Advisers must summon all their agility, adaptability, and innovative thinking to survive.

Financial advisers and practice owners could be forgiven for feeling, at times, like they are caught up in an endless round of ‘Squid Games’. Whilst the price of failure in real life is not nearly as high as in the popular tv show, advisers must summon all their agility, adaptability, and innovative thinking just to survive, let alone get ahead.

Advisers have a lot of change to get their heads around, including:

• regulatory changes which come with new compliance and reporting obligations and challenge practice economics (e.g., DDO, Ongoing fee arrangements)
• investment landscape changes such as the surge of younger investors using share trading apps, the rise of crypto, or the growing demand for ESG investment options
• technological trends including the increasing popularity of video-based engagement, or the rise of new social channels such as tik tok
• advice landscape changes including the consolidation of licensees and the growing unlicensed ‘finfluencer’ phenomenon
• new product proliferation courtesy of the recently passed Retirement Incomes Covenant (RIC) and the APRA’s IDII intervention.

At the same time, consumers expect an advice experience that is comparable with other product categories. That includes a seamless, integrated experience across multiple channels and touchpoints, and a transparent approach to pricing.

Many advisers, on the other hand, are undergoing a ‘crisis of differentiation’.

A recent survey^[1] asked US financial advisers how they differentiated themselves from their peers/competitors. 76% of respondents said the number one way they differentiated themselves is through their ability to understand their clients’ needs and objectives. But this isn’t really a point of difference, it’s just how advisers fulfil their legal obligations to clients.

The second most identified point of differentiation was ‘the provision of above average client service’. 72% of advisers nominated this as their Unique Selling Point (USP), prompting industry observer Michael Kitces to note “the math doesn’t work”.

It seems safe to assume a survey of Australian advisers would yield similar results.

All of which means that from time-to-time advisers will face the need to make real, substantial changes within their business, whether it be their advice processes, their organisational staffing and structure, their channels, their breadth of offering, their pricing, their approach to client segmentation, their marketing, even their entire business models.

Change can be challenging

The first challenge with change is recognising the need for it. Whilst the reality is that the evolving advice landscape means previous drivers of success are unlikely to take advisers to the next tier of performance, this can be hard for many to acknowledge. Many advisers will think to themselves ‘why change something that has worked to now?’, or even ‘if it isn’t broke why fix it?”.

The second challenge is that implementing meaningful change across a business can be hard. Really hard. And the price of failure can be high. That’s because most changes of any substance will have some sort of client impact, either direct or indirect.

The good news is that that there are some tried and tested ways advisers, and their practices, can become ‘change fit’.

Because, whilst the vast majority of financial advice practices are small^[2], when it comes to implementing change, they can still benefit from applying the same change management techniques and methodologies employed by large corporates.

Technique 1: Taking a strategic approach to managing change

There are countless management models in use today, including Lewin’s Change Management Model, Kotter’s 8 step change theory, and the Prosci ADKAR model.

The good news for advisers is that a strategic framework for change needn’t be complicated, and can be distilled down to three key principles, What, why and how?

Why are we changing?

The reason for change needs to be clear to, and understood by, your whole team. There are several important aspects to this. Firstly, communicating the need for change to all your staff will help get them all on the same page and help you identify those staff who may be resistant or anxious.

Secondly, as much as possible, any change – even that borne out of regulatory evolution, needs to be linked back to a client benefit. (This could be better value, faster processes, greater transparency, or improved decision making). Change that comes from a positive place is less likely to be seen as an imposition and will get better staff ‘buy in’.

What are we changing?

This involves clear identification of what needs to change and what it will change to. Quite often, one major change can be the catalyst for a series of flow on changes. For example, a change to your pricing approach could require changes to documentation, processes, and client engagement, as well as the overall impact of a change in the scale or shape of your revenue.

Take the time to talk this through with your staff and document the discussions, as they could be a source of valuable ideas.

How will we implement change?

Planning is critical for the successful delivery of change. At a simple level this involves breaking down the change into steps and interdependencies, which need to be sequenced and assigned to team members. Progress and status of these steps should be regularly checked, so that any adjustments to approach or completion dates can be made.

For more complex change, some of these steps may require external expertise and resourcing. And, for changes with major client impact, advisers can benefit from understanding and undertaking a number of specific activities which, again, mirror the way larger organisations approach transformational change.

Technique 2: Manage changes as projects

The term project management is fairly ubiquitous today, as is much of the language (Agile, Gantt charts, Red Amber Green etc). But while its commonplace for large organisations to have sophisticated project management frameworks in place, it would be a mistake to think that the same methodologies can’t be equally as valuable in a small business context.

According to the Project Management Institute^[3], a project is simply:

“a temporary effort to create value through a unique product, service or result.”

In a financial advice sense, this means that everything from modifying a process, updating your website, organising a client event, or planning a newsletter can – and should be – regarded as a project.

There are several reasons to manage changes on a project basis:

1. Makes big goals achievable – by forcing a degree of planning.
2. Reveals gaps and pitfalls in a change – sometimes the planning of a project can reveal the ‘cons’ of completing it before you’ve invested a lot of time, resources, and money.
3. Avoid being overwhelmed – project management helps you break the work down into bite sized pieces so you can make progress and avoid getting so overwhelmed that you end up doing nothing.
4. Allocation of tasks – breaking down a big change into a series of smaller tasks will make it easier to divide tasks amongst your team.
5. Gets the work out of your head – and onto paper. Writing down what needs to be done to accomplish your goals will help you get done faster without a lot of rework. Keeping everything in your head is a recipe for disaster.

Regardless of whether you run a project in a spreadsheet, or with dedicated project management systems and methods (from Microsoft project through to Agile, PRINCE2 and Waterfall), the basic principles of managing projects are the same:

Technique 3: Conduct a Gap Analysis

In simple terms, Gap Analysis involves comparing the actual level of performance versus the desired level of performance for a process, strategy, or technology solution.

Identifying performance gaps in policies, processes, technology, and strategies, and determining how to bridge those gaps going forward is often both the catalyst for a change program and the guiding parameters around what the change needs to look like.

The benefits of a formal gap analysis can flow in both directions. They can:

• identify a need for change that wasn’t previously recognised (as could be the case when examining the financial viability of different client segments); as well as
• preventing a lot of unnecessary rework if the analysis reveals the gap between the current state and the desired state is much closer than assumed (as could be the case, for example, with an existing process around fee agreements or complaints recording.

Gap analysis process

There are five key steps to conducting an effective gap analysis:

1. Identify any information critical for analysing current business performance in the area of focus (for example, average onboarding time, or client retention rate or cost to serve). A number of data sources is likely to be needed.
2. Identify the current state of your business in that focus area. This involves documenting your current processes, resources, and technologies used in that area.
3. Determine the desired state. What performance level is needed?
4. Determine where any gaps might exist between the two states. This is not just the end state but gaps between actual and desired state for individual steps, which requires mapping all the missing pieces in your processes, policies, or resources.
5. Create ‘mitigants’ – specific goals and objectives that are linked to your desired performance improvement.

It is essential that your gap analysis is documented, to help you focus on the details, to facilitate sharing, and so you can refer back to it as you implement the changes.

A wide range of gap analysis templates are available free, online. A typical format is similar to that shown in Figure 1, below.

Technique 4: Formalise your customer feedback processes

Customer feedback can be both a catalyst for change, and an important input into the gap analysis process.

Despite this, the majority of Australian advisers assign a low priority to feedback from their clients, with 2019 research^[4] suggesting less than one in three advisers seek such feedback with any formality or regularity.

One possible barrier to obtaining client feedback could be uncertainty about the best method. Advisers should be pleased to know there are several ways to solicit client feedback without resorting to expensive externally managed research, from face to face, one on one interviews, to focus groups, written and phone-based surveys, and client advisory boards.

A few key principles to bear in mind when gathering feedback:

1. Feedback needs to be specific and actionable.

Rather than asking ‘how satisfied are you?’, drill down into individual elements of your product and service proposition, for example:

• the speed with which you respond to emails or return phone calls
• the clarity of your documentation
• the approachability of your staff
• the breadth of your offering – is there anything you don’t offer they wish you did (e.g., ESG investment options, life insurance)
• preferred contact frequency v actual contact frequency
• usability of your website
• referred type of client events
• readership of your newsletter.

In terms of overall customer satisfaction, a more useful question could be to ask the likelihood of them moving to another financial adviser in the next 6 months to 2 years

2. Be mindful of survey fatigue and make it easy as possible for clients to provide feedback.

This means keeping a survey short (for example a 5-minute completion time and allowing questions to be answered using a rating scale (1 to 5 or 1 to 10)

3. Make sure you also provide free form comment fields for people who want to take the time to provide more specific feedback (this is where the gold can be found)

4. Consider incentivising responses, through a gift or prize draw

5. Allow clients to provide anonymous feedback if absolutely necessary

6. Consider the timing of your survey carefully to maximise response (avoid school holidays for example).

As well as the feedback itself, there are other benefits from engaging your clients through surveys.

Firstly, the mere fact you are seeking feedback is in itself a positive and can help drive deeper client connections.

Secondly, surveys can actually lead to client referrals. Rather than directly asking for a referral – which can seem a bit out of place in a survey – simply ask respondents to rate their likelihood – on a 10-point scale from highly unlikely to highly likely – of recommending you to their family, friends, or colleagues. Known as the ‘net promoter score’ (NPS) method5, clients who score a 9 or 10 are likely to be advocates for you and your practice, and you should contact these clients down the track to see if they have anyone specific in mind.

According to the Netwealth Advice Tech report6, the most widely used platform to create, distribute and analyse client feedback is Survey Monkey, along with Google Forms and Microsoft Forms.

Client review services such as Adviser Ratings and Google Reviews are useful for eliciting and promoting high level customer satisfaction, but they don’t allow the depth of detail and targeted questioning you can achieve through your own survey.

Client advisory boards

An increasingly popular way of seeking client feedback- and at the same time deepening relationships – is to establish a client advisory board. These boards are typically made up of a cross section of your most valuable clients. High level considerations for setting up a client advisory board include:

• draw up a short list of potential members
• keep each board small
• consider rotating membership so it isn’t seen as too much of a burden
• select clients from a range of demographics
• choose clients who are happy to share their views and given honest feedback.

Board meetings are typically twice a year, one or two hours long, and often held away from the adviser’s premises, sometimes with a social element (which serves as a reward for their participation).

Logistically, make sure you have a specific agenda which is shared in advance with board meetings. Make clear your expectations around their participation, and time commitment.

As with written surveys, ensure your questioning is specific and targeted.

Consider recording the meeting (with their permission) so you can review the discussions afterwards.

Always send a follow up note, thanking them for their time, summarising the discussions, and identifying any specific ways you plan to act on your feedback (this is essential if the board members are to feel their participation was worthwhile).

Technique 5: Map your clients’ journey with your practice

Client feedback, regardless of how it is gathered, is often the starting point for changes (improvements) to the experience you offer clients. This is after all, where the most meaningful differentiation between advice practices can be found.

The process of refining or even overhauling client experience based on deep client insights is called customer journey mapping, a technique which typically involves the following steps:

1. Define your ideal/existing client profile.
2. Develop a client persona (a detailed description of who they are, what they do, think, and feel).
3. Define phases of their journey with the category and with your business (think of all touchpoints).
4. Identify steps the client is taking in each phase to solve their problem.
5. Identify what the client is thinking throughout the journey.
6. Quantify their emotional journey.

Although journey mapping has typically been done by large brands and organisations, there are tools available that make it scalable to the needs of smaller advice practices.

A number of providers have developed downloadable toolkits7 to enable advisers to map out the client experience – from the client’s very first interaction with your business (perhaps via your website or your office reception) to ongoing engagement.

By identifying customer frustrations and pain points in their journey, service experiences can be adjusted to minimise or eliminate these pain points going forward.

As valuable – and important – as this process of stepping into the clients’ shoes is, a truly engaging experience needs to be based on real customer insight and input and delivered consistently by all staff across the entire business.

For this reason, the optimal process is one where staff and customers alike are involved in both mapping the journey and designing solutions to the pain points.

Summary

The seemingly constant disruption across the financial advice landscape means advisers frequently face the need to make real, substantial changes within their business, across everything from their processes, their channels, and their offering, to their actual business models. Almost all change will have a direct or indirect client impact, meaning the price of failure can be high. Of course, implementing change can be as hard as accepting the need for it in the first place. Leading advisers are adept at both embracing change and executing it, and in many cases, they are adopting the tools and techniques used by larger organisations to more formally plan out and implement change, and to ensure those changes are based on deep, genuine, client insights.

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References:
[1] https://www.thinkadvisor.com/2021/09/30/kitces-the-5-trends-shaking-up-the-advisor-world/
[2] https://riskinfo.com.au/news/files/2021/02/Musical_Chairs_Report_2020_Q4.pdf
[3] https://www.pmi.org/about/learn-about-pmi/what-is-project-management
[4] https://www.businesshealth.com.au/future-ready-viii-extract-executive-summary-jan-2020
[5] https://www.netpromotersystem.com/about/measuring-your-net-promoter-score/
[6] https://www.netwealth.com.au/web/insights/advicetech-glossary/survey-and-client-feedback-tools-for-wealth-professionals/
[7] https://www.netwealth.com.au/web/insights/netwealth-innovation-toolkit/customer-journey-workshop/

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