…understanding what your clients may not be telling you

This is the second article in our Insight series drawn from the most recent analysis of our CATScan Client Satisfaction Survey data and focusses on one of our industry’s greatest issues – principal dependency. Through our latest Future Ready VIII analysis we know that 70% of advice practices are run by a single owner and, in the majority of these cases, risk management is poor. Think key person and succession planning for example.

The CATScan dataset now contains feedback from over 45,000 Australian clients, all of whom are using the services of a financial adviser. As such, these findings are unique in the Australian advice marketplace and exclusive to Business Health. We hope you find them of interest and value as you build out your plans for 2021 and beyond.

Is your business more than just you?

Because Business Health engages deeply with both advisers and their key clients, we have access to a truly unique and multifaceted picture of today’s marketplace. By integrating the key insights gained from our proprietary data, we are able to identify and track emerging trends that have the potential to impact the future success of Australia’s advisory practices.

While our latest Future Ready VIII* whitepaper clearly highlighted the perilous state of succession planning among practice principals (just 10% have adequately prepared their business for the transfer of ownership), this risk becomes further magnified when we overlay one of the key findings from the CATScan Client Satisfaction Survey analysis.

63% of all clients would not be comfortable dealing with anyone else in the practice other than their current adviser. Given, in many firms, the practice owner is also the adviser to the key clients, it would appear principal dependency remains very much alive and well in our profession.

While this may not have been a huge issue in the past, remember, the average age of practice principals is now fast approaching 60. Many owners are starting to seriously consider how and when they will exit their business or perhaps wind back their day-to-day client facing activities and take on more of a strategic management/mentoring role within their practice.

We also fully appreciate that, by the very nature of the work they do, extremely strong bonds develop between great advisers their clients. In fact, of the nine key service delivery areas covered in the CATScan survey, clients rate the business relationship they have with their adviser above all else.

This depth of relationship is a true business asset and while such key person dependencies can never be eliminated, there are some practical steps that can be taken to manage and mitigate this business risk. If you feel that your practice may not thrive (or perhaps even struggle to survive) without you at the wheel, you may like to consider these suggestions:

  1. Ensure you introduce all of your key staff to your clients – if your team is one of your greatest assets, make sure they are not your practice’s best kept secret.
  2. Continually promote your support team. Publish their names and photos on your website, let them author/contribute articles for your blog posts or newsletters, have them speak at your client webinars/seminars and develop a “who’s who in the zoo” contact flyer that you can include in your client induction material.
  3. Make sure you are not the problem. Be disciplined and immediately delegate all administration calls/queries to the appropriate member of your team. Only get involved if there is a problem or an issue is escalated to your level.
  4. Wherever possible involve others in all of your client meetings (both those held physically in your offices and also any contact conducted remotely via video conferencing). Take any opportunity to showcase the capacity of your team.
  5. Be mindful of the terminology you use – refer to your business, your practice, your firm and your team. Always “we” and never “I”.
  6. Proactively manage any personnel changes. While it is a fact of life that people move on, don’t let the first your clients hear about it be when they ring and ask to speak to someone who is no longer with you. Make sure you put a plan in place to proactively manage the transfer of client relationships.
  7. Find reasons for your key support staff to regularly speak with your clients. Supplement your face-to-face contact with a proactive client communication program that includes all of the key members of your team. All communication/contact does not have to come from you.
  8. Channel all initial client enquiries through your support team. Encourage them not to put calls straight through to you and always ask “can I help” or “may I ask what it was regarding”?
  9. While reducing principal dependency delivers obvious upside for your practice, in all your discussions with your clients, reinforce the benefits for them – as a client, what’s in it for me? Continually explain to me why I am better off dealing with your team and not solely you.
  10. Don’t forget your referral partners and centres of influence. While you will need to handle these relationships a little differently, it is just as important that your alliance partners are comfortable and confident dealing with anyone in your practice.

And finally, while we are very mindful of the old adage “lies, damned lies and statistics”, perhaps the last word should go to the numbers themselves – while it is now universally acknowledged that principal dependent businesses have a much lower capital value, our HealthCheck data also shows that those practices that have an effective succession plan (which of course includes identifying and addressing any key person dependencies) deliver 46% more profit per owner than those who have don’t.

If you think this could be a return worth the investment of your time and effort, please let us know. We have a wealth of experience helping advisory firms better understand what their clients think of the services they are receiving and together, we can learn what your clients think of your team and how wedded they are to only liaising with you.

For your consideration.

*Since 2002, Business Health has released a series of white papers providing a comprehensive insight into the health of the Australian advisory industry and its preparedness for the future. These papers have become known as the Future Ready analysis. The eighth in this series, Future Ready VIII, has recently been released and is based on the consolidated analysis from Business Health’s HealthCheck data warehouse.