Even then, asking the wrong questions, or the right questions the wrong way, may produce unreliable results, and surveying satisfaction, comparing results with industry norms and setting measurable objectives and plans for continuous improvement, all require expertise.

In particular, as the following table indicates, out of the nine key performance areas covered by CATScan, the key area of client communication ranks relatively poorly. And it’s not only the ratings that suggest improvement is very much needed in this area – the written comments that clients make support this conclusion. Clients expect to receive more meaningful information about their advisers and their practices, and they want that information communicated to them in a meaningful and timely way.

Meaningful and timely communication
Your clients have entrusted their financial well being to you and your practice, so it’s likely that they have confidence in your technical ability and expertise. Otherwise they would not be your client! So they certainly expect you to communicate issues that affect their financial plan – changes to regulation, the investment market and so on.

But CATScan feedback also tells us that they’re looking for their trusted adviser to provide constant reassurance of the relationship. They’re interested in being kept informed as to what else is happening within their adviser’s business; what changes are occurring and why.

A sale or merger of one practice to another is a key trigger we’ve noted that can result in negative client feedback. Even something as simple as a change of name (without any change whatsoever to the practice itself) can still create bad vibes, while a change in personnel (especially a key client relationship person) can certainly set off alarm bells in the client’s mind.

As to the issue of timeliness… it will be commonsense to all of us, that the client should be told of any change before they hear of it elsewhere. There is nothing worse for a client than to ring their adviser’s office and be informed after the event that there has been a change of company name or, worse still, that their favorite client service person has left the practice! Yet it is not uncommon for a CATScan report to contain a number of such comments from clients when these changes have occurred.

With modern technology, surely it isn’t too difficult to send an email advising of a change – it’s quick, efficient and cost effective. And with over 80% of clients using the internet, email has fast become an acceptable form of communication for most. Further, why wouldn’t you place a change communication on your website for all to see?

Finally, your very best (“A” class) clients merit a phone call, if not from their adviser directly, then at least from the practice, advising of a change. What a great opportunity to further build on the relationship!

By communicating in a timely (proactive) fashion, you should be able to turn any potentially negative situation into a positive. And, as the following table indicates, the more points of client contact, the better the commercial result!

Regularly seeking feedback from your clients is always desirable, but it is particularly important to check client attitudes before and after changes of ownership and at times of extreme market volatility.

Mergers and acquisitions
Recent announcements by several major institutions indicate that the appetite of the past several years’ for acquisition, merger and consolidation is set to continue unabated. And while we’ve no doubt that such initiatives are always intended to be in the best interests of the shareholders, feedback from client satisfaction surveys (CATScan*) would suggest that the change process could often be handled more effectively from the client’s perspective.

It’s important to appreciate the golden rule of client services – the client’s perception is your reality! At the end of the day, it’s what the client thinks that matters ……professional relationships are developed and maintained on trust. Your technical expertise is expected and, in our view, is the “ticket to the game”.

Volatile markets
Good communications are vital in times of increased market volatility and poor investment returns. So, if your clients truly are your most valuable asset, why is it that over two thirds of all Australian advisory practices have no structured approach to actively seeking feedback, in good times or bad, but approach the job in an ad hoc and frequently amateurish way?

Given the tumultuous investment markets of late, why haven’t the 70% of practices taken any action? Could it be that:

• principals don’t know how to construct and implement a survey capability (or don’t know who can help them do it)?
• it simply doesn’t rate as highly as other pressing work priorities?
• it all gets down to cost at the end of the day – can a practice afford the cost of implementing a client survey?
• principals assume they already know what their clients think?
• “ignorance is bliss” and some principals just don’t want to know?

These are all commonly expressed reasons and (except for the last one) and all have some degree of validity. However the following table clearly demonstrates that the practices that invest the time, effort and money to find out what their clients are thinking, not only strengthen their relationships, but also generate (on average) a 74% increase in bottom line profit.

Methods of discovering client attitudes
There are a number of different ways to seek feedback from your clients, each with its pros and cons. The main ones are summarised below.

Tips and traps when surveying clients

Regardless of the survey method adopted, here are 10 rules that will help to maximise the benefit of your survey.

1. Don’t embark on this process unless you are serious about doing something with the results – client feedback that is ignored or discounted can do more harm than good.
2. Only include clients whose opinion you value – then you will be compelled to act on the findings.
3. Ensure you are able differentiate your “A” class (or very best) client responses from the others – these are your most valuable clients and it is vital to know how satisfied they are.
4. Adopt a structured approach – it is hard for a client to give you an objective assessment (good or bad) when you have just bought them a drink at a Christmas function!
5. Guarantee your clients confidentiality and anonymity – this will ensure completely honest (and sometimes brutally frank) feedback.
6. Don’t just consider your findings in isolation – benchmark your results against your peers and colleagues, past results and, best of all, best in class practices.
7. Ensure you thank your clients for taking the time to provide you with their feedback – no-one likes to think their efforts have been taken for granted. A little thank you goes a long way.
8. Share your results with your clients, prospects, referral partners and of course your staff – post selected extracts to your website, include a summary in your next newsletter. Incorporate testimonials into your marketing/promotional material, but seek permission first!
9. It is not set and forget – your first survey will create a baseline from which you will be able to measure your progress over time. We recommend that you conduct client surveys at least on an 18 month to two year cycle.
10. When you act on the key findings always remind your clients that the changes are a direct result of their feedback.

Conclusion
Many business leaders have commented on the importance of putting customers first, and of really understanding what they like and how they think. The retailer Marshall Field said “Give the lady what she wants”, and the way to find out “what she wants” is not to assume, but to ask.

Rod Bertino is a partner and director of Business Health Pty Ltd, a consulting firm specialising in the financial services industry. Business Health develop and market a suite of unique and exclusive business diagnostic tools, including CATscan customised client surveys. To date, over 40,000 Australian financial planning clients have completed a CATScan survey.

Rod can be contacted at rod@businesshealth.com

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

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While there is no doubt that measuring your practice against the best of your peers can add enormous value, external benchmarking should only be one of the inputs into your decision making process. Building your business strategy solely around a comparative industry standing is fraught with danger. To help put your results in the right context, you may like to consider these top five benchmarking tips.

1. Quality of information

Traditionally in the financial services profession, many practices have struggled to produce an accurate, timely and detailed set of “real” numbers for their business. The outcome of some benchmarking processes can at times best be described as “dodgy”. Does the phrase, “Garbage in equals garbage out” ring any bells?

The key learning here may be the more detailed or complicated the financial benchmark, the more cautious you need to be in analysing the results. In our view, information or data should primarily be used as a guide. For example, information gained from a website which provides “free” analysis with little scrutiny of the data being entered or of the business actually providing it, might sound alarm bells for some.

2. Benchmarking in isolation

One of the major problems with benchmarking is looking at any metric in isolation – numbers in a vacuum are very dangerous! Drawing accurate conclusions purely from financial benchmarking can sometimes be very difficult.

For example, a practice gearing for significant growth and keen to employ the best available talent may well be investing significantly more in staff salaries than the marketplace average. In this case, the fact that they have fallen outside of the industry benchmark is probably a positive.

3. Qualitative versus the quantitative

While they are extremely important, in most business the numbers are “lag” indicators – they are the result of your strategies and actions. To get the best possible picture, your benchmarking analysis should include both qualitative and quantitative information.

Consider the areas of your practice that drive financial output, not just the results themselves. Client interaction, business planning, risk management, IT and staff development (to name just a few) are all critical drivers of success.

4. Long term or short term

To decide on the most appropriate benchmarks for your practice, you must first determine where your firm sits within the “business life cycle” – what are your time frames?

There are always trade-offs to be made between short term results and long term plans – short term profits can be maximised by carefully managing expenditure but by not investing in practice infrastructure, you may be jeopardising sustainable long term success.

It is unlikely a practice looking to sell in the immediate future would be investing heavily in new hardware and software and as such, an industry benchmark based around the average IT spend per staff member will be of little relevance and provide limited insight.

5. Fit with your strategy

Avoid the disconnect between measurement and strategy – make sure you are measuring “apples with apples”. If you have built your practice to attract and retain high net worth investors and you operate a deep relationship/high touch model, ensure you are comparing yourself against other similar firms in this space (or better still, the best in class providers in this market).

Specific target markets require unique value propositions and tailored business models. The key benchmarks will vary significantly between practices specialising in a narrow client demographic or offering a select service offer.

Conclusion

The benchmarking of a business will almost always produce interesting results. We all like to know how we stack up against others in our profession. Nevertheless, the time and effort involved can only be justified commercially if the insights that arise translate into real plans to improve the business and a commitment to steadily work towards improving scores over time.

The experience at Business Health shows that the firms that consistently score well on the hard numbers like revenues and profits share a number of attributes that can be hard to measure, but which seem to be critical for success. It will be in these areas that underperforming practices may need to be ruthlessly self-critical, and to concentrate their efforts to reform and improve. Here are five of these common attributes of great advisory firms.
1. Great leadership

All of the successful advice practices we have worked with are headed by a great leader. This person usually has an incredibly clear vision for the business and is able to articulate this vision and lead others on the journey into the future.

They welcome and embrace change and while they may also be talented financial advisers, they think like successful business owners. Without exception, they have a documented plan for their business and this plan provides the strategic blueprint for sustained success and a focus for all operational activities.

2. Talented & committed staff

With the competition for good people so intense, the successful firms are able to attract and retain the best available talent. They invest heavily in the development of their team and offer not just a competitive remuneration package, but also flexible incentive plans and innovative equity programs.

To ensure they maximise their return on this investment, the best practices have sound performance management processes in place and continually encourage greater involvement in all aspects of the business.

3. Truly client centric

While the term “client centric” has become somewhat of a cliché, the best advisory practices truly do put their clients at the centre of everything they do. They have a compelling value proposition built around a thorough understanding of what their ideal clients want.

They treat every client fairly and with respect, but not equally – while no-one receives poor service, they fully appreciate that their best clients deserve their best service. They also are in constant contact with their clients (through all stages of the investment cycle) and proactively seek feedback on how they could further improve their offer.

4. Willingness to invest in the business

To deliver sustained results in any business, the owners must continually review and enhance their operational infrastructure. The most successful principals understand this and are always willing to make prudent investments for the future.

They also know that it is almost impossible to make quality business decisions without accurate and timely business information – the best firms really do know their numbers.

5. Readiness to actively seek help

And finally, the most successful practice principals surround themselves with people smarter than themselves and they are not afraid to ask for help. They are always willing to listen and learn and they consult widely, and not just from within the financial services profession.

They usually meet regularly with a mentor or coach (or in many cases an advisory board) for objective advice and guidance about their business and most importantly, this external input also provides an additional layer of accountability for the owners.

Average Practice Dimensions
Derived from the Business Health HealthCheck database which contains detailed information collected from over 2,000 Australian advisory practices in 2009 – 2011.

* The above results have been calculated using the averages at an individual practice level and then averaging these across the data group. This approach produces a far more meaningful result and explains the apparent “discrepancy” if some of the key practice attributes are simply multiplied or subtracted from each other.

# All of the “notional” profit and salary calculations contained in this report assume a notional $100,000 salary for each principal working in the practice.

Summary

Benchmarking provides a very useful comparison of any business with its peers, but if the time and effort spent is to be worthwhile, it will be important to ensure that the right information is collected in the right way, that the correct lessons are drawn from the analysis of the results, and that a program of continuous improvement is undertaken to ensure that the firm’s performance relative to its peers grows over time.

Rod Bertino is a partner and director of Business Health Pty Ltd. Business Health is a consulting firm specialising in the financial services industry. Business Health develop and market a suite of unique and exclusive business diagnostic tools which are supported by a range of specialised consultancy services. Rod can be contacted at rod@businesshealth.com.

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

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