Sales strategies

The sound of your voice

What clients need most, they may not be receiving.

It has long been held that no sound exists in space because sound waves cannot travel in a vacuum. And most of space is a vacuum. But in 2022, using data from a series of telescopes worldwide, NASA recorded actual sound from a massive black hole 54 million light years away at the center of the Perseus cluster of galaxies. Due to the copious amounts of gas surrounding the black hole, NASA was able to capture actual acoustic waves. As you might expect, the emitted sounds are as ominous and spooky as a sci-fi thriller.

This discovery represents yet another remarkable accomplishment for the space agency. And despite the fact NASA has been pointing its attention to the heavens since it began 65 years ago, its patience paid off as we finally heard a voice from space. You’re likely wondering what this story has to do with your financial practice. Actually, very little, other than the fact it may raise the question, are your clients waiting patiently to hear your voice?

At AuguStar Financial, we understand the delicate balance you must strike between managing investments and maintaining strong client relationships. That’s why we’re here to highlight a concerning trend in the financial services industry—one that could put your client base at risk if not adequately addressed.

The disconnection dilemma

It’s no secret that clients expect more from their financial professionals than ever before. Gone are the days when biannual meetings were sufficient. Today, clients crave regular updates and proactive engagement, and their preferred channels for this communication are clear: phone calls and email.

Here’s where the disconnection dilemma arises: Many financial professionals are struggling to meet these heightened communication expectations due to limitations on time, increasing regulatory requirements, and turbulent market conditions.  The consequences of overlooking clients’ communication needs, however, could be dire. Clients who feel unheard or neglected are those who may simply walk away.

The rise of robo-advisors, investing apps, and the COVID-19 pandemic have brought new challenges and opportunities for client communication. As a result, many financial professionals risk losing clients to other advisors due to a lack of frequent and meaningful communication.

To shed light on this pressing issue, we turn to a recent study conducted by YCharts, which surveyed 671 individuals to gauge their expectations and experiences with their financial advisors. The study offers invaluable insights into client behavior and preferences, highlighting the need for advisors to revisit and revamp their communication strategies.

Clients expect more meaningful connections

The study found that clients’ expectations regarding communication have significantly evolved. The need for meaningful, compelling, and actionable communication from financial advisors has never been greater.

One of the study’s most striking findings is that a quarter of surveyed clients considered switching to a new advisor since the onset of COVID-19, and nearly 22% actually made the jump. Even more concerning is that a larger percentage of higher net-worth clients have made the switch, indicating that clients with more significant assets actively seek better communication experiences.

Why clients leave

While portfolio performance remains a crucial factor in client satisfaction, frequency of communication was found to be a key driver in helping clients understand their investments, with clients who reported being contacted frequently or very frequently understanding 73.3% of meeting material on average, compared to just 63.9% for those who were infrequently contacted.

Furthermore, clients who felt they were contacted infrequently were more likely to turn to social media or other news sources for answers rather than consulting their advisor. This highlights the significant role that frequent and informative communication plays in maintaining clients’ trust and confidence.

The impact of virtual and digital communication

The COVID-19 pandemic accelerated the adoption of virtual and digital communication channels in the financial advisory industry. The survey found that 51.7% of clients reported meeting with their advisors virtually and in person, a considerable increase from 38.2% pre-pandemic. However, the shift towards virtual meetings has raised concerns about reduced face-to-face contact, leading to diminished client-advisor communication.

The study also found that, next to in-person meetings and phone conversations, email remains a preferred medium for client-advisor communication, with 73% of clients preferring updates via email. Text messages have gained popularity, with 35% of surveyed clients indicating a preference for this channel. This underscores the importance of offering various communication options to cater to clients’ preferences.

Client communication is paramount

The aftermath of the COVID-19 pandemic has brought client communication to the forefront of financial advisors’ concerns. The study’s findings emphasize several key points:

• A significant number of clients have switched advisors since 2020, with portfolio performance being a crucial factor in their satisfaction.
• Communication style and frequency play a pivotal role in client retention and referrals.
• Clients under 60 and those with higher net worth are more likely to consider switching advisors.
• Frequent communication reinforces clients’ understanding of their investments and reduces their reliance on external sources for information.

Actionable recommendations for financial professionals

Recognizing the critical importance of client communication, here are four actionable recommendations for financial professionals to ensure they meet the needs and expectations of their clients:

1. Commit to a cadence: Establish a consistent communication schedule that aligns with your clients’ preferences and needs and that you are confident you can sustain. Consider goals such as bi-weekly blog posts, monthly newsletters, or quarterly calls to high net-worth clients.
2. Create new touch points: Expand your communication strategy to include a variety of channels, such as email, phone calls, and possibly text messages, to engage with clients on their preferred terms. This approach increases client comprehension and engagement.
3. Prioritize knowing your clients and their goals: Deepen your understanding of your clients’ financial goals and aspirations. Portfolio performance is essential, but staying abreast of changes in your clients’ lives helps you remain relevant and helps you adjust to any changes in their investment objectives.

Summary

The YCharts study underscores the critical importance of client communication across the wealth management industry. Financial professionals must adapt and improve their communication strategies to meet the evolving expectations of their clients.

By ensuring you provide frequent and meaningful communications for your clients, you’ll be far more likely to retain your client base and attract new clients through positive word-of-mouth referrals.