’t expect that.
Exactly.
But, wow, do I value that and appreciate that.
Exactly.
So, I think we’ve got to look at all of this in the context of there’s still opportunity.
Hey, it’s Steve. We’ll get back to the show in just a minute, but first, I’d like to make you an offer. Every week I send out a tip or an idea to help you become more referable. It might be something I picked up during an advisory board meeting, it might be an idea from one of our amazing guests. Every other week, I announce a new interview on the podcast. So, never miss an episode. Or maybe it’s something I picked up from a new research report and I deliver it right to your inbox. Would you like to become a little more referable each week? Then send an email to steve@theclientdrivenpractice.com and I’ll even throw in my latest alert, five reasons you need to listen to your clients now before someone else does. Just put five reasons in the subject line, that’s steve@theclientdrivenpractice.com and put five reasons in the subject line. And I’ll send you your free guide right away and then a little tip about how to become more referable every week. Now, back to the show.
When you ask a client about how much value their advisors deliver, there’s not really a ceiling on that. The people can say, oh, they’re great, they’re wonderful to work with without realizing that the advisor potentially could be doing things that would raise that ceiling so much higher, that people could be so much more loyal and excited about them. And as we talk about on the podcast, so much more referable by doing things that are unexpected. So, for example, you just said a few minutes ago, that 63% of people had job security for their children as something that has changed in their level of concern.
I heard that kind of thing in an advisory board where we were asking questions related to that. And one woman said, “Because of the housing boom, and because of how much prices have been going up, I had to go in and help my children purchase their first house or their next house or something like that. And we did it as an advance on their inheritance.” And she said, “Well, maybe you could give me some advice on how best to do that.” Well, many advisors wouldn’t think about that and many clients wouldn’t necessarily think to ask their advisor about that kind of thing. But it goes to the point that you made before about digging in and asking what’s changed and what’s new on their minds and those kinds of things to uncover some of those things that neither advisor nor client would necessarily think of, but that the advisor could really actually lend a lot of value to.
Absolutely. And it doesn’t always have to be having all the answers. So, I’m looking at this data through the lens of on average, what are clients saying? But in a similar vein, when we’re working directly with firms together, input, our focus is on what do clients want, but then how are we going to respond to that. So, can we target those clients who said job security for my children and share some content on that? So, I think that at the advisor level, it’s all very good to look at this overall data and think, “Oh, that might apply, but it’s at the business level, I think we’ve got to really do something with this insight.”
Right, right. So, clients are generally very satisfied, 87% were somewhat or very satisfied with their advisor. You ask also about a lot of specific ways that advisors supported clients. Was there anything interesting in the answers to those questions?
Well, we really dug in on the client experience. So, we’ve been talking about this at nauseum for the last 18 months. We’re all on Zoom, we’re doing this. And in a way, and it’s funny, I just did a presentation on this topic of when there’s this exogenous shock to the system, we tend to focus on the foundation. Can I use Zoom? What about digital signatures? What are all those things? But never has service been a driver of engagement and really that’s all that is. And it’s harsh to say, because it’s been so difficult to make this transformation, but at the end of the day, those things aren’t going to drive deeper engagement. They just change and they become table stakes.
Right, sure.
We were really in interested in what has changed. And in particular, are there things that I know, certainly I’ve heard a number of advisors say and wondered, is that an assumption we’re making or is that the truth? And of course, the truth changes from one client to the next, but we did go deep on things like frequency of contact and how clients want to meet and that sort of thing. So, among the findings there, if you just take something as simple as how often would you like to meet. Now, not every client said, “I want more contact,” but about a quarter of them said, what I want for the next 12 months is actually a little more than I’ve had in the past.”
Oh, interesting. Okay.
And so, all that means to me mathematically is that the overall level has to increase. More hours are going to have to be invested, even if it’s 25% of the clients. And I think that that could change again. This could be just a reflection of vulnerability, it could be demographics creeping in, but I think we are going to be meeting with clients a little more. We’re investing more time in that.
Yeah. Yeah. And to your point, whatever the reality is, changes from client to client, but it also changes over time.
Yeah.
As you just pointed out, coming through the pandemic, people may be a little more nervous and may want to meet a little bit more often. I have zero doubts that the next time the big bear market shows up, they’re going to want to meet a whole lot more frequently. And then when we get into the next 10 year bull market, people will say, “Oh, once a year might be fine.” So, yeah, but it’s interesting that even though we have this relentlessly upmarket that people still want to potentially meet a little bit more frequently now.
Well, they do because we still have issues with client self-confidence. And this was the big data point that came out of last year is we created a self confidence index. It’s something we’ve been tracking for individual advisors and advisory firms for the last year. And it told us that irrespective of wealth, clients were still feeling a bit insecure, were feeling a bit out of control. There was lack of clarity. And to me, those are things they may not have ever labeled or even articulated, but it’s what’s going on beneath the surface. And when you say, do you need to meet a little more often, if I’m in that category, even just a little yeah, something’s going on, and may not even have known that. So, I think that’s driving some of that as well.
Interesting. And I know that you were asking about the forms or review how people meet as well. And I think what your study found was that people generally still prefer in person. Is that what you saw?
Well, generally, yes, but to me, the finding and this mirrors, what we’ve been finding with individual firms as well, is that only 53% of clients said I would prefer in person when it’s available. The balance, so the 47% either were ambivalent, 11% had no preference, 23% said more web meetings, please. We still have a group who liked the telephone. There you go. And so, to me, that’s a big, big difference. It doesn’t mean it’s the majority, but it’s pretty darn close and I do not think we would’ve seen this two years ago.
It’s a shift that we know about, I suppose. But this is one of those questions where I feel like every firm needs to understand this because I hear way too much, “Oh, my clients all want to get back to in person.” And maybe that’s true and there is a demographic skew for sure. Older, more in person, absolutely. And so, but I don’t think we can assume that that’s the case.
No, I don’t think we can, because I think I’m sure that these statistics are accurate for your population. But again, when I get into individual groups, even older clients have started saying a whole lot more frequently, “No, let’s do more of them by Zoom. That would be great.” So, there are big differences from client base to client base that’s really interesting. So, let’s talk about communications, about what kinds of things advisors are talking about with their clients. I know that last year there were some particular things that people wanted to hear more about. What did you find this year? Was that consistent or were there different things this year that people want to hear about?
Well, the overwhelming finding there, I think goes back to what we were actually talking about is that, yes, there are differences, but they are all over the map. So, the top three topics is a reflection of not only the fact that there was a global pandemic, but a change in an administration over the same period of time. So, what they were telling us is that they were really interested in things like changes to tax legislation, as a result of the new administration. Keeping data safe is still one of those evergreen topics that top the list, but health and wellness is still among the top topics as it was. And again, this is more likely to be one of the topics that has increased in interest since the pandemic started.
So, when you go down the list, it’s not topics like, I want to understand of the intricacies of the markets, it’s financial legacy, it’s having a vision for my life in retirement, it’s helping my kids make better financial decisions. We’ve always known that this is the case, but these are the topics. And hey, just one thing I really wanted to mention if I can, is because going back to your previous questions about client experience. Because there was a data point that for me, I’m not often surprised, but this was the money shot as it were. Because we did ask clients about their preferences around meetings, but we also asked them if they feel it’s possible to have meaningful conversations virtually. Because I think that is, and this kind of hits at the referral side of things too, 76% said, “Yes, I can have meaningful conversations with my advisor virtually.” So, that wasn’t muted at all.
Yeah, exactly. That’s pretty clear, yeah.
That’s very, very clear. And interestingly, it wasn’t that the other quarter said no, only 7% said no because 17% said it’s not applicable, I just haven’t met with my advisor. We haven’t had that interaction or we we’re not meeting or something. So, overwhelmingly, I think we can say that clients can be comfortable with this and that we can have the depth of conversation if we’re doing it the right way. In fact, when we ask them to rate the quality of virtual reviews compared to in person, basically 73% said it’s either the same or better and there was 19% who said it was better. So, just under a quarter said it was less. So, again, all of this data, it doesn’t mean you don’t have to go that path, it might be different, but it tells us that it’s possible, at least through the lens of the client.
Interesting. Well, this is all great stuff as always. Your studies are some of the most valuable reads that advisors can do when you bring these out. You’ve got a model around this, how you pull all this together and implement it, called the exceptional advisor. Can you tell us a little bit about that and then tell people where they can learn more about this study?
Yeah. And look, on that, let me give the shout out entirely to the Investments and Wealth Institute. We partner with them on the research over the last number of years and the exceptional advisor model really is their model. So, we’ve worked very actively with them to incorporate the data, but you can learn a lot about that model on their site. And we’ll make sure we include the link and there’s some further data on that model. So, every year we’re looking at the different components, but the quick version of that is that there are elements of the relationship that are foundational, expertise, ethics, those two big things. But then around that, there’s varying degrees of interest in everything from guidance to service and so on and so forth. So, they’ve really tried to create a framework for how you can think about being an exceptional advisor.
Cool. Well, Julie, thanks for doing this. Like I said, it’s a huge service to the industry. And thanks for bringing it so we could spend an episode talking about it.
Absolutely. Take care.
See you.
Hi, it’s Julie again. It was great to have you with us on Becoming Referable. If you like what you’ve been hearing, please do us a favor and rate us on iTunes. It really does help. You can get all the links, show notes, and other tidbits from these episodes at becomingreferable.com. You can also get our free report, three referral myths that limit your growth, and connect with our blogs and other resources. Thanks so much for joining us.