Towry and the urgent need for IFA firms to encourage loyalty
When Ashley Cole left Arsenal for Chelsea, it is unlikely a single Gunners fan changed allegiance.
It hardly needs saying that this is because football fans are loyal not to the players in their team but to their club.
So why is it that when advisers leave IFA firms they are sometimes able to poach the clients they have been working with?
As the dust settled after the explosion of over 150 tweets last week about the collapse of Towry’s legal case against seven Raymond James advisers, this was the question that many in the advice industry were left pondering.
Some have called for the creation of an industry-agreed standard on restrictive covenants in contracts – or a ‘Broker Protocol’, as it is called in America – to outline rules for advisers to follow when they leave their employer.
Sensible though this might be, it focuses entirely on restricting the adviser and speaks nothing of retaining the client simply by ensuring they want to stay.
So how can IFA firms make clients loyal to the business, as well as the adviser?
The clue is in the words of the judge in the Towry case when she handed down her verdict at the Royal Courts of Justice. Mrs Justice Cox highlighted the “trust” people feel for advisers when they have had “a close, personal and professional relationship” with them.
As any adviser will tell you, this trust primarily comes from the adviser consistently providing the relevant and best information to enable the client to make important decisions at their convenience. This relies on a demonstration of knowledge and expertise. Secondly, it also comes from his or her bedside manner and personal touch. For example, a good adviser will not have to be reminded of the client’s personal circumstances.
Put simply, IFA firms must do more of what the advisers themselves have been doing for decades: developing personal relationships, hooking clients up with information and providing support at their convenience. This was previously nearly impossible for bigger companies, which can have hundreds or even thousands of clients – but it is now manageable with digital technologies.
Here are three steps IFA firms could be taking to build trust and long term relationships with the people their advisers advise.
• Build an online support community for clients. You only have to look at the huge success of sites like MoneySavingExpert and The Motley Fool to realise people are looking for peer support as well as regulated financial advice when thinking about what to do with their money. Some 93% of customers think that word of mouth is the best and most reliable way of deciding which products and services to buy, according to famous research from 2009 by NOP World (now GfkNOP). A support community will connect your clients to each other’s wisdom and experience across geographical boundaries, 24 hours a day, at the click of a mouse and without your business having to be involved in the flow of information and advice. Having access to this invaluable resource will make clients less likely to dump their adviser’s employer when he or she changes jobs.
• Build an online relationship with clients. Connect with the client and give them free access to useful information and financial planning tools through social and digital channels. Talk to them about that content and encourage them to share and discuss it with their own networks. Ask for feedback about the company’s customer services and build online public customer services into the firm’s business model. All of this can be done through the popular social networks that the majority of your clients will already be using – Facebook, Twitter, LinkedIn and YouTube. In 2011, according to eMarketer and ROI Research, 34% of social network users were more loyal to brands they ‘liked’ on Facebook versus brands they did not ‘like’. Similarly, 46% were more loyal to brands they followed on Twitter versus brands they did not follow.
• Encourage brand advocacy. It’s likely that customers are recommending your advisers, rather than your firm. This means both the current client and the new customers often feel more attached to the adviser than the business through that introduction. So make it easy for clients to talk about what the business does best. How do you do this? First find the advocates by surveying your customers. Potential advocates are the ones who answer ‘very’, when you ask how satisfied they are with the service. Then ask them to write a review or recommendation for you or ask them to recommend you on their website/blog or on Twitter. There are many other ways of advocating your business (more here) and your job is to offer them the opportunity that will appeal to them and will require the least effort. Third, thank them. Simple.
These ideas will all help build loyalty to the IFA business while, if anything, helping to improve the individual relationships of its advisers with their clients. Try implementing at least one of them and, you never know, you might one day have your clients singing “We’re [insert name of your firm] until we die!”