Monday 20 April 2015

New Macquarie research reveals the surprising truth behind client satisfaction, with important insights for every advice practice.

Outstanding client relationships are at the centre of every successful advisory business. But while we all understand the importance of client satisfaction, identifying the activities that have the greatest impact on engagement can be more challenging. According to Sherise Mercer, Head of Market Development for Macquarie's Virtual Adviser Network, the problem for most practices is simply a lack of reliable information.

"Often advisers lack the data they need to accurately measure current client engagement levels and identify the factors that could drive them higher in the future," she says. "That's important, because there is a very clear link between higher satisfaction and improved business outcomes, especially retention, referral and share of wallet. Without accurate data, it can be very hard to target business improvement initiatives where they will be most effective."

"Essentially, you can end up spending a great deal of time and money on activities that simply don't have the impact you expect."

To help solve that problem, Mercer and her team created the Propensity Project – an in-depth analysis of advice practices and their clients across Australia. By measuring client engagement and benchmarking practices against their peers, the project aimed to give advisers the insights they needed to make more informed strategic decisions and achieve a higher return on investment.

The results not only highlight the importance of satisfaction for sustainable success, they also reveal that the true drivers of satisfaction are often very different to those on which advisers have traditionally focused.

Understanding what makes clients tick

The Propensity Project was based on an in-depth survey of 1,283 clients across 21 financial advice and accounting practices in June and September 2014. The Project team measured client engagement across multiple aspects of each practice's service offering. Then, using advanced statistical analysis, they identified specific drivers of engagement and key factors in creating stronger client relationships.

As well as measuring overall performance across the adviser population, the project also identified benchmarks for key service attributes, representing the best score achieved by any practice for that individual measure. By identifying best practice benchmarks, the Project team was able to uncover the characteristics that made the best performers stand out from the rest – with valuable insights for every advice business.

Often advisers lack the data they need to accurately measure current client engagement levels and identify the factors that could drive them higher in the future.

How much does satisfaction matter?

"Our analysis makes it very clear that improving customer satisfaction is the key to better business performance," says Mercer. "Highly satisfied clients have a much higher propensity to stay with your practice over the long term, recommend you to others and invest more of their money with you."

For example, Macquarie's research found that 90 per cent of clients who were highly satisfied with their advisers said they were likely or highly likely to refer them to others, compared with just 18 per cent of moderately satisfied clients and 1 per cent of less satisfied clients. The results for other key business metrics were equally compelling.

Driving client satisfaction: The four Ps

So where should you target your efforts to increase client satisfaction? To answer that question, the Propensity Project measured 26 separate service attributes across four different dimensions of the client experience: People, Process, Personalisation and Perception of Value.

By asking clients to rate their adviser's performance for each attribute, then comparing those ratings to satisfaction scores, the Project team was able to determine the relative importance of each attribute in driving engagement and performance.

"We found that the less tangible aspects of a high quality client experience are often more important to client perceptions than concrete financial results," says Mercer. "It isn't that financial performance doesn't matter, more that clients seem to regard a good financial outcome as a baseline expectation, rather than a differentiator. As a result, intangibles can play a decisive role in driving up overall satisfaction levels."

For example, portfolio performance and fairness of fees both ranked outside the top 10 drivers of satisfaction, in eleventh and fourteenth place respectively. Instead, advisers who scored highly on attributes such as understanding client needs were most likely to have highly satisfied clients - and better growth potential.


Fundamental to doing business, clients will only work with people they like and respect.

The People attributes measured clients' perceptions of the competence and expertise of staff, and the quality of their personal interactions with the practice. Here, the Project team's analysis showed that while clients value knowledge and strong communication skills, it is their advisers' ability to inspire confidence that makes the greatest difference to overall satisfaction, together with their attention to detail.

"The advice relationship is based on trust, so maintaining confidence is enormously important. It's not enough to simply be good at your job – you also need to actively demonstrate your diligence and expertise through every interaction with your clients," Mercer says. "In other words, communicating effectively and demonstrating expertise and knowledge is the key to building the client's trust and confidence."


Clients are most satisfied when their expectations of timing and process are managed and delivered upon.

The Process attributes measured clients' perceptions of the practice's processes, from first meeting to ongoing interactions with staff. They revealed that clients place a high degree of importance on fast and efficient service from their main contact within the practice, both in delivering advice and implementing recommendations.

"We often tend to think of Process attributes as hygiene factors – necessary, but of secondary importance," observes Mercer. "However, our research very clearly demonstrated that setting clear expectations around delivery, then meeting those expectations, plays a large part in shaping the client's impression of their main adviser and making them feel valued. While high quality support from other people in the practice certainly matters, it's the main adviser and the attention they give to the client that makes the biggest difference."


Clients expect the personal information they provide to their adviser to enable proactive interactions between formal reviews.

"Of all the dimensions, Personalisation turned out to be the most important," says Mercer. "But true personalization requires more than high quality needs analysis and individually tailored service. Clients are looking for advisers who will take the initiative and proactively manage their affairs, contacting them regularly with ideas and information to make them feel confident and empowered."

Perception of value

In a service industry, tangibles such as documentation and communications act as proof of the value delivered.

The Value attributes reflect clients' overall perception of cost and value for money in the relationship – and they show that communication is key. Clients place a high priority on being kept informed, underscoring the importance of frequent and clear communications and high quality reporting. Other attributes more commonly associated with cost, such as the transparency and fairness of fees, had much less impact as drivers of client satisfaction.

"High quality communications are a concrete demonstration of the value you provide, in an industry based largely on service. In our discussions with advisers, we've found that a number of high performing practices make a point of ensuring clients never leave a meeting without something tangible – a welcome pack, a portfolio report, a whitepaper, whatever it might be," says Mercer.

"Above all, these findings suggest that demonstrating clear value is critical. If clients feel well informed and have confidence in their adviser, then they are much less likely to focus on fees and the cost of advice."

Measuring satisfaction across client segments

While the Propensity Project demonstrated that high client satisfaction is the key to strong business performance, it also found that high overall satisfaction levels are not always enough on their own.

"We typically found very significant differences in engagement between client segments, even within the same practice," says Mercer. "It's also clear that client engagement does not always translate into positive results unless advisers take concrete steps to capitalise on the goodwill they have worked so hard to build."

The Project team segmented the results across multiple client categories, including age, tenure and profession. They found that the clients most likely to rate their advisers as outstanding (with a satisfaction rating of nine or 10) included older clients (72 per cent), retirees (73 per cent) and clients with a tenure of 10 years or more (67 per cent). But professionals (51 per cent), midlife clients between 30 and 45 (49 per cent) and new clients with a tenure of one year or less (47 per cent) were relatively hard to please.

"Time-poor professionals and those in the highly pressured accumulation stage between 30 and 45 are among the most demanding," says Mercer.

"That underscores the importance of efficient service and proactive management, and highlights the need to tailor your advice and communication style for different segments and stages in the advice lifecycle."

Gaining clients for life

Variations across the client lifecycle can be particularly important for advisers seeking to create sustainable success over the long term. Unsurprisingly, Macquarie's research found that the longer clients stay with their adviser, the longer they are likely to stay in the future. Yet it also revealed some dangerous dips in retention levels at key points across the lifecycle.

"We found intention to stay was at its lowest among 30-45 year olds, with around one in five unwilling to commit to using their adviser over the long term. In the midst of the accumulation phase, this age group is often under a lot of financial pressure, so they are particularly likely to make decisions about staying with their adviser based on results."

In contrast, clients under 30 and older clients showed a strong sense of loyalty to their chosen adviser, with 86 per cent of clients in both segments agreeing that they expect to be using their adviser for many years to come.

Perhaps more alarmingly, the team found that intention to stay falls among clients with a tenure of four to nine years, before climbing to a peak of 86 per cent in the 10 year plus segment. These findings suggest that, without targeted action, advisers risk losing mid-term clients, even if they maintain the same high levels of service as in earlier years.

"It's clear that the four to nine year period can be a critical phase in the client relationship," says Mercer.

"When we asked clients to describe their state of mind when going to meet their adviser, we found a noticeable dip in the number who say they feel valued during this phase, while only 38 per cent said they felt confident and in control. Without reassurance, negative sentiments like these can easily lead clients to opt out of ongoing advice, or find another adviser they feel will better meet their needs."

Fortunately, there are steps you can take to reassure clients and demonstrate the importance of staying the course. "Some of the most successful practices have structured programs in place for precisely this period of the lifecycle."

"The good news is that if advisers can maintain engagement until year 10, they're highly likely to gain a client for life."

Customer satisfaction is the key to better business performance. Highly satisfied clients are simply much more likely to stay with your practice over the long term, recommend you to others and invest more of their money with you.

Closing the referral gap

While the team's analysis showed a strong link between satisfaction and willingness to recommend, it also found that, by itself, a high propensity to recommend was not always enough to generate referrals. In fact, the client segments that expressed the strongest propensity to recommend were often less likely to actually make recommendations than less engaged but more active segments.

For example, while retirees were 32 per cent more likely than professionals to say they were very willing to recommend their advisers, they were in fact 15 per cent less likely to actually do so. Similarly, clients under 30 reported significantly higher rates of recommendation than older clients, despite the latter's high willingness to refer.

"Making a referral requires a positive act from a client, so satisfaction and good intentions on their own are not enough. Without a structured program to cultivate and track referrals, even the most client-focused practice can find it difficult to convert goodwill into tangible results," says Mercer.

"The key is to target your program at the most productive client segments – both those with a high willingness to recommend, and those with a higher propensity to take action."

The team's research also suggested that intra-family recommendations are a potentially rich source of new clients, with 69 per cent of clients agreeing that it's a good idea to introduce your family to your adviser.

Putting the client's experience first

Overall, Mercer says the key lesson from the team's research is to focus on the client's overall experience, rather than simply financial outcomes.

"Focusing on the most important aspects of the client experience, from the client's point of view, can have a measurable impact on building and sustaining your business. That means sustainable success isn't simply built on great service and strong results – it's also about the way you demonstrate your competence and diligence from day to day."

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