Survey reveals how frequently clients would like to hear from you via e-mail, telephone, in-person meetings, and postal mail.
For the next three articles, we will be reviewing answers to behavioral questions of investors using financial advisors from the survey I created last year that was completed by 980 individual investors who subscribe to either Morninstar.com and/or Morningstar investor newsletter publications.
The questions cover behavioral aspects of how clients view non-financial elements of their relationships with their advisors. Last month we reviewed answers to the following question: What are the top five aspects of a financial advisory relationship? (Click to see that article.)
The survey questions/statements we will review over the next three months are the following:
1. Rank how often you prefer regular communication from your advisor.
2. How confident are you that the plan developed by your financial advisor will help you achieve your financial goals?
3. Check the three most important areas of a financial plan to you.
As you may recall from recent articles, the purpose of the survey was to gauge investing behavior and choices and how influential these choices are in the investment decision-making process. Of the 980 surveys that were completed, 306 were completed by investors that use financial advisors. The information contained in the answers given by these investors can be highly relevant to advisors in their quest to serve clients in the best way possible. It is important to remember that the Morningstar investor survey is composed of a very specific type of investor population so let's review that now.
The population of survey takers in the Morningstar universe was generally defined as "mostly male, mostly experienced [experienced having a double meaning here--experienced in the sense that they are not new to investing and experienced in the sense that that over half of the survey takers were over 60 years old], and mostly do-it-yourself" investors. What this means is that the majority of survey takers were proactive, engaged, and self-directed investors, which naturally is only a subset of all investors. The populations of survey takers that use financial advisors are likely to be somewhat less self-directed, but we can assume since they subscribe to Morningstar services, they are still somewhat self-directed. It is important to remember not to extrapolate what is learned in this set of articles to the general population of investors because it contains many passive and/or unsophisticated investors as well as "middle of the road" investors who are somewhat engaged but don't have the time or aptitude for more. And of course, the general population of investors contains a higher percentage of women and young investors. For simplicity, I call the investors who took the survey that use financial advisors "PEM-FA investors" going forward to stand for Proactive, Experienced, and Male investors who use financial advisors.
We will now review the answers to a question about how often clients prefer regular communication from their advisors. The four methods of communication referred to in the question were: e-mail, phone, in-person meeting, and regular mail. There are some interesting conclusions that can be drawn from the responses to these questions. I will offer my own observations and recommendations as they relate to communication with clients. Examining questions such as this is important because advisors should know how clients view non-financial aspects of their relationship with their advisor. There are valuable insights into this subject from these responses.
Results: Although the highest number of respondents picked Monthly e-mail communication, a healthy 30% of clients prefer weekly e-mails from their advisors. I would assume (hope) that this doesn't necessarily mean a personalized e-mail per week, but some form of e-mail communication from the advisor's firm, such as a market summary piece, a research report, or some form of market correspondence to the client. It is noteworthy that 20% of respondents appear to be satisfied with quarterly e-mail communication.
I personally would recommend weekly e-mail communication of some kind and monthly e-mails at a minimum. It is very important for clients to get e-mail from you. Some clients actually prefer e-mail to other forms of communication. As the world goes digital, it is critical that advisors keep up with these trends. E-mail is an easy way to keep in touch.
Results: The highest number of respondents picked Monthly communication. In contrast to e-mail communication, in which weekly communication was the second highest answer, the question related to the telephone had "quarterly" as the second highest answer with almost 32% of respondents wanting quarterly telephone calls from their advisors. What this means to me is that, on the whole, clients expect more e-mail communication from their advisors and will settle for less frequent phone calls. It is also noteworthy that 17% of respondents appear to be satisfied with quarterly phone calls from their advisors.
I personally believe that the telephone is an underutilized communications tool. I may be from the "old school" (I grew up in the business in the late 1980s and early 1990s), but in this digital age, I think that picking up the phone and making personal calls goes a long way toward building great client relationships.
Results: The most frequently chosen answer to this question was "once or twice a year," which makes sense given that people are busy and they get a lot of communication in other ways from their advisors. The next most popular answer was quarterly at 31%. Only 11% prefer monthly in-person meetings.
I personally see my clients more often than twice a year, but that is the nature of how I deliver investment services to clients. If clients are happy with once or twice a year, then that should be fine. But similar to picking up the telephone, I am a firm believer in in-person meetings. They go a long way toward building the relationship.
Results: Regular mail communication is, as expected, the least regular of the expected communication tools (fewer than 2% want more than monthly mail communication). The highest response was monthly mail communication at 46% of respondents. It may be surprising that some clients (23%) would be satisfied with once or twice a year mail communication, but perhaps these people are switching from regular mail to e-mail as the preferred method of communication.
I have found that many clients are going "paperless," which I think is absolutely fine. Some clients are always going to want to receive paper communications that are delivered by the post office. But I believe that as the digital age marches on, we will see less and less dependence on mail as a form of communication.
Hopefully you have learned something about how PEM-FA view non-financial aspects of their relationship with their advisors. In next month's article, we will review how PEM-FA investors answered behavioral questions related to how confident they are that the plan developed by their financial advisor will help them achieve their financial goals.