The Administrator's role in Creating a Great Client Experience
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Behavioural Finance teaches us that 95% of decisions are made subconsciously. Investment Advisors who understand the biases that shape decision-making have an opportunity to leverage their support staff to make this work to their advantage.
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The Administrator's role in Creating a Great Client Experience
- 1. The Administrator’s Role in Improving the Client Experience Amelia Young, CFA December 2012
- 2. Agenda • How people make decisions • What you can do about it 2
- 3. 95% of decisions are made subconsciously Understanding the mental shortcuts our brains employ to make complex decisions can help you develop a better client experience
- 4. Myopia (people are short-sighted) Which would you choose…? $100 $50 Today Year 1 Examples from your day-to-day: • 60-year olds who lost 10% of their portfolio vs. 40-year olds who lost 20% • Surge in business activity during RSP season. • People panicking to create wills right before taking a trip without their kids
- 5. Status Quo Bias (people are creatures of habit) • Neglecting automated monthly • Avoiding decisions (eg. picking an contributions to RSPs advisor, naming beneficiaries)
- 6. Anchoring (people see what they expect to see) What is the relationship between a roulette wheel and the number of countries in Africa…? …nothing – unless they happen to appear right next to each other.
- 7. Affect Heuristic (people use their gut) = Low Risk/ High Reward = High Risk/ Low Reward Regardless of investment performance, clients will be more satisfied with your practice if the interactions they have with you evoke feelings of happiness
- 8. Review Subconscious Driver Definition Affect Heuristic Being drawn to people/situations (People go with their gut) that evoke an emotional response Myopia Having a distorted view of trade- (People are short-sighted) offs between current vs future events Status Quo Bias Being entrenched in (People are creatures of familiar/habitual behaviours habit) Anchoring Framing things based on (People see what they expect subconscious benchmarks that are to see) not relevant
- 9. It’s not just clients who suffer from these biases! • 78% of Advisors said it’s very important to “communicate concepts in a way that is easy for the client to understand” • 95% of Advisors said they “Always or Frequently” use vocabulary that is “appropriate to the client’s level of investment knowledge”
- 10. What can you do about it? Growing AUM Keep existing Grow those Secure new assets assets clients Competitive Investment Lead Investment Returns Generation performance Administrator Increased Influence Good service Closing contributions Use insights about subconscious drivers to design a more effective client experience.
- 11. Service • Manage anchor points • Be proactive • Set expectations • Communicate standards - repeat • Help the Advisor track compliance with the standards • Help clients minimize stress and keep perspective with lots of communication • Keep notes • Develop a plan • Follow-up up on client “to dos” • Make it easy
- 12. Increased Contributions • Be the “Weight Watchers” for their financial discipline • Monitor who has PACs and develop action plans to initiate them • Remind the Advisor when clients without PACs are in the office (or if amounts haven’t been updated) • Always have forms available for signing (pre-filled) • Follow up on contact info changes • Get new money in before it’s spent • Positive reinforcement – make it fun! • Prizes/contests for completing PACs • Rewards for savings milestones
- 13. Closing Business • People care about how much you care about them! • Offer great hospitality (eg. choice of meeting place, refreshments, prepare the room) • Seek out personal details and prompt the Advisor • Where are you coming from/going to? Are you in a hurry today? • Family developments (eg. kids’ achievements) • Volunteer pursuits • Personalize materials (eg. presentation cover with client’s name on it even if contents is generic) • Fight inertia by diligently following up on leads • 60% of consumers have looked for an Advisor in the past 5 years • Only 30% of sales are closed in the first meeting. 24% take 3 or more! • 65% of people evaluate more than one advisor when making a selection
- 14. Parting Thoughts • People’s behaviour is generally quite rational • Accept it • Influence what you can • Every practice is different – embrace the difference and tailor these tactics to: • Advisor’s style • Client priorities • The team and your role in it • Manage your own biases by: • Testing • Documenting • Revising • Repeating
Editor's Notes
- Our lives are composed of millions of choices, ranging from trivial to life-changing and momentous. Luckily, our brains have evolved a number of mental shortcuts, biases, and tricks that allow us to quickly negotiate this endless array of decisions. We don’t want to rationally deliberate every choice we make, and thanks to these cognitive rules of thumb, we don’t need to. Yet these hard-wired shortcuts, mental wonders though they may be, can also be perilous. They can distort our thinking in ways that are often invisible to us, leading us to make poor decisionsSo, at the best of times we’re hard-wired to take mental shortcuts. Guess what happens when we are forced to make decisions about things that have a strong emotional impact? We become even worse at objective decision-making.[click to graphic]There aren’t a lot of things people get more emotional about than their money.[click]What I want to talk to you about today are a few of the specific mental shortcuts our brains take. Then, I’m going to give you some suggestions about how to use these shortcuts to your advantage to enhance the experience you’re providing to your clients.
- Show of hands…You have a choice of $50 one year from now vs. $100 2 years from now? Who would choose to get $50 one year from now? $100 2 years from now?[Click to 2nd chart]Consider this chart…$50 today vs. $100 one year from now (be honest!)This also explains other situations you might come across on a day-to-day basis… [click for other examples]60-year olds who lost 10% of their portfolio in the recent market correction were generally much more upset than 40-year olds who lost 20% (ie. Long run patient; short-run impatient)a surge in business during RSP season. we enjoy the sense of checking urgent things off a list. Following through on more complex, longer-term decisions tends to drop down the list quickly when you’re confronted by life’s urgent demands. The more urgent the task the greater the sense of satisfaction. By comparison, sitting down and working through the details of your personal and financial lives doesn’t offer the same sense of excitement and immediate gratification.People panicking to create wills right before taking a trip without their kids. Since these things take time, it’s often impossible to finish before they leave town. Then, my friend doesn’t hear back from them again until a few days before the next trip.
- I won’t ask for a show of hands for this one, but who’s ever been on a diet? Or tried to quit smoking? There’s a famous Harvard Business Review article called “Strategy and the Fat Smoker.” The author’s point is that smart people know perfectly well they should eat healthy food and they shouldn’t smoke. If people behaved the way they know they should, no one would smoke and everyone would be thin. Clearly that’s not the case – and so you see another subconscious behaviour at work – “Status quo bias”, which essentially means that people are creatures of habit. Status Quo bias makes it difficult for us to do two things in particular:First, to exercise self restraint [click]. This is particularly true when short-term deprivation is required for long-term benefit (aka the Myopia we talked about a minute ago).Second, it makes us actively avoid unpleasant situations. [click] like when we feel overwhelmed with too many choices, or significant consequencesHow does this apply to your advisor’s practice?[click] Clients who lack self control don’t typically do a good job of saving money, and if they’re not saving, your assets aren’t growing[click] Similarly, a client’s inability to make a decision creates lots of work for you - chasing them with phone calls, paperwork, missing information etc.
- What is the relationship between a roulette wheel and Africa? Generally speaking, there isn’t.Suppose I spin a roulette wheel as you watch, and it comes up pointing to 65. Then I ask: Do you think the percentage of African countries in the UN is above or below this number? What do you think is the percentage of African countries in the UN? Psychologists have done experiments recording the estimates of subjects who saw the Wheel showing various numbers. The median estimate of subjects who saw the wheel show 65 was 45%; the median estimate of subjects who saw 10 was 25%.The current theory for this and similar experiments is that subjects take the initial, uninformative number as their starting point or anchor; and then they adjust upward or downward from their starting estimate until they reached an answer that "sounded plausible"; and then they stopped adjusting. This typically results in under-adjustment from the anchor—more distant numbers could also be "plausible", but one stops at the first satisfying-sounding answer.Strack and Mussweiler (1997) asked for the year Einstein first visited the United States. Completely implausible anchors, such as 1215 or 1992, produced anchoring effects just as large as more plausible anchors such as 1905 or 1939.At a more personal level, anchoring is why you were happy staying in hostels when you back-packed through Europe at 19, but now at the age of 40 – not so much. OR, once you’ve been to a gourmet burger joint, McDonald’s just isn’t as satisfying anymore.This is important to your practice because it illustrates the point that you never know what experiences could be shaping peoples’ expectations. As a service provider, your primary goal isn’t achieving a specific service level. Rather, your goal must always be to meet – or exceed – the client’s expectations. If their last advisor mailed their statements 10 days after month-end, you’ll look like a hero if you’re able to get them out in 5. However, if they’re used to having a coil-bound booklet couriered to them within 48 hours, they will think your service is poor.
- Have you ever wondered by advertisements for investment products and services always have photos like this? What does a couple siting on a beach have to do with investment advice?If 95% of decisions are made subconsciously, and people have a tendency to avoid decisions when they’re stressed, marketers look for imagery that provokes positive emotions.Consider this situation…You're about to move to a new city, and you have to ship an antique grandfather clock. In the first case, the grandfather clock was a gift from your grandparents on your 5th birthday. In the second case, the clock was a gift from a remote relative and you have no special feelings for it. How much would you pay for an insurance policy that paid out $100 if the clock were lost in shipping? In an experiment, subjects stated willingness to pay more than twice as much to insure the clock that had sentimental value. This may sound rational—why not pay more to protect the more valuable object?—until you realize that the insurance doesn't protect the clock, it just pays if the clock is lost, and pays exactly the same amount for either clock. (And yes, it was stated that the insurance was with an outside company, so it gives no special motive to the movers.)Put another way, if a person’s feelings towards an activity are positive, [click] they are more likely to judge the risks as low and the benefits high. In contrast, [click] if their feelings towards an activity are negative, they are more likely perceive the risks as high and benefits low.Bottom line… [click] Regardless of what their investment performance is, people will be more satisfied with your practice if the interactions they have with you inspire feelings of happiness, warmth, comfort, safety etc.Source: http://lesswrong.com/lw/lg/the_affect_heuristic/
- My firm recently conducted some research profiling advisor selling practices. We asked advisors to rate the importance of communicating concepts in a way that clients can understand. [click] 78% said it’s very important to communicate concepts in a way that’s easy to understand”. 95% of them say they “always or frequently” do this.Generally speaking, however, reality is more like this. [click] Being spoken to in jargon and technical language is the thing consumers complain most about their advisors not doing well. It’s been proven in countless industry studies and we found it the mystery shopping my team did – and remember, I had financial services professionals doing that mystery shopping.Bottom line – just like clients whose decisions and behaviours are subconsciously impacted by their past experiences, so are people who work in the industry. We might think we’re using accessible language, but it’s really difficult to have an objective perspective on that.
- So now that I’ve given you some insight into what you’re up against in creating a positive client experience, what can you do about it?Let’s go back to first principles about being in the investment business these days [click]I’d like to spend the rest of my time today focusing on the bottom three boxes [click]. I think there’s a lot Administrators can do to impact these pieces, and you can use an understanding of people’s subconscious decision drivers to design a more effective customer experience.
- Be ProactiveProactively seek to understand what service elements are anchor points (eg. small talk)Set expectations by establishing service standards (eg. call frequency, reminder, paperwork, waiting time)Communicate standards - repeatKeep notesDocument the types of things people call about and when (eg. RSP contributions, tax receipts, market declines)Develop a plan to address them proactively to avoid last minute panic (eg. early reminders, newsletters)Follow-up up on client “to dos” (eg. wills, insurance forms) until they’re completeMake it easy – pre-fill documents, take them to their home/office for signing, coordinate appointments with specialists
- Get the affect heuristic working for you by making prospects feel special.Prompt re: personal details (eg. kid who’s an Olympic swimmer)
- Many of you will be familiar with the serenity prayer. It goes something like “give me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.” I hope I’ve given you some new insight into how people are hard-wired to behave a certain way. The benefit of this knowledge is that it can help you assess more accurately what you can change and focus your efforts where and how they will be most effective. In short, work with the ways our subconscious drives our decision-making rather than against it.