Written by: Finn Gilbert
A 2021 study from the Money Management Institute revealed that 38% of investors didn’t have a financial review with their advisor during the onset of the pandemic. After an extremely volatile period in markets worldwide, this is a concerning statistic. Even more so because a 2020 Ycharts survey revealed 88.2% of financial advice clients would consider their advisors’ frequency of communication when deciding to retain their services.
Building relationships with clients throughout the year is key to client retention and growth. Volatile market conditions in particular present a unique opportunity for advisors to engage clients, reach out to prospects and provide a lot of value. However, when advisory teams don’t have the right systems and tools in place, regular communication is difficult, let alone during volatile periods. Advisors not only struggle with an influx of emails and calls from emotional clients, but also with identifying their most vulnerable clients and taking timely actions. As a result, clients may turn to other means to receive advice, which hurts retention and business growth.
So what’s the solution? Do advisors need a new kind of tool? The short answer is “no” — a firm’s CRM should be enabling advisors to build deeper client relationships more easily. In particularly tough market conditions, good CRMs can help advisors understand different client situations, manage increased workload and streamline ongoing client education. Ultimately, they provide the environment for advisors to proactively deepen relationships with clients through volatile times and beyond.
Understanding different client situations
One reason financial advisors struggle to engage clients proactively is because they don’t have access to a complete client picture. In fact, advisors often fail to understand their clients even on a surface level. This was exhibited by a 2018 survey conducted by Investment News which found that only 39% of financial advisors had a detailed understanding of their clients’ net worth, and only 35% had a detailed understanding of their clients’ income. With an incomplete client view, advisors can’t fully understand their client’s unique financial situation. As a result, they can’t provide tailored and effective guidance.
For example, take a young investor with low financial literacy and little investing experience. They’ll most likely need specific, hands-on guidance compared to an experienced investor nearing retirement. It goes without saying that clients have different investment goals, risk tolerances, and financial situations that need to be treated individually. What advisors often forget is that clients have different communication styles and preferences and may express their concerns in different ways. Without technology that captures and unifies this quantitative and qualitative data, advisors can’t identify their most vulnerable clients or engage them effectively.
Managing increased workload
During volatile markets, financial advisors also face significant struggles in keeping pace with rapidly changing market conditions and client needs. Advisory and service teams often find the increased workload difficult to manage. Client communication usually increases as clients seek guidance and reassurance, which can overwhelm advisory teams and make it that much more difficult to be proactive.
Without the right systems and tools in place to help streamline task management, it’s difficult for advisory teams to be efficient in normal times, let alone in a period of tough market conditions. Volatile markets expose and intensify process inefficiencies. Unfortunately, during this period of time, firms don’t have the bandwidth to implement new processes or technology to help. As a result, advisors and clients suffer.
The good and bad news is that unpredictable markets are recurring. Just because advisors and clients suffered once doesn’t mean they can’t be better prepared in the future. Firms can implement processes and workflows in their CRM that help advisors and their teams support clients during unpredictable times. And these processes don’t have to be complicated — they can help prioritize outreach, implement communication plans or trigger portfolio reviews. What matters most is that they enable advisors to better manage their tasks and maintain client relationships during volatile markets.
Navigating client financial literacy
A third reason financial advisors struggle during volatile markets is the varying levels of financial literacy among clients. Research shows that 78% of financial professionals strongly agree that financial literacy is an issue in America and almost 90% have encountered financial literacy issues among their clients. Financial literacy is not a one-time lesson, but a continuous process that requires ongoing education and support. In the age of Twitter, smartphones, and live streams, any question can be answered easily and nearly in real-time. For better or worse, people tend to use social media for financial advice when their advisor isn’t communicative enough, which can result in unfavorable decisions and client attrition.
While navigating different client literacy levels is challenging, nurturing client knowledge not only better prepares clients for market fluctuations in the future but also deepens the advisor-client relationship. In addition, research has found that clients with high investment knowledge are significantly less likely to switch providers than those with low investment knowledge. Nurturing financial literacy may call for a variety of tools and channels, however firms can start within their CRM, tracking financial literacy levels, creating educational email templates and more. Increasing client knowledge not only provides the opportunity for advisors to conduct proactive outreach and deepen relationships, but also softens the impact of volatile market conditions on firms and their clients.
Volatile market conditions are tough on advisors and clients alike. Without the right technology in place, advisors face significant challenges in understanding different client situations, managing an increased workload and providing ongoing education and communication to clients. However, there’s no need to bring in new tools — firms can better leverage their CRM to help advisors identify vulnerable clients, quickly reach out to them, develop an ongoing communication and nurture financial literacy. Ultimately, this provides a platform from which advisors can proactively deepen relationships with clients through volatile times and beyond.
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