Monday 22 July 2019

Even the most loyal clients could have a question mark at the back of their about whether your fees are justified. The most important thing you can do is have a frank discussion up front about the elephant in there room - it could also protect your growth pipeline.


Since 2013, Macquarie has conducted in-depth analysis of thousands of clients across its Virtual Adviser Network (VAN) – a group of growth-focused advice firms – to reveal what drives client satisfaction, retention and referrals. In 2018, the robust Propensity Project survey, which has now gathered the experiences of 10,000 end clients, shone new light on how people are feeling about their financial advisers in today’s climate.

The survey measures 26 attributes of the client’s advice experience, but in the 2018 Propensity Project a new attribute was added. It asked people how strongly they believed: “My adviser puts my interests above their own.”

According to the Head of the Macquarie Virtual Adviser Network, Sherise Mercer, the results were startling.

“We do this study every year. And, for the last four years, the findings have been pretty constant,” says Mercer.

10,000 end clients, 2015-2018
Top drivers of satisfaction Top drivers of retention Top drivers of likelihood to refer
  1. Make me feel valued
  2. Be proactive
  3. Give me the right level of information
  1. Make me feel valued
  2. Manage my portfolio for the best risk and return
  3. Give me the right level of information
  1. Make me feel valued
  2. Be proactive
  3. Give me confidence

“But, when we put in that new attribute things changed. Today, the No.1 driver of referrals – by a wide margin – is: ‘I feel my adviser puts my interests above their own’. In other words, the clients who are continuing to refer their advisers to family and friends are those who are firmly convinced their advisers are putting them first.”

2018 “My adviser…”
Satisfaction Retention Referral
  1. Makes me feel valued
  2. Is proactive
  3. Puts my interests above their own
  1. Connects me to others as needed
  2. Helps improve my financial knowledge
  3. Makes me feel valued
  1. Puts my interests above their own
  2. Makes me feel valued
  3. Is proactive

Mercer is fascinated by the difference between the drivers of retention and referral. “What the Propensity findings tell us is that you can have a client who continues to be satisfied with their advice experience and no intention of taking their business elsewhere – who will now think twice about referring their adviser to people they care about.”

“And that’s a problem. In 2018, 39% of the clients in our survey said they heard about their adviser via a recommendation from friends or family. In other words, if people stop referring you, it could put two-fifths of your growth pipeline at risk.”

What does it take to convince a client their interests come first?

Mercer says that, when the team drilled down into the Propensity research into what it takes to convince a client that their interests come first, two of the top four drivers were about fees:

  • Fees and payments are fair
  • The fee structure is clear and transparent

“Clearly, recent headlines about best interest duty, grandfathered commissions, hidden fees and conflicted advice have taken their toll. To ensure their best clients keep advocating for them, advisers need to address these issues – head on. It’s critical that clients truly understand your fee structure, are convinced that nothing is hidden, there’s no agenda – and that fees and payments are fair and deliver value.”

She emphasises that this is a conversation advisers need to have with every client – even long-term, perennial supporters. Because the data doesn’t change with tenure.

“Even your best clients may have unanswered questions about the issues raised in the media. But they’re unlikely to raise them with you – especially if they have a good relationship with you.”

“It’s not that they don’t believe or trust you. It’s just they don’t have any proof. That’s why you need to proactively initiate the conversation.”

How to have the conversation

Mercer offers the following advice:

  • Timing: “Don’t wait for a client to ask. Proactively raise the issue of fees in your next meeting.”
  • Audience: “Have the conversation with every client – even advocates. The clients you instinctively feel don’t need to hear this are exactly the people you should be talking to. The irony is, loyal clients don’t want to hurt your feelings, so they don’t ask. But, while they have any lingering doubts, they will not advocate on your behalf. Unless your clients are 100% sure you put their interests above your own, they won’t feel comfortable referring you to friends and family.”
  • Fees: “Clearly set out what you charge, how it’s calculated and the value it delivers.”
  • Grandfathered commissions: “If you don’t have any commissions, state that up front. If you do, explain what it is and reasons behind it.”

“The client should walk out absolutely clear that they understand your fee system, why it’s fair and the great value they get from it. That’s the story they’re going to tell at the BBQ or dinner party when they recommend you.”

Act now to secure advocacy and growth

Mercer believes the industry is at a trust tipping point. “Over the past few years, things have been ticking along and trust levels with advisers have remained stable. But in the current environment, where trust has declined, it’s essential that advisers address the niggling, unanswered questions that are stopping otherwise loyal and satisfied clients from referring them.”

“Those who tackle the fee conversation will give clients a chance to air any concerns, address them proactively and strengthen the relationship. Even for clients with no concerns, the fee conversation has little downside. You’ll just reinforce existing trust and remind the client they’ve been meaning to introduce you to their niece or their brother.”

“Bottom line: every client meeting this year should include a conversation about fees.”

Related products

Subscribe to our monthly newsletter

We bring you technical updates, financial insights and industry expertise.

 

 

Wider View of Wealth newsletter preview
 
Thank you for subscribing.
Please try again.

Simply fill out your details below:

By submitting this enquiry, I acknowledge that I have read the Macquarie Group privacy policy, and understand that Macquarie will use my personal information to contact me in relation to my enquiry, and for other general marketing purposes.

You can change your marketing preferences by telephoning Macquarie on 1800 806 310 or customising your preferences with the unsubscribe link included in our marketing communications. Please note that all of our calls are recorded. If you do not want your call to be recorded, please advise the Macquarie staff member.

Contact us

Monday to Friday 8am – 6pm (Sydney time)

1800 808 508

Talk to us today

To speak to a specialist complete this form and we'll be in touch.

Help and support

Visit our Adviser Help Centre and search our adviser FAQs.

Additional information

This information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502 (MBL) for the use of licensed and accredited brokers and financial advisers only. In no circumstances is it to be used by a potential client for the purposes of making a decision about a financial product or class of products. Except for MBL, any Macquarie entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of MBL and MBL does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.

Macquarie Propensity Project Report, 2018, 2,617 respondents.

Macquarie Propensity Project Report, 2015-2018, 10,000 + respondents.

Any information on this page in relation to mortgages has been prepared by Macquarie Securitisation Limited (MSL) Australian Credit Licence (ACL) 237863 ACN 003 297 336.

Unless stated otherwise, this information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502.

This information is provided for the use of licensed and accredited brokers and financial advisers only. In no circumstances is it to be used by a potential client for the purposes of making a decision about a financial product or class of products.