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by Patrick Spenner

The level of understanding financial planners have about their clients directly correlates to their potential for success, according to a new “know your client” benchmarking study.

The study, developed by Capital Preferences and T. Rowe Price and fielded by FPA, sought to identify the behaviors and techniques financial planning professionals can leverage to know their clients, and provide a roadmap for planners to evolve their client understanding approach.

The study benchmarked more than 80 “know your client” (KYC) building blocks, each a distinct behavior, method, tool, or skill that planners can employ to understand their clients. Building blocks ranged from how financial planners understand client goals and preferences, to how they manage family dynamics, to how they apply insights from understanding clients to deliver a better client experience.

Data was also gathered on performance indicators—client relationship quality, business health, and adviser satisfaction. Marrying the building block data with the performance data pinpoints which building blocks matter most when it comes to performance.

Here’s an overview of the key insights from the first wave of benchmarking, which had 315 client-facing financial planners participate during July and August 2018.

Overall, higher levels of KYC proficiency correlated to higher growth and better-quality client relationships. High-performing planners, defined in the survey findings as those who operate at “Level 3” with advanced proficiency, compared to low-performing planners, operating at “Level 0” with basic proficiency, do better in these ways:

  • 73 percent of clients are willing to recommend Level 3 planners, versus 47 percent who are willing to recommend Level 0 planners;
  • 14 percent net client growth rate (experienced by Level 3 planners), versus 6 percent (experienced by Level 0 planners); and
  • 74 percent of client relationships were defined as “personally fulfilling” by Level 3 planners, versus 48 percent by Level 0 planners.

Rise of the Behavioralist

The survey data revealed an emerging, very high-performing segment of planners deemed the “behavioralists.” They are early tech adopters who provoke their clients in particular ways. One in seven planners in the survey was classified as a behavioralist. These planners outpaced their non-behavioralist peers in these ways:

  • 30 percent net growth rate, versus 11 percent;
  • 18 percent referrals (per 100 clients), versus 9 percent;
  • 73 percent of clients willing to recommend, versus 60 percent; and
  • 75 percent of client relationships defined as “personally fulfilling,” versus 60 percent.

Behavioralists excel at balancing the human and the technical. They are taking greater advantage of cutting-edge science and technology (such as data aggregation and revealed preferences tools) to get a more evidence-based, holistic picture of client’s actual financial behaviors and underlying values and preferences.

Of course, they also listen to what clients say—but they really differentiate themselves in what they listen for. They are hunting for “say-do” gaps—where a client’s behavior is misaligned with what the client says or thinks. For example, they compare what a client says about how they spend money against the client’s actual historical spending using data aggregation and real-time spending tools. When they find these gaps, they use them constructively to help clients take meaningful steps in areas of misalignment.

Behavioralists are skilled facilitators with unprecedented depth of insight into client behavior. They use that understanding to facilitate client growth and develop better plans and healthier working relationships, which are ultimately more enduring and fulfilling.

Family Matters

The survey data showed meaningful differences between high-performing and low-performing planners in the area of how they engage partners and adult children of the primary client.

High performers spend more time understanding partners and spouses. In the first year of a client relationship, high performers spend more than six hours understanding partners, compared to less than four hours for low performers.

Moreover, high performers are more likely to routinely engage the broader family (partners and adult children) on important aging issues. Those issues range from legacy wealth transfer to financial acumen of children to detecting client cognitive decline.

Families are preparing to hand down more than $24 trillion in the years 2015–2027; at the same time, 90 percent of heirs seek the services of a new planner when inheriting wealth, according to Deloitte. The benchmarking data suggests that planners who choose to make family engagement a meaningful part of their value proposition are better positioned to win this wealth transfer.

Relationship Building

Though often referred to as a “relationship industry,” there is a wide variation in actual relational skills among planners. This becomes most apparent when looking at what it takes to facilitate in-depth client understanding. It can be intimidating, risky, and uncomfortable; many planners feel underqualified. 

A development opportunity for planners exists around cultivating more robust relational competencies and embracing a willingness to move toward—rather than avoid—uncomfortable conversations.

The benchmarking study showed only about half (46 percent) of planners have reached a point where they’re operating at Level 2: really looking closely at client behavioral tendencies rather than just what clients say. Very few planners (about 7 percent) operate at Level 3 where they are going the extra mile to actively monitor client cognitive health and keep an eye on clients in between check-ins for unordinary behaviors that require follow-up or some kind of intervention.

​Patrick Spenner is chief marketing officer and head of product at Capital Preferences, which provides advanced technology for understanding customers, leveraging decision science, and behavioral economics. Capital Preferences is the creator of TrueProfile client diagnostics.


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