Executive Summary
After advisors do all of the work of bringing on a new client (Marketing! Prospecting! Onboarding! Compliance!), it can sometimes feel natural to let the relationship go into "maintenance mode". And while all may appear well on the surface – the client rarely contacts the advisor with problems but they show up for every annual meeting – they may actually be feeling quite disengaged with the financial planning services being provided. This can result in fewer referrals and even the loss of the client, who might eventually opt to move their accounts to another (more appealing) advisory firm.
Some types of client disengagement can be difficult to detect until it's too late, as client disengagement manifests, by definition, as a lack of action, up until the client decides to leave the advisor altogether. Given how difficult it can be to detect forms of disengagement, it may be helpful to think of different levels of client engagement as part of a spectrum, where the most engaged client recognizes their advisor as a partner and guide; they are open to exploring new ideas proposed by their advisor, ask questions, and are willing to develop and maintain good habits. Clients on the lower levels of client engagement may tend to disregard their advisor's instructions or have a limited understanding of what their advisor can do, simply viewing them as problem-solvers for pain points and not as sources of guidance to plan for – and reach! – important goals.
One particular key attribute of many disengaged clients is that they tend not to reach out when issues arise, which can create a vicious cycle precluding an advisor from providing deeper value (because they didn't know there was an opportunity to do so in the first place) and resulting in the client's failure to recognize the advisor as someone who could have provided guidance and value, reinforcing their decision not to reach out for help… and so on.
However, advisors can address client disengagement by using questions that encourage client participation and invite them to engage more actively in the financial planning process. Questions such as "What is different from the last time we met?" and "What changes are coming up soon?" can help to reveal relevant talking points and planning opportunities at the beginning of the meeting that the disengaged client may not have thought about mentioning on their own. Additionally, checking in with clients deeper into the meeting to monitor any potential financial anxiety can facilitate a more open and honest discussion if there are issues that a client has, but have not yet surfaced. For example, advisors might ask how confident the client feels with their financial plan or what worries them most (or least) about their finances. Finally, asking for feedback at the end of the meeting can help the client recognize that the advisor values their engagement and input; it also helps them recognize the progress they've made and the advisor's role in achieving that progress. Facilitating another opportunity for honesty and discussion provides another way to build trust and encourage client engagement.
Ultimately, the key point is that highly engaged clients not only provide more referrals and recognize their advisors' value, but they also tend to be more enjoyable to work with. And by carefully choosing the right questions to ask, advisors can recognize their clients' engagement levels and ensure that more of them are (and stay!) fully engaged!
High Retention And Low Engagement Can (And Do!) Co-Exist In Financial Planning
When it comes to the reasons why clients choose to stay with their advisors, the fact that high retention rates can coincide with low client engagement might be surprising. But the reality is that retention rates do not necessarily have a positive correlation with engagement rates. And when it comes to the business of financial planning, especially when an owner's goal is to grow their business, understanding the difference between these 2 client metrics is important.
According to Julia Littlechild, "Positive [retention rate] data is masking a lurking problem." The lurking problem that Littlechild refers to is the low engagement rate of many financial planning clients. This problem can have a range of business problems, from unengaged clients who don't give referrals to the impact of disengagement on long-term retention. And when financial advisors don't recognize the lack of client engagement, they can end up with painful stories about valuable clients who got away. These clients may have seemed perfectly happy, but then they call their advisor out of the blue with instructions to move their accounts to a new advisor!
Having such a client-that-got-away story is not the end of the world. Receiving fewer referrals as an advisor might want is not indicative of bad service, but is just one sign that there is work to be done. Notably, this signal underscores the importance of understanding the distinction between retention and engagement, to recognize how to increase client engagement as a way to support long-term retention!
High Retention Doesn't Necessarily Equal Happy Clients
Benchmark studies have shown that retention rates for financial planning are extremely high – often ranging around 90%. And while high retention rates are desirable, they can also mislead advisors by creating a false sense of security. While retaining clients is obviously desirable, retained clients are only retained until they are not; the fact that they have stayed with an advisor doesn't necessarily give any indication about whether they will continue to stay.
Status quo bias, which describes the preference to continue doing what one is already doing and to resist making change, can explain high retention rates even when there may be low client engagement. A financial planning client might not be thrilled by their current advisor's service (they don't give referrals and they are relatively unengaged, often attending meetings but rarely, if ever, reaching out to the advisor proactively); nevertheless, they resist making a change to find a new advisor because doing so would entail more work than they believe their current situation calls for. But when an opportunity to switch to a new, potentially more suitable advisor presents itself to the client, they'll jump at the chance to make the change.
Engaging Clients Takes Work, But Will Be Worth The Effort
Unlike retention, client engagement doesn't represent a client's passive behavior resulting from status quo bias. Instead, engagement requires very active involvement on behalf of both the advisor and the client. The active roles and effort required to engage clients can help explain statistics like, "64% of people with a financial advisor feel unsatisfied in terms of 'having someone to talk to about money'" from the Nonfiction Research group that studied over 2,000 Americans to examine how people feel about their money.
There is certainly a lot involved in understanding the issues that motivate clients to become more engaged, from their personal beliefs about money to their social relationships to their money scripts. Julia Littlechild, who specializes in the study of advice engagement, has found that only about 26% of clients are engaged. And while she defines an engaged client as one who is satisfied and who has provided their advisor with a referral, advice engagement can be described more generally as a framework; Mike Lecours, financial advisor and co-founder of fpPathfinder, views advice engagement as a framework that can be used by advisors to "address the challenge of motivating clients." As an emerging concept, Advice Engagement is designed to improve the delivery of advice and encourage clients to become more active in the financial planning process, with the ultimate goal of improving the likelihood that the client will accept and follow the advice.
In another study conducted by the MQ Research Consortium and the Kansas State University Personal Financial Planning Program, researchers found that advisors tended to underestimate how much financial anxiety clients had, which may align with the earlier statistic of how 64% of people with an advisor felt unsatisfied in terms of having someone to talk to about their money. This disparity between an advisor's perception of how their clients may be feeling and the actual anxiety a client is experiencing may be supported by the disconnect between high client retention and low engagement.
Retaining clients who may be experiencing major transitions (when switching advisors may be more likely to happen) and actively seeking ways to engage clients will not only be beneficial for the health of the business (as retaining engaged clients will likely lead to more referrals) but also support better relationships between advisors and their clients!
Identifying Signs Of Client Engagement
In an article about assessing client engagement levels, Mike Lecours develops a model that includes 4 general behavior patterns that financial planners can look for to assess their clients' engagement levels:
- Level 1: Disengaged & Overwhelmed. Clients at Level 1 generally don't listen to their advisors and may even resist their instructions. This can be very confusing and frustrating for all parties involved.
- Level 2: Becoming Aware; Still Struggling. These clients have a limited view of what an advisor can do and often consider them simply as problem solvers. The reality is that advisors can and often want to do much more than just alleviate their clients' pain points; they like to help them plan for the good things, too.
- Level 3: Taking Action & Gaining Control. Clients at Level 3 tend to be much more open and interested in the financial planning process, recognizing their advisor as a partner and guide. Clients are not only open about sharing information but also unafraid of asking questions about the information to ensure they fully understand expectations and directions.
- Level 4: Maintaining Behaviors & Pushing Further. Level 4 clients are fully engaged, and advisors tend to find them very fun to work with! These are the individuals who advisors can ask, "What's possible now?!" They are open to exploring new ideas proposed by their advisor and willing to maintain new habits.
While observing client behavior can help advisors identify the client's engagement level, disengaged clients tend to struggle with 3 particular characteristics: fear, low confidence, and denial.
Fear
Many advisors take pride in doing a thorough job for their clients such that clients rarely need to call them, with the belief that clients who do get scared (e.g., over market conditions, political impact on the economy, retirement concerns) are uneducated about the issues and simply need help to better understand the reality of their situation. Furthermore, when clients have a good understanding of their financial plans and accept that they have been designed with safeguards against potential risks (all the things advisors have spent time teaching them), it might be easy to assume that these clients don't call because they have full confidence in their advisor and their plan.
Yet, what about the 3 fear responses – fight, flight, and freeze – that could naturally result from a worrisome market event? Both the flight and freeze responses can result in the client not reaching out to their advisor despite the fact that they may be feeling very afraid. The flight response might cause someone to avoid talking about money or the event altogether, and the freeze response might also cause a person to avoid reaching out to their advisor because doing nothing can feel safer than facing the fear of how the market might affect their assets.
Clients value their advisors when they address their fears, anxieties, and worries because even the best clients are going to experience these emotions. When clients call to talk to their advisor about how they may feel uneasy about their plan, this can be a sign that the client feels safe with their advisor and wants their support. A recent Morningstar study by Danielle Labotka showed that addressing emotions and discomfort with money helps advisors keep clients around, as they're seen to offer safe spaces for clients and their money, where clients can talk openly about their feelings about money, markets, and relationships.
The key point is that by simply talking to fearful clients about their concerns, advisors can add tremendous value and establish deeper relationships.
Low Confidence
Confidence is an important emotion that impacts action and engagement, and the lack of confidence is often the reason why many clients refrain from engaging with their advisors and fail to take action in the first place. Clients who show little interest or resist their advisor's advice often have low confidence. On the other hand, clients who request information from their advisors and question the information they receive are often very confident.
Importantly, while overconfident clients might be challenging to work with at times, clients with low confidence can also be a challenging issue to address. And if the advisor doesn't recognize and acknowledge the client's feelings, the relationship – and even the client's financial plan – can suffer adverse consequences. As while an overconfident client will call, discuss, or be a little pushy – they still reach out. The client with low confidence, though, might never call and relay important information the advisor would otherwise need to know to adjust the plan and help the client adapt to changing circumstances.
Denial
When someone is reluctant to share their true feelings or experiences, they may say that they're "fine" to project an artificial semblance of being okay. But a person who says they are "fine" doesn't always mean that they feel that way (and, as Aerosmith's song title suggests, F.I.N.E. can even stand for feeling "F**ked Up, Insecure, Neurotic, Emotional")!
Even if a client says they're fine and is truly feeling content, this doesn't necessarily mean all is well in the relationship. Feeling content for the client might mean that they don't feel any need to see their advisor because nothing in particular is wrong; this may indicate a potential issue where the client recognizes their advisor solely as a problem solver to consult when something needs to be fixed and not as someone they want to talk to when things are going well. In these situations, clients may not be benefiting from the full value of their advisor. Because even though advisors are problem solvers, they offer even greater value in ensuring clients are on track with their financial plans, helping them avoid derailing situations, and recognizing new opportunities to help them realize their goals – all of which require the client to call and check in with the advisor from time to time, even when everything is going right.
Spotting signs of low engagement like fear, low confidence, and denial (or hesitance to meet and discuss circumstances even when things are going well) allows advisors to take action. And for advisors who want to help boost client engagement (so that the clients they retain are also engaged in the planning process!), there are strategies they can use to encourage engagement and that help clients feel great about their financial life!
3 Opportunities For Engagement In A Client Meeting
When a client is engaged, they will often solicit feedback from their advisor and won't hesitate sharing their own input regardless of whether things are working or not. Advisors hear these clients say things like, "This was so helpful!" or "I want more clarity on X; can we go over that again?". Engaged clients want to be a part of the solution – these clients are ready to talk through various ideas, come up with their own ideas to vet, resist suggestions they don't agree with, and push further for more ideas or planning scenarios they find interesting.
Additionally, engaged clients are better for the advisor's business – they give referrals and remain clients through life's transitions while growing closer to their advisors over time. And engaged clients are often just more fun to work with. They think their advisors are, too – which is probably why engagement has much to do with referrals!
By recognizing highly engaged clients and being able to identify clients who may feel disengaged, advisors can strategically use engagement-focused questions during all stages of a meeting to ensure all clients are engaged or are moving toward engagement.
Collaborative work done by Julia Littlechild and Asset-Map – 2 leaders in the advice engagement space – provides a fantastic list of questions advisors might want to ask during meetings to encourage engagement. The following sections discuss their list and include additional details on using these engagement questions in a meeting.
Opening The Meeting With Questions To Get Past Denial
As noted earlier, disengaged clients who may be in denial about their financial situation might say they're feeling fine and may only think of their advisor as a problem-solver. And clients who say they feel fine can be hard to inspire and sometimes harder to engage because they don't always present the advisor with obvious talking points to bring up.
Yet, for the advisor-client relationship, this opens up a whole new line of ideation for the advisor. When people plan from a place of contentment and see their advisor as a partner in achieving new goals, this can be really exciting and can be the basis of questions intended to encourage a "fine" client move toward engagement. And clients who are already engaged will also love these questions.
Advisors can use open-ended questions to begin a meeting as a way to encourage the client to share recent updates. Questions like the ones below also encourage them to talk about what they expect to happen in the future. Because even if things really are fine, wouldn't it be better if things were great?
- Share with me about what is coming up in the near future.
- What is different from the last time we met?
- Tell me about any significant changes since we last spoke.
- What changes are coming up soon?
- Give me your plans for the next 12–18 months, big or small. What are you planning for in the near term?
All of these questions can help an advisor start conversations that focus on engagement and encourage open dialogue about upcoming changes. They also normalize the idea that clients don't need to be in a rough situation in order to meet or talk with their advisor; advisors can help them realize that they don't just help clients solve problems during the bad times; they also help them plan for the good times, too!
Asking Questions During The Meeting To Address Fear And Low Confidence
Fear and low confidence are difficult feelings to wrangle and can result from many sources. While advisors want to understand their clients' feelings, starting a meeting by directly addressing anxiety and confidence could be overwhelming for the client. Clients may shy away and respond that they are "fine" when they are not, or they may say that things are okay even if there is something on their mind.
Starting with questions that directly address emotions can be difficult and even uncomfortable for clients to answer, especially because it can be common for many people to not really know how they feel at a given moment. Admitting things like, "I feel scared", "I feel confused", or "I feel like I'm on the verge of a breakdown and not sleeping" can be very, very difficult to say out loud, especially during a meeting with someone they might only see 2 to 4 times a year for an hour.
Midway through a meeting, however, the advisor has the conversation flowing, everyone is probably feeling a bit more open to sharing, and a discussion about feelings (especially big ones like fear and confidence) may not be as jarring. Even disengaged clients will be more open at this point in the meeting, especially if it begins with questions addressing engagement. Which is why questions that check in on client anxiety and confidence, such as the ones below, are more effective when asked in the middle of a meeting, after clients are comfortable in the flow of conversation and feel safe to discuss them.
- On a scale of 1–10, how confident do you feel with your (financial goals, financial plan)?
- Why did you say X, or What do you think would need to happen to get you to X?
- What do you worry about the most when it comes to your finances these days?
- What do you worry about the least when it comes to your finances?
- What would be different if you could feel more financially confident than you do right now? In what area of your life would you immediately see a change or a difference, and what would it be?
Closing The Meeting By Soliciting Feedback
Soliciting client feedback is a terrific way to end a meeting and garner engagement. Feedback questions might feel a little uncomfortable the first time an advisor asks them, but they can be invaluable for learning about the client and gaining their trust. Furthermore, recognizing the courage it took for a client to engage in a financial discussion with their advisor can help the advisor recast a stressful situation into a positive (and maybe even exceptional!) experience.
Consider the following examples that encourage honest client feedback – the cornerstone for building more trust and stronger client relationships.
- How can I better serve you?
- What is your biggest takeaway from this meeting today?
- What insight from today do you feel is more actionable?
- How can I improve these meetings for you in the future?
- Do you feel we accomplished something in this meeting?
Ultimately, while navigating the nuances of fear, hesitation, and complacency of clients through engagement-driven questions might feel awkward at first, doing so can be an enriching experience for both the advisor and the client, yielding greater trust and enthusiasm in the financial planning relationship. By initiating these conversations, advisors do more than just identify problems and propose solutions – they connect in meaningful ways with their clients. This connection is what's at the core of engagement, and through these exchanges, advisors can transform everyday transactions into rewarding and lasting partnerships!
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