How can Financial Advisors better communicate with clients? The team at YCharts recently conducted a survey that yielded some very interesting results. Connor Kitko joins Jay Coulter for this episode of Resilient Advisor to share their findings.
Download a copy of the report by visiting go.ycharts.com/clientcomms.
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Episode Transcript
Intro Vocals 0:01
This is The Resilient Advisor Show with Jay Coulter.
Have you thought about making the move to independence? The Independence incubator from resilient advisor provides a proven roadmap to help advisors understand all of their options. Learn more by visiting independenceincubator.com.
Jay Coulter 0:27
Did you know that portfolio performance is the number one factor in client satisfaction? Did you know that almost 90% of clients consider and advisors communication style and frequency when considering whether to make a referral or not? And did you know that 51% of clients are happy with the frequency of the communication from their advisor? That means 49% are not this data is from a recent report issued from YCharts. Joining me for this interview is Conor Kitco. From Ycharts, Connor is no stranger to the resilient advisors show, we're going to break down this report that they released Connor, welcome back to resilient advisor.
Connor Kitko 1:09
Thank you, Jay, very happy to be back feels like home.
Jay Coulter 1:15
So if you would like to download this report, and follow along with this conversation, please visit go ycharts.com/clientcomms that c o m m s, they'll also be a link in the show notes. There's a lot to break down inside of this report, Connor, why don't we just start at a high level with the three key takeaways that you guys found? And I'd love for you just to kind of walk us through it. So the first takeaway, right clients have switched advisors since 2020. In the search for more, what does that mean?
Connor Kitko 1:53
Yeah, so we had found, like you noted, Jay, that about half of clients were not pleased with the level and the frequency of communication that they received, particularly throughout, you know, this very critical period, in the aftermath, and during the COVID 19 pandemic. And so we found that about 22% of our survey clients, and we spoke to upwards of 670 individuals who all work with a professional financial advisor, and 22% have switched advisors in these last few years since the pandemic began, further, another 25% considered switching. And those numbers actually increase when you slice up the data further, and you look at younger clients who are earlier on in their financial journey. And then also clients with more money being managed by their advisors. So folks who have more than $500,000, with their advisors, management, again, even more than that 22, switch 22% that switched, it was a bigger factor for those individuals, which I think is particularly eye opening.
Jay Coulter 3:06
Very eye opening. I wonder if thinking through the experience a lot of folks had since 2020, where they were at home, they were maybe taking a closer look at their finances. Do you think that played a factor into these results at all?
Connor Kitko 3:21
I think it did. I think that, you know, you saw so many new people coming into the investing world. And then also people just with a renewed focus on their finances. As you know, the market went down and up very dramatically very quickly. We did also ask, though, about a newer trend, robo advisors. And so about 3% of all of those 670 people we surveyed, they did switch to a robo or some kind of automated platform. So we saw those get very popular throughout the pandemic as well. And that's an interesting shift to note too.
Jay Coulter 4:02
So that number doesn't actually scare me, though, because three percent is not a large number. And I have to make a guess that those were younger clients for some of these advisors. Do you think there's any utility in that thought process?
Connor Kitko 4:16
I think so. And just to talk numbers as well. Definitely agree. So if you look at all respondents 3% switch to a robo advisor. And for younger respondents, it was just 3.7%. So agreed. It's not significant. But there was a percentage of folks who considered switching to a robo, those being 8% of all respondents and then that number climbs to 10% for the younger group. So thinking about it, maybe they looked into it with all that extra time like you said, but I'm sure that there is still a little cause for concern as well. Okay, this person thought about leaving me for him, another individual or automated service?
Jay Coulter 5:03
Yeah, there's so much data in here to unpack, we could spend a couple of hours doing it, because please remember, go download a copy of this report at go.ycharts.com./clientcomms. I'd like to discuss, and I'm gonna get excited about this, the reasons why they were considering making a move with the number one reason being something I have been pounding the table about in the advisor, community portfolio performance, what a shock performance still matters. what's your takeaway, Connor?
Connor Kitko 5:35
Yeah, this is an interesting one. And, you know, I've been at YCharts working in this industry for five years. So I totally missed this move into more holistic planning, and very, very much. So lots of benefits to be had there. But it still always comes back to the portfolio in our eyes. And we saw that with the survey results, we ran a similar one back in 2019. And we asked folks, what are the top three factors for you when selecting or deciding to retain or an advisor, back in 2019, portfolio performance was third on the list with about 40% of folks saying that that was one of their top three factors. Now, when we ran this survey in December of 2022 75% of people said that portfolio performance was one of their top three factors. And so that was the most popular and even more. So. portfolio performance was more important than accessibility or availability, and then also having a deep understanding of me and my goals. So those two factors are certainly important for every advisor-client relationship, but portfolio Performance back in the limelight, as again, that whipsaw that we've that we've experienced the last couple of years has a lot of folks concerns. And, you know, we did see an increase in this regard as well for that older demographic of folks older over the age of 60. So thinking about these big market swings, how that might impact someone's decision to retire or to continue working. Definitely a lot of change for people in that position.
Jay Coulter 7:16
Yeah, I love my friends in the behavioral finance field, they're doing great, great work. But the idea that performance is not important, has really crept into the marketplace. And that's easy to do in 2019, when everybody is at the end of a bull market, what I find is that advisors who've been around a little bit like I have, and you've been through the bursting of the internet bubble in the great financial crisis, you know, at the on the other side of that type of carnage clients do care about the performance of their portfolio. And it's not the only thing, the behavioral finance side of this business is still important. Based on this research, the couple other things that you did already mentioned, were accessibility to the advisor, and the advisor having a deeper understanding of their goals, which does play into that behavioral side of the business, any data in there that you think advisors should be aware of?
Connor Kitko 8:10
Um, you know, I would still say that just so like I said, 75% of respondents ranked portfolio performance and their top three, but those other two factors accessibility and understanding my goals, were right behind it at about 70% Each, further down the list, breadth of services. So, you know, about 20 to 24% of folks said that their breadth of service from the advisor was a big factor for them. Also, financial education was lower on the list. And I think one thing to to note, as well across both 2019, and this most recent survey in 2022, fees charged was kind of in the middle in both surveys. So it's not the most important, it's not the least important. But you know, certainly a lot of folks tend to fixate on fees, maybe start thinking of these other factors, putting them top of mind first.
Jay Coulter 9:10
Or you also have some interesting data points around communication style preferences. So before we start talking about this advisors think about how you communicate with your clients, what platforms and tools are you using, which do you think are the most effective? And now Connor, let's walk through what your survey found. What are the most preferred communication styles and what did you learn from the research?
Connor Kitko 9:36
Absolutely. So I'd say the first thing I'd like to call out, which is, perhaps an obvious one is just a switch to virtual meetings. So we asked folks before the pandemic, how often were you meeting? Were you meeting only in person, a hybrid of both virtual and in person or only virtually? Now the number of folks who meet only in person is down to 20. A percent. And before the pandemic that was 49%. So a lot more people are going through this hybrid approach. And about 20% of survey clients now meet with their advisor, only virtually. So that's the first interesting point. And then the second on these asynchronous communication formats, you know, when we're not in the mood in the room together, how do I prefer to engage with my advisor? 73% of respondents chose email, which was far and away, the most preferred option. So kind of just back to basics, you know, I feel like email would be most people's first choice in terms of connecting with a client 45% said phone call 35% said text message, which I thought that was actually surprising to the high side where, you know, hey, maybe about a third of your book of business would prefer or would be open to receiving a text update, via, you know, actually picking up the phone and calling them. And then,
Jay Coulter 11:05
Hey, Connor, before you continue moving down that list, what's interesting about text, I have found that in my own coaching, business text is preferred in the team over at snappy cracking, I mean, they they figured this out a little while ago, then the data there is very clear, your clients want to communicate with you via text message,
Connor Kitko 11:23
great love, snappy cracking, and I have no doubt that they've definitely dug into this topic as well. And yeah, I mean, hey, we're all moving to Texas, you know, every one, as I call my parents, or get in touch with them, it's definitely more tax than call, I have to admit. But uh, yeah, it's really interesting to see we did not see, however, a great response for things like Twitter, or LinkedIn, or even Facebook and Instagram. So still a lot of folks preferring the text messages, the phone call and the email.
Jay Coulter 12:02
Yeah, that was very eye opening. To me, as somebody who has wasted a lot of time on those social media platforms, building a brand, I noticed the YouTube videos themselves, as far as a preference only came in at 3.6%, the number of advisors that have been reaching out to me to discuss their YouTube strategy and just get my thoughts has really started been on the uptake. I wonder if that doesn't change. Next time you guys produce this report, you have any thoughts?
Connor Kitko 12:30
I do have thoughts I think that video is really impactful, especially if I'm just scrolling through a LinkedIn feed, and I see, oh, I want to listen to this person's thoughts. And that 60 seconds of my day, that's so convenient. But I would say that, I agree, I would see more advisors looking for more ways to communicate because one group of their clients may prefer one thing and another prefer something else entirely. So I think about, you know, sending an email with in it, a video recording, also kind of a transcript or a text synopsis of the topic you're discussing. And then maybe even some other resources, like a podcast that you joined, or other things, but email is still kind of that channel through which everything is being passed. That's right.
Jay Coulter 13:18
So number two phone calls. 45% prefer that. I cannot tell you how many advisors especially when I first start working with them, they don't pick up the phone and call their clients. But what they're gonna find once they start doing it is these folks deepen their relationships, when they started having more regular phone, communications, and most importantly, the referrals. And as the data from the Schwab research tells us every year, you know, 70% of your new clients will come from a result of a referral or introduction over the next 12 months. You got to pick up the phone and talk to him. Alright, so along the lines of referrals, you guys have some interesting data in here around the around communication preferences and referrals that advisors receive. What did you guys find Connor?
Connor Kitko 14:07
Yeah, so really, we asked folks, would you consider your advisors frequency and style of communication when making a referral to a family member or friend, which, you know, I think that this would be part of the puzzle for a lot of referrals. But maybe as we just mentioned, performance, breadth of services. There's a lot of other things that might go into this decision. But the data is really strong here, with 89.7% of respondents saying yes, I consider the frequency and style of communication when making a referral. And even slightly higher than that for that higher AUM client, the high net worth individual, they are thinking about your communication style, the touchpoints, the interactions, and how those are perceived by the client because this is based on The client's perception regardless of what an advisor might be doing or not be doing. So definitely important. Your communication style and the impression you give people is going to impact your business.
Jay Coulter 15:14
Yeah. And you have to be thoughtful about it. Like there has to be a plan. If you're just winging it, you're going home at night, wondering if you're taking care of your clients, if you're communicating with them enough. If you have a robust plan in place, it can really impact your business. One thing that you guys did some research on that I loved was frequency and the impact of frequency on your business. What did you guys find?
Connor Kitko 15:36
Yeah, we also looked at things like retention. And so similar numbers. 88% of clients would consider frequency of communication when deciding to retain their advisor services. And we also saw some interesting things with regards to effects on the clients, you know, their understanding and their confidence in their financial plan. So we asked folks, how much of a typical conversation with your advisor just clicks with you, you just automatically understand the concept or the information. And our respondents said about 70% of the conversation. So I think that's good, definitely would like to see it higher. But then we looked at individuals who said they are contacted infrequently versus contacted frequently. And the infrequently contacted group said they only understand about 64% versus 73%, for someone who does have regular contact with their advisor. So these smaller touch points, maybe in between your annual meeting, or a check in meeting throughout the year. They do build that understanding. And it is, you know, it's that understanding grows with more touch points, which I think is really compelling,
Jay Coulter 16:56
very compelling. And again, it gets back to the necessity of being very thoughtful about your communication style. And your frequency. There's a data point in here that this was the biggest shock to me. 51% of surveyed respondents wish their advisor communicated with them more. What do you take away from that? How is that even possible in this day and age?
Connor Kitko 17:20
Yeah, how is it possible is a really good question. I think, you know, we talk about with our clients, kind of a two by two matrix of communication styles with on the x axis thinking, is it one to one communication or one to many communication? And then on the other axis? Is this an ad hoc communication kind of more reactive? Or is this a scheduled or a proactive communication? And so kind of thinking about it in those different buckets? Am I reaching out to one client because of a specific situation that arose? Or am I sending out information to all of my clients every month on the first Tuesday of the month? And kind of compartmentalizing things like that? We've heard some great reception to just the idea of layering that strategy in and then also making it a little bit easier to Yeah, reach out to those clients who wish that they were hearing more.
Jay Coulter 18:22
All right, so before we wrap up, there is some data in there about where clients are getting their information about their investments in the markets. What's your takeaway from that part of the report?
Connor Kitko 18:34
So we asked folks who's your primary source, or what's your primary source of information for market data and performance of your own investments. Now, about 38% of folks said, my advisor, and 35%, said, my portal, whatever I use to log in and check my investments, a smaller number of people 9% and 12%, respectively, said social media and traditional media, then looking into the group who is less frequently contacted by their advisor, they go to their advisor less, and they go to outside media sources more when they have questions about the market and about their investments. So if you, you know, I think it's reasonable to say you want to control some narratives, and you want to have your clients coming to you with those questions. And what you are signaling is going to affect the decisions that they make in those situations.
Jay Coulter 19:35
Yeah, I can tell you from my own personal world. And I'm just going to assume my friends don't listen to the show, who aren't financial advisors that people have reached out to me with investing questions that have generated as a result of something they saw on tick tock is alarming. It's beyond alarming. So you do need to make sure that you're controlling the narrative. I love the language around that. Connor before we wrap up it any concluding thoughts on this research that you guys have produced?
Connor Kitko 20:04
Yeah, I just say, you know, it's we're still in the midst of this critical stretch, lots of clients are thinking critically about their finances, and who is the best person to steward them through that journey, an increased focus on performance as part of that, too. And also, you know, looking down the line, perhaps this is a critical time period that clients will remember, and not to instill too much fear. But you know, you may be on a shorter leash, and you may be thinking, Okay, I need to do extra now to kind of reconfirm to my clients that, you know, I'm here for them. And especially through these difficult times in the market.
Jay Coulter 20:47
My biggest takeaway from all this is, number one, make sure you have that robust communication plan in place, you're executing on it, and make sure you're controlling the narrative. Connor I appreciate you coming on everybody, please download a copy of this report, go.ycharts.com/clientcomms. And if you are not currently using YCharts or you've never looked at the platform, go take advantage of one of their seven day trials. If I can help you when you go through that trial period. Reach out it is a really impactful tool that can help you in your client communications and managing your business. Connor thanks so much for coming on.
Connor Kitko 21:24
Thank you very much, Jay. awesome to be here, as always.
