Greater Client Servicing with Less Resources

Like many industries financial advice is traversing a realisation that the future is going to look significantly different from the past.  While it can be argued this is always the case, the sheer level of mergers and spin-offs taking place over the next few years is a good indicator that the underlying economics of advice are changing.  Return fundamentals have shifted as regulation increases but the underlying needs of the customer remains the same. One obvious outcome is that advisors will move higher up the value curve and only service clients who will tolerate increased fees.  But others will look for ways they can continue to service clients with less resources and it is here that risk profiling concepts can certainly help.

At its heart risk profiling is an exercise in keeping clients content.  The discovery of investments which investors find comfortable by definition means they will require less ongoing attention from the financial advisor.  Recommendations that meet their needs will require less switching, again leading to a lower ongoing servicing requirement. But beyond these core benefits technology which leverages insights from risk profiling can help streamline advice.

Catching a problem early always trumps catching it late.  This is especially true when we are dealing with psychology as concerns have a habit of compounding in our own minds.

It’s for this reason that proactive client servicing in respect to concerns can have great benefits, not just for their own satisfaction and comfort, but also for their ability to stick to their long term financial plan.

Proactive servicing means knowing when clients might be concerned and for this we can turn to their risk profile.  By monitoring recent market dynamics in relation to a client’s risk profile we can know ahead of time which clients are likely already concerned, which ones might be becoming concerned and which ones are still feeling comfortable.  Risk profiling technology can give us these insights for our client base on mass by monitoring portfolios in relation to risk profiles and then segmenting which should be given proactive check ins. That’s deep service with less resources.

Another method to free up resources is to focus on financial literacy and ensure your client base has accurately aligned expectations.  Informed and financially literate clients are typically lower maintenance as they can identify that negative market events are temporary and need to be looked through.  Education which occurs early in your advice relationship, regarding their risk profile and historical portfolio characteristics pay long term servicing dividends.

Finally, automating your risk tolerance testing to be distributed annually is easy to do and creates an immediate benefit in that clients see they are being serviced without direct outreach from you.  Sometimes we receive push back that risk tolerance testing annually will require more work from the adviser in the event that the risk profile has shifted.

Risk tolerance is unlikely to shift markedly from year to year, but in the event it does, this is certainly something that you want to know about.  A far more costly outcome will be if risk tolerance shifts unknowingly for the financial advisor and then the next downturns proves to be too much for the client. This is when portfolios are dumped and clients are lost.

In time we are all going to have to do more with less.  Risk profiling can help ease some of the burden by keeping clients content and reducing their maintenance requirements.  The question is just whether you see risk profiling as something you are required to do, or something that you can’t afford not to embrace.