EFFECTIVE CLIENT REVIEW - AllianceBernstein

[Pages:16]EXECUTION GUIDE

THE EFFECTIVE CLIENT REVIEW

An effective Client Review is a formal conversation that requires thorough preparation and a well-crafted plan. It has the potential to differentiate a Financial Advisor (FA) from the competition and spark referrals. But it needs to be managed properly.

This guide offers a step-by-step model for conducting a uniquely effective Client Review. It also offers basic guidance around the role a review plays in an efficiently managed advisory practice and how that review can be positioned to assist in strengthening and expanding relationships with existing clients.

AB ADVISOR INSTITUTE?

Ken Haman

Managing Director

For financial representative use only. Not for inspection by, distribution or quotation to, the general public.

AN EFFECTIVE CLIENT REVIEW IS AN IMPORTANT TOOL FOR STRENGTHENING AND EXPANDING CLIENT RELATIONSHIPS.

THREE QUESTIONS

The best way to build a successful business is by developing ongoing loyalty and deep bonds with your clients. The Client Review provides a powerful tool for creating this type of client experience.

QUESTION 1: WHAT WILL DRIVE THE SUCCESS OF YOUR ADVISORY PRACTICE? Do you want to be perceived by clients as slightly better than many very similar FAs? Or do you want to be perceived as uniquely different? The key to being perceived as different is to establish a unique, high-quality relationship with each client in your practice based on those clients understanding how you're working to achieve their financial objectives. The Client Review provides the foundation you need to establish a deep relationship with each client.

QUESTION 2: WHAT IS YOUR VALUE PROPOSITION? Becoming uniquely valuable in the eyes of your clients requires you to understand your mission and to be able to articulate that mission, not just in marketing materials but in every interaction you have with each person you're serving. Is your mission to simply outperform a benchmark, elevating yourself slightly above the masses of advisors who do similar work? Or is your mission to achieve your clients' unique desired outcomes? If your practice is designed to service your clients' outcomes, maintaining full awareness of those outcomes as they

change over time is critically important. The Client Review allows you to maintain this constant awareness and adapt your service as each client evolves through the stages of life.

QUESTION 3: WHAT IS THE PURPOSE OF A CLIENT REVIEW? The purpose of the Client Review is to establish a unique, highquality relationship. During the review, you should do more than simply defend recent performance. While performance should be discussed, the review is an opportunity to build a stronger, more meaningful relationship with each client. Consider the Client Review as part of a larger communication plan that includes regular contacts and conversations. The review should explore personal subjects and center around how well the client is approaching his desired outcomes, how likely it is that those outcomes will be achieved, and what additional services or engagements with the FA would be most beneficial to the client. This allows the review to become an opportunity to engage the unique individuality of each client instead of making a comparison to other advisors or simply discussing performance.

For financial representative use only. Not for inspection by, distribution or quotation to, the general public.

THE EFFECTIVE CLIENT REVIEW 1

THE ROLE OF THE REVIEW

By assisting clients in making sound decisions at all stages of life, the FA helps clients achieve their desired outcomes.

THE DISCOVERY PROCESS AND UNDERSTANDING DESIRED OUTCOMES In order for the FA to assist clients in achieving their desired outcomes in life, a thorough discovery process is necessary. This process allows the advisor to define what the client is trying to achieve, which then becomes the foundation for the entire relationship. During the discovery, the FA not only defines the desired outcomes but also explains some of the methods by which those outcomes will be achieved. If the client doesn't believe that you thoroughly understand her goals, you are by definition just an investment manager and are now forced to prove that you are better at that task than everyone else in your market.

Client Reviews are an extension of the discovery process. They provide an opportunity to report on the achievement of substeps toward the goals, and possibly even to adapt those goals over time, as the client evolves or as her needs change.

THE ROLE OF THE ADVISOR: ASSISTING IN DECISIONS ABOUT THE FUTURE Moving away from focusing on the past and comparing performance to benchmarks is challenging for many FAs. In the traditional relationship between a stockbroker and his client, the role of the broker was to provide access to investments available in the marketplace. If those investments performed well, the stockbroker was seen as successful. If they performed poorly, the broker failed. This is how the benchmark provides a useful report card to assess success or failure.

In the case of the outcome-oriented FA, the role is much broader. Now the professional has transformed from a broker of investments to a trusted advisor. The scope of activity and the breadth of concerns are now far greater: the FA is guiding each client on a pathway of

decisions stretching into the future. The sum total of the advisor's professional point of view that informs those decisions defines the advisor's Standard of Care (more on this concept later).

In this model, it's assumed that every client is engaged in a planning process that begins with a thorough discovery. This inquiry consists not only of the client's financial situation but also of his unique personal style, values, goals and aspirations. It's assumed that the FA will look at various scenarios for helping the client achieve those goals and use advanced statistical modeling to determine which scenario represents the best possible set of choices for the client.

This set of choices is then tested to determine the probability of a positive outcome for the client. In this way, the foundation of the conversation between client and advisor is based on the likelihood of the client achieving what he is trying to accomplish. The entire relationship centers around the FA's work in understanding the uniqueness of each client's needs and desires and helping that client achieve his desired outcomes. The advisory role is primarily about what is happening today and what is likely to happen in the future, with much less emphasis placed on what happened in the recent past.

KEY INSIGHT: CLIENTS EVOLVE OVER TIME There is perhaps no insight more important than understanding the evolutionary nature of a client's life. FAs engage a client in discovery at one point in life. It can be very easy to forget that the client is evolving virtually every moment after that first meeting. The big thing in each client's life changes throughout life. At one point it may be preparing for marriage, but then evolve into raising and educating children or launching them into the world. Later there may be issues surrounding retirement, dependency and eldercare.

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For financial representative use only. Not for inspection by, distribution or quotation to, the general public.

And the future is frightening. Because we have experienced the past and sorted out information from those experiences, the past has a quality of fixed and familiar. Humans can have lots of feelings about the past--anger, regret, sadness, joy and so on--but we cannot feel anxious about the past. Anxiety is reserved for the future. This is the important insight on which the scripting is based: most humans are anxious about the future because we have not yet experienced the consequences of the decisions we are making today. Many of us wonder what will happen and feel anxious about the possibilities of problems in the future. For clients with substantial wealth who have transferred their emotional dependency from their own competencies to the productivity of their money, this can make them feel very anxious about what the future will bring.

This focus on the future provides another key insight into the role of the Client Review. Like all human beings, investors experience time by moving through chapters of their lives. In this way, we all experience the current moment (the period of time we call "now") as a transition from a familiar previous chapter to an unfamiliar next stage of life. It's helpful to understand that everyone is looking forward to the next big thing in his life, sometimes with excitement and sometimes with dread.

In the presence of this inevitable anxiety, the FA can create some clarity and confidence about how the future will look for each client. The trusted advisor's role is to help each client navigate the stages of her life, keeping in mind her financial goals. The advisor fulfills this mission by first discovering what the client wants in the future and then by building a plan that has a high probability of achieving those desired outcomes. How the plan seems to be working from moment to moment is much less important than how the advisor supports the client through long periods of time in the same way that using a map to find the best route across the country is more impactful on a successful trip than whether or not you get delayed at a stoplight for a few minutes.

HOW WILL YOU EXPAND YOUR BUSINESS? This idea of moving from stage to stage through life helps the FA think more strategically about the individual needs of each particular client, which also informs what an effective Client Review should encompass. For each client, the review looks different, as each relationship consists of a completely unique engagement. Importantly, the foundation for each review should be the advisor's thoughtful professional point of view that informs the recommendations that are made to each client. The aggregation of the full range of these points of view becomes the Standard of Care that informs the way the practice delivers value to each client.

Some clients in earlier stages of life will be focused entirely on accumulating more money without much clarity about what that money will be used for. But as clients age into their 50s and 60s, they typically become more focused on the actual outcomes they want to experience in their future. The closer each client gets to his destination, the clearer the resources and opportunities will tend to be. In this way, as clients get closer to retirement and to actually starting to live on their accumulated wealth, the ability to see specifically how much they will have and what that will be able to do becomes paramount.

The FA should work to be seen as journeying with the client through each of these major steps in life. Each stage represents a new opportunity to strengthen the relationship and potentially expand the advisory role. If the review is properly managed, the FA introduces new opportunities to service each client's needs-- expanding the relationship to include additional services and products that the client will value. In this way, the Standard of Care anticipates the evolutionary steps the client will take, and the effective Client Review process evolves with the relationship at each stage.

For financial representative use only. Not for inspection by, distribution or quotation to, the general public.

THE EFFECTIVE CLIENT REVIEW 3

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