Corporate Executive Board, the consultancy and research firm, lays out the steps that wealth managers must take to build confidence and trust.

The following article is by Leila Ghorashi, practice manager at Corporate Executive Board. CEB is an advisory, research and consultancy firm with clients in more than 50 countries and 5,300 organisations. The opinions in this piece are not necessarily endorsed by this publication, but WealthBriefing is grateful to CEB for sharing this material with us on an exclusive basis. To view more of CEB's work, click here.

More than 40 per cent of high net worth European consumers expressed little or no confidence in financial providers in the third quarter of 2011, based on the Corporate Executive Board’s Consumer Financial Monitor, a quarterly poll of more than 18,000 consumers worldwide of which 1,500 represent consumers in 10 European countries. 

This represents the lowest confidence level among regions across the globe. With markets churning on every bit of new news about European sovereign debt, austerity budgets, and the future of the euro, it is no surprise that wealth management firms across Europe see an opportunity to rebuild client trust by demonstrating the value of their advice. Indeed, to manage through moments like this is exactly why clients pay for advice.  Wealth management firms know they will struggle to meet projected revenue growth goals of 15 per cent without client confidence in their advisory propositions. 

CEB’s analysis of its client experience survey of more than 1,000 HNW individuals uncovered three critical and sequential actions required to deliver a confidence-building client experience. First, firms pave the way to confidence by using service moments to demonstrate competence with their clients.  Second, firms tailor advice to their client’s unique situation to build trust. And finally, firms teach clients the relevance and rationale behind their advice to foster confident decision-making. CEB research shows that these three actions when performed together can triple the number of highly-loyal clients in a firm’s portfolio. The research shows that 59 per cent of highly-loyal clients are likely to increase assets at the firm, 57 per cent are promoters and 77 per cent of them recommended their advisor in the past 12 months. These behaviours can double revenue per client from both individual relationships and referrals from an average of $17,000 to $35,000.

More specifically, we tested more than fifty client experience factors to determine their effect on client loyalty.  We identified specific activities that kill, build and have no impact on client loyalty within each action step and the emotional outcome associated with moving from below to above average for each. For example, we found that improving reactive and respectful communication from below average levels to above average ones results in a 37 per cent lift in clients’ perception of ease of doing business. Surprisingly, convenient offices and reducing advice-related effort have no meaningful impact on client loyalty.  

To execute a confidence-building client experience, we recommend that European wealth executives:

- Fix "loyalty killers" and improve "loyalty builders": To effectively allocate scarce resources, wealth management firms must identify the activities that kill loyalty, build loyalty and have no impact within their client base. Research shows that firms today are performing at below average level against 64 per cent of loyalty builders, leaving much room for improvement. 

- Foster employee ownership of the client experience: Wealth management firms must increase accountability for the client experience by tying its delivery to performance management outcomes. During our research, we regularly heard executives express the sentiment “everyone wants to own the client but nobody wants to own the client experience.” That mentality needs to be reversed. The firm owns the client and all employees are responsible for the experience. 

- Equip advisors with hard tactics to achieve emotional outcomes: With markets in flux, it is increasingly difficult to rely on investment performance and technical competence to demonstrate value.  Leading firms equip their advisors with tailored relationship management tactics and minimum standards around contact quality and frequency. In the process, they ensure consistently high-quality advisor-client interactions that forge emotional connections.

- Educate clients on the rationale behind advice:  Leading firms recognise that expanding share of wallet across the relationship lifecycle requires firms to not only create customised solutions for clients but also to teach clients the science behind their solutions from day one of the relationship. 

Market conditions remain volatile and clients are wary of a global recovery. Firms must engage their wary, demanding, and often emotional clients if they wish to build clients’ confidence and their bottom lines.