Jon Sadler discusses the importance of engaging regularly with clients.
Most financial advisers’ filing cabinets, whether electronic or paper, hold a collection of ‘landmines’ in the form of disengaged clients. Have their circumstance changed? Are their needs still being met? Is the risk profile of their investments still appropriate? It may not be obvious at first glance, but addressing these risks can offer opportunities which could yield lucrative, long-term business. And it can be more straightforward than you would think.
Falling out of touch with clients can happen in a number of ways. It can happen where policies are transferred to an adviser’s agency as part of a new client engagement. It can happen if pension providers have merged or sold books of business to different providers. And, of course, client circumstances – such as employment or family matters – are subject to constant change. Whatever the reason, advisers are required to identify the changes and ensure that the recommended products and risk profiles remain suitable.
Revisiting existing clients
The answer is to regularly revisit existing clients. By doing this, financial advisers will go a long way towards ensuring that they adhere to TCF principles which call on them to ensure that their clients’ expectations continue to be met and that the recommendations made reflect their clients’ changing circumstances.
Revisiting existing clients is rarely just a ‘de-risking’ exercise, though. It also presents financial advisers with numerous business opportunities. Returning to existing relationships – even ones which have been left fallow for years – is, after all, considerably more resource-friendly than forming brand new ones.
Some financial advisers report that they have existing client numbers in their cabinets which run into thousands, leaving the business with significant commercial risks. Unless these clients are re-visited and re-engaged on profitable terms, their value in terms of contribution to profit and ultimately the value of the business will fall away.
For example, if an adviser has a back-book of 100 pension clients with an average case size of £150,000, revisiting these clients could result in an additional 0.5% pa ongoing retainer per client. This would serve to ‘de-risk’ the adviser’s business and increase revenues by £75,000 per annum. Perhaps more importantly, though, these clients would now be ‘active’ and re-engaged to the firm, providing an increase to the overall value of the business.
A concern for many advisers will be the time and resources needed to efficiently review their existing clients and demonstrate the added value they can offer. In order to make this seemingly arduous task as straightforward as possible, risk assessment and portfolio modelling tools can be used to assist advisers in quickly and effectively assessing attitude to risk and selecting appropriate funds. The resulting reports speed up the review process and assist in demonstrating added value to clients.
Streamlining and efficiency
Such tools ensure that financial advisers’ processes remain as streamlined and efficient as possible – a guarantee which will be especially attractive in a post-RDR environment.
As well as using modelling tools in order to reconnect with past clients, many financial advisers are reviewing their investment processes with a view to using managed portfolio funds selected by third party specialists, rather than enduring the stresses and resource requirements of fund-picking themselves.
By enlisting dedicated investment managers to take this time-consuming job off their hands, financial advisers can focus on the business areas which can best help them to improve their client relationships and profitability.
Many financial advisers have cabinets of existing clients which are worth delving back into. Reconnecting with clients and, in particular, with pensions clients who will often remain with advisers for their lifetime, could pay dividends in the end.
By using the frameworks and tools available to demonstrate added value, financial advisers can increase efficiency and turn their ‘landmines’ into ‘goldmines’.
Jon Sadler is head of retirement at Alico Wealth Management
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