How to create a high profit advice practice

Advisers always have a keen eye on the performance of their business, aiming to determine where they should focus their efforts to have the biggest positive impact on the profitability of the practice. Macquarie’s Sherise Mercer explains how conversations could hold one of the keys to success.

How to successfully grow a financial advice business is a subject keenly debated by practice leaders in big and small firms, from regional offices to the centre of our big cities.

This subject can become more of a focus in the first months of a new year, when advisers are asking themselves: where should I focus my energies for the year ahead to successfully grow my practice? 

What high profit practices do differently 

Research we conducted among financial advice firms in 2013 discovered that there is a significant difference between lower profit and high profit firms.

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A much greater proportion (56 per cent) of high profit firms stated that their primary referral source for new business is existing clients, while this was the answer for a much smaller number of low profit firms (37 per cent).  

With this statistic in mind, we looked to some client research to uncover what factors make it most likely that a client will refer their adviser to others.

What wasn’t surprising was that the more highly satisfied the clients, the higher the proportion of clients who were likely to recommend their adviser’s services. 

What was surprising was the significant difference only a slight uplift in satisfaction can make in terms likelihood for a client to recommend.

Of those clients who scored their advice experience as a six, seven or eight out of 10, (this is by no means an unsatisfied client) only one in five clients would be highly likely to recommend their adviser to others. 

However, for those clients who gave their adviser a satisfaction score of nine or 10 out of 10, a huge 90 per cent of clients would be highly likely to refer their adviser to others.

This translates to an additional 70 per cent of your client base actively recommending you, which could make an enormous difference to the success of your growth aspirations. 

So, focussing on providing the best possible experience to your existing clients would appear to be an efficient and effective way to direct your energies for the year ahead. The next question is; how do you do that?  

What do clients want? 

This is where it starts to get particularly interesting. We ran some analysis to assess which attributes of the advice experience had the biggest impact on high satisfaction, expecting that things like portfolio performance, financial and investment knowledge, and fairness of fees, would be key.

However, these three did not even rank in the top 10 most important attributes.  

These attributes may still be important, but clients are likely to consider them as a given. The three parts of the advice experience that we found can lift client satisfaction to a nine or 10 out of 10 were: 

• My adviser has the ability to choose financial solutions that meet my needs; 
• My adviser keeps me informed; and 
• My adviser proactively manages my financial affairs.   

How do you achieve high satisfaction? 

When a client says it is most important for my adviser to have ‘the ability to choose financial solutions that meet my needs’, the root of this requirement is in understanding the client’s personal circumstances and what is important to them. 

The heart of this lies in the family. Research we conducted into Australian family and their finances in early in 2013 found that understanding the sometimes complicated dynamics of a client’s family, their hopes, their dreams and their fears, is important.

This often means having conversations with your clients that go far beyond your standard fact find to delve deeper and discover their underlying needs.  

When you initiate these ‘open’ conversations and clients share their broader concerns, you create the opportunity to prove you understand their needs and fast-track the client’s trust in your advice.  

In terms of delivering on the “keeping me informed” attribute, we believe there are two parts. The first part is that if you actively help improve the client’s financial knowledge the percentage of highly satisfied clients (nine or 10 scores) moves from 34 per cent to 69 per cent. 

Even more importantly the percentage of dissatisfied clients (one to five scores) drops from 20 per cent to only one per cent. The second part is ensuring you deliver on the expectation you have set in terms of your communication about the client’s situation. 

In today’s world, keeping clients informed can be done through many touch points, and often using more than one is the most successful approach, be this face to face conversations, email conversations, blogging or events. 

When you get this right and you show your clients you will keep them informed, they gain a feeling of control.  

Lastly, the final of the three adviser attributes, ‘proactively managing my financial affairs’, is all about anticipating issues and managing their day-to-day concerns.

Whether this is a question they have about an insurance claim, a confusing form they have to complete or an approaching date for their term deposit to expire, the client wants to know that they do not have to worry about these matters. 

Their adviser will take care of all of this for them. 

When you demonstrate that you will manage their financial affairs and anticipate any issues they might experience before they arrive, the client will have a greater feeling of confidence in both you and their financial situation.  

Your focus for 2014 

Many of these findings might not be new news to you, because providing exceptional client experiences is what you do every day.

However, it should offer some relief that fully focusing on your existing clients can bring growth for your business as well. 

It’s timely to consider at the beginning of the year whether, despite the best of intentions, your team is really giving a nine or 10 experience to all your clients, even those who have been with you for many years. 

Of course, you know your clients and your business better than anyone else. You are the experts and you probably have a whole host of ways to demonstrate the attributes I have highlighted here on a daily basis. 

However, one idea I want to leave with you is that when you think about this holistically, conversation may be the key.

Whether this is a conversation among your peers to share best practice and ideas that can fast-track your success, conversations with your clients to ensure you are meeting their needs to the highest standards, or conversations with your product providers to make sure they are meeting yours to a similarly high degree, keeping an ongoing dialogue can drive success in many ways.  

Ultimately, highly satisfied clients are only too willing to have a conversation with their friends and family to recommend you, and from these conversations can come others. The potential for your business speaks for itself.  

Sherise Mercer is a division director at Macquarie Banking and Financial Services Group.