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Financial Planners, How Well Do You Know Your Client?

According to a new industry benchmarking study, financial planners who have a higher level of knowledge about their clients realize greater satisfaction, better client relationships and higher net client growth.

The Financial Planning Association’s “The State of Client Understanding,” developed in collaboration with Capital Preferences and T. Rowe Price, finds that financial planners who engage in leading “know your client” relationship behaviors see 56% higher client willingness to recommend and 72% higher net client growth rate.

The study tested 80 different client relationship building blocks to identify the behaviors and techniques financial planning professionals should leverage to gain a better understanding of their clients. Behaviors ranged from how financial planners ascertain client goals and manage family dynamics to how they apply these insights to deliver a better client experience.

Not surprisingly, higher levels of “know your client” proficiency correlated to higher growth and better quality client relationships. In fact, financial planners who reportedly engage in these leading behaviors were found to gain greater personal satisfaction from 60% more of their client relationships.

Behavioralists and ‘Say/Do’ Misalignments

The analysis also reveals that there is an emerging segment of advisors who actively facilitate client self-discovery and behavior change. “Behavioralists excel at balancing the human and the technical, and are taking greater advantage of cutting-edge science and technology (e.g., data aggregation, planning software, revealed preferences tools) to get a more evidence-based, holistic picture of clients’ actual behaviors and underlying values and preferences,” the report explains.

The study notes that about one out of seven respondents are behavioralists, but they dramatically outperform the non-behavioralists by actively identifying and constructively resolving misalignment gaps between what clients say they want and what their behaviors show.

It found that planners who pinpointed this disconnect had almost triple the client growth rate compared to those who did not (30% versus 11%), double the referral rate (18% versus 9%) and more fulfilling relationships (75% versus 60%).

Moreover, the report explains that, while many advisors don’t actively seek points of tension or look to resolve tension when it surfaces, behavioralists seek to “identify, embrace and explore points of tension” with clients in a respectful, supportive manner by blending a matrix of “skill, will and means.”

Family Matters

Family matters is also a critical component of the “know your client” pursuits, according to the study. Highly proficient planners reportedly spend more time directly engaging their primary clients’ partners and adult children.

In fact, the study found that these highly proficient planners are more likely to discuss aging-related lifestyle transitions (54% versus 32%) and cognitive decline with their clients and their families (80% versus 57%) than lower performing planners. They also were more likely to facilitate family conversations around legacy and wealth transfer issues (43% versus 25%). “The results support our view that advisors who focus on deepening relationships with multiple family members can increase client loyalty,” explains Jean Dunn, Vice President of Client Loyalty Insights with T. Rowe Price.

Financial planners who target a specific client audience also tend to be more proficient in knowing their client’s behaviors and see stronger outcomes. This suggests that planners who focus and go deeper with a single client type can use that understanding to more efficiently attract similar clients, the report emphasizes.

“This study clearly redefines what it means to ‘know your client’ and how understanding their behaviors is highly correlated with solidifying strong, lasting client relationships built on a foundation of understanding and trust,” notes Financial Planning Association President Frank Paré.

The survey findings are based on 311 global responses from client-facing financial advisors and planners, 126 of which were from the United States.