Financial advisors who start their own firms, like so many other entrepreneurs, are driven by a vision of how clients should be served, and then build a business to deliver those services. If the vision is a good reflection of what people really do want, and is well-executed, the business is rewarded with success and growth.
The caveat, however, is that even successful entrepreneurs aren’t always right in predicting what their clients want and need. Sometimes business owners misjudge what clients really value most in the business, or even lose perspective in how the business is perceived by the clients altogether. In some cases, it’s simply a matter of an idea that seemed great in the business owner’s head but isn’t so appealing to the clients who would actually need to pay for it.
So how can financial advisors avoid these potentially costly missteps? By forming a client advisory board – a group of key clients and influencers who can provide feedback to the firm owner and management, before new initiatives are rolled out or changes are made, to get constructive criticism from the end client about whether it’s really a good idea or not.
And in today’s guest post, client advisory board facilitator Steve Wershing provides some best practices, based on his own years of experience, about how financial advisors should go about creating and implementing an effective client advisory board – from how to identify the right people and ask the right questions, to finding the right way to run the meeting, the right frame of mind to approach it, and the right follow-through to execute it.
So whether you’re an advisory firm that’s already running a client advisory board but wants ideas on how to run it better, or a firm that’s thinking about putting together a client advisory board for the first time, I hope that today’s guest post from Steve Wershing helps you to take the next step forward!
Golub Group (rebranded to Summitry in 2020) is a large, successful advisory firm that provides wealth management services to its affluent clients. Principals Colin Higgins, Kurt Hoefer, and Joe Martin were not satisfied by the firm’s growth rate. Specifically, they believed they should be attracting more referrals. Indeed, the rate of new referrals was below industry averages. And so they embarked on a project to discover what was missing.
In asking clients what they found most valuable about the services Summitry provides, they made a startling discovery. While they pride themselves on the thoroughness and care they devote to financial planning and comprehensive advice, all of the comments they received from clients were limited to their investment management services. Clients made almost no mention of the guidance the firm provided beyond portfolio management. In fact, clients who commented on planning services spoke of them not as a core offering but as a favor the advisor did beyond the firm’s primary service. It triggered a strategic effort to reposition the firm in the minds of clients and centers of influence.
The mechanism by which they made this discovery? Their newly organized client advisory board.
The idea of a client advisory board for financial advisors has been discussed, even debated, for several years. Some have gleaned valuable strategic ideas from their boards, going so far as to refer to their advisory board as their "secret weapon". Yet at the same time, others deride the idea.
I have facilitated over 100 client advisory board meetings, and that experience has taught me two things: the most common fears advisors have about the idea never materialize; and all of the commonly perceived negative outcomes of client advisory boards are not inherent risks of having a board itself, but are rather the product of boards done badly.
Client Advisory Board Best Practices
In this post, I will share with you some of the key concepts I’ve gleaned from years of facilitating client advisory boards, that will help to make sure your client advisory board is a success.
There are five key concepts to mastering your advisory board experience:
- The right people
- The right questions
- The right facilitator
- The right frame of mind
- The right follow-through
The Right People
It is true of advisory boards as it is of dinner parties: the quality of the conversation depends on who is sitting at the table. Carefully comprising your board has a huge influence on its success and value.
The best general advice for who to select is to pick 9-12 clients you most want to clone. The kinds of long-term clients you want more of. (Michael’s Note: This is why it’s called a client advisory board, and not a customer advisory board!)
After going through your full client list, you may find that you want more than the dozen that make for an ideal sized group. Pick the top 12, and keep the rest of the list for later. If your board is a success, it will be a good idea to start rotating membership. After 2 years or so, you will begin “graduating” board members and bringing in new blood (the clients who didn’t get an advisory board invitation letter the first time).
Some advisors think the advisory board should represent the full spectrum of clients in their practice – this is a mistake. A clear and effective market niche is fundamental to a successful marketing plan. One of the greatest benefits of an advisory board is that it can help you to better understand your particular value and what differentiates you from other advisors. To help achieve clarity in tailoring your service mix and marketing strategy, your client advisory board should be composed of the target clients you’re trying to reach in your niche – those who represent your ideal client.
Most of the candidates for your board will be among your best clients. "Best" does not necessarily mean all of your biggest clients, though most who you invite to serve on your advisory board will likely be among your biggest. Every advisor has one or a few very large clients that just don’t fit well with the rest of the practice. Maybe they demand something other clients don’t. Maybe they don’t utilize many of your services. Maybe they complain about cost (assuming your other clients don’t). Maybe they are just hard to work with. And while they may remain your client if you’ve decided they’re “worthwhile” given what they pay, they shouldn’t get an invitation to serve on your advisory board.
For instance, I worked with one firm whose core investment strategy involves portfolios of mutual funds. One of the firm's biggest clients, an income-oriented retiree, demanded a portfolio composed primarily of individual bonds, partly because that’s what he had at the wirehouse he worked with before moving to his current advisor. He also had no interest in the financial planning services that were central to the advisor’s value proposition. While the firm appreciated this client, and they had a mutually beneficial relationship, his experience with the firm was fundamentally different than most of the other clients. He demanded some things that would be of no value to the firm’s target clients. He had no appreciation for much of the firm’s core offerings. He would make a poor choice for the firm's advisory board.
You want to find candidates who utilize the full range of your services – at least all the services you consider core to your offering. Clients you feel you have done significant work for. Who may have referred you to other clients in the past. Ideally ones who are influencers in your target market.
The Right Questions
Even more important than having the right people, asking the right questions is critical to the quality of your outcome. Early in the life of your advisory board, it’s best to focus your questions on the client experience you deliver. What is most valuable about what you do for them? What was it like to become a client? What are the best parts of your review meeting? What should you stop doing?
Over time you can begin to dig into more specifics, to engage them in providing guidance on solving your business problems, to get help with attracting new clients. But early on, the focus needs to be on understanding the client experience as it currently exists – from their perspective – and what you can do to improve it.
There are a couple guidelines to making this work. First, use open-ended questions. These prompt discussion, and will typically begin with Rudyard Kipling’s “Six honest serving men” – “Their names are What and Why and When And How and Where and Who.” Closed-end questions, answerable with a one-word binary response, cannot take you anywhere. “Are you satisfied with the service we are providing you?” is about the most useless query I can imagine putting in front of an advisory board. It takes you nowhere. The responses will give you no detail. And of course, they are satisfied, at least mildly, or they wouldn’t have accepted the invitation and be sitting there in your client advisory board meeting. Asking something like “what have we done for you that created the most significant change in your life?” will get much more interesting insights.
Next, recognize up front that there are some questions that will require several clarifying questions to really drill into. If we ask a board what they appreciate most about an advisor, one of the first answers we will get is “trust.” But that doesn’t really tell you anything. You need to ask the question so that you can follow it up, and try to learn something interesting and new. All clients trust their advisors, whether they should or not. But what creates the trust? What experiences did the client have that led to that feeling? What stories can we uncover? I have heard answers that included spending time with a client who is going through a difficult time in their life, a lack of conflicts of interest because the advisor does not sell product, community activities that are expressions of the advisor’s faith, and how the advisor works with the clients’ other professionals. Many were unique to the advisor, and all were valuable in understanding what the clients perceived as significant.
Digging into questions will affect how many topics you can realistically put on a single client advisory board meeting agenda and actually be able to process through. Exploring deep questions like what clients value most, or an in-depth review of your website, may limit your advisory board agenda to two or three items, even with a two and a half hour meeting. Easier topics, like what kinds of client appreciation events clients would be most interested in, will take less time.
Another secret is to distribute the questions in advance. The single most frequent and consistent feedback we see after client advisory board meetings is about the preparatory information sent before the meeting. If we distributed an agenda ahead of time, board members tell us that it added significant value to the conversation. If we did not, the request that we do so in the future invariably shows up on the list of things that would make subsequent meetings better. So plan to communicate the advisory board meeting agenda in advance (along with a clear description of the advisory board role to set proper expectations).
The Right Facilitator
Related to having the right questions is the importance of having a third-party facilitator managing your meetings. Freelance facilitators can be found in larger cities, but there are other ways of finding a candidate to run your meeting. Many business coaches, especially ones who offer strategic planning consulting, have facilitation experience. John Gugle, of Alpha Financial Advisors, engages one of his clients who works in corporate communications and has experience facilitating groups. Anyone who has experience running focus groups or planning meetings may have the requisite skills.
A good facilitator will know what questions to ask, how to follow them up, what to drill down into, and how far to go with them. In planning meetings (as a facilitator myself), I find myself frequently saying to advisors “how about if we were to ask it this way?” But that’s really just the beginning. Beyond the questions is managing the dynamic of the group.
Your client advisory board can be, and should be, a relationship-building experience. Being part of the conversation – as the advisor – enhances that. There is something fundamental that changes when you stand up and walk to the front of the room to lead the discussion… and as the advisor, you don’t want to be on that side of the conversation. You want to be in the conversation. Be one of the tribe, sitting alongside your clients.
There are a host of other benefits to hiring a professional who knows how to run an advisory board meeting. They have the skills to keep your conversation on track and on schedule. If the conversation begins moving down an unproductive path, they can put it back on course. They can address what for you as the advisor might be an embarrassing situation. Can you imagine asking your biggest client to please stop talking, if they were dominating the meeting? A facilitator can.
When I was first working with one of my consulting clients, they had put together their own advisory board a couple of years before. In the last meeting they had before we started working together, clients had expressed a few concerns. The principal of the firm reacted as many people would – explaining the reasons for the process that was causing the clients’ concerns. Unfortunately, the explanation did not satisfy the clients, and the advisor began sounding defensive. It went downhill from there. As you might imagine, it was not a productive meeting. A good facilitator will jump into that transaction, ask some probing questions, and help guide you, the advisor, to a productive outcome.
A facilitator can also help you get information that would be difficult for you to get on your own. Let’s say a product or service idea comes up in the course of the meeting. The board discusses the relative merits. It sounds promising. The facilitator could ask “so if this advisor were to add this to his menu of services, how should that be communicated? What would be the best way to introduce it to clients?” Coming from the facilitator, it is a request for information. If it were to come from you, it might be perceived as (uncomfortable) selling pressure.
The Right Frame of Mind
Your openness and willingness to really listen to your clients affects the quality of the outcome. Demonstrate that you are interested in how they really feel, that nothing is taboo, and that everything is fair game. It is an attitude that I call Zen mind.
In some forms of meditation, you do not suppress any thoughts. Rather, they arrive, you visit with them for a short period of time, and then let them go. Similarly, in a successful advisory board meeting, you welcome all comments on the topic at hand, discuss them for a time, and then move on to the next topic. Discuss them if appropriate, but no need to evaluate them. No need to react to them. And please don’t debate them.
There is no risk to having clients speak their minds or offer ideas. You are not committing to any action in the meeting – your only commitment is to listen. Any idea that comes up in the conversation, before it can be acted upon, will need to be discussed and researched with your staff. If you find it would not work for one reason or another, you will come back to the group and let them know. Honestly considering what they have to say honors their opinion. You are under no obligation to implement any specific idea… at least until it is studied further (after the meeting).
And not every comment even need be considered further. Part of the art of working with client feedback is to know what to disregard. Everything expressed in an advisory board meeting is simply the opinion of a single client until other board members pick up on it. If it stops with the one person, it may not bear further attention. Ideas that are embraced by more of the board bear further consideration.
Sometimes ideas will arise that are in conflict with the way you do things now. Hear them out. Consider them later. No matter what you do, avoid providing explanations or rationale for the way you do things. That is the quickest way to shut down conversation. Do that even once and you will find it challenging to get people to offer open feedback again, if you can at all.
Prove to your clients that they can express any concern, and you will welcome that feedback with gratitude, and you will get advice worth its weight in gold. Marc Freedman, of Freedman Financial in Peabody, MA, pointed out the value of asking difficult questions by describing one of his client advisory council meetings shortly after the market turnaround in 2009. “When the market was going down for months, quarters, and years, did we have the guts to ask our clients ‘Why do you stay? Why are you still here?’… I think every advisor would be refreshed to hear the reasons their clients stay.”
The Right Follow Through
Follow-through is the final key to getting maximum value from your client advisory board.
A personal note is a nice touch after an initial advisory board meeting. More important, send participants a summary of the discussion, highlighting the most important ideas discussed. Your facilitator should have captured the ideas and conversation points of the meeting on an easel pad during the meeting. Use those notes to capture action items for follow-up after the meeting.
Let board members know what you plan to work on as a result of the meeting. It might be something as simple as a bullet point list of the recommendations or action items from the meeting. My clients get a more thorough review of each topic we discussed in the meeting with a list of action items at the end. Regardless, reflecting back to your clients what you heard in the meeting and a list of items or issues you plan on addressing is an important component of the advisory board process.
Most important, you then need to act on that feedback! Discuss the feedback with your staff, and explore what you might change in response. If the item is not simple and explicit, brainstorm alternatives. If you cannot deliver exactly what was requested, look for an alternative.
We see this approach employed frequently with technology. Modern advisor software solutions can do a lot, but sometimes not exactly what the clients wanted. We can usually come close, though. Take quarterly reports, for example. Walking through the reports with the board is always illuminating. You might be surprised what clients value and what they don’t. What they look at and what they ignore. And how they misinterpret some of the graphs you generate. Yet advisory boards often request a change that, upon investigation, cannot be accommodated by the software. So the firms try to distill the kernel of what the board requested, and format a report that communicates it as closely as possible. They return to the board as “we couldn’t do exactly what you ask for, but how about this?” With the benefit of the prior discussion, most firms create something their clients like.
Report back to your board on the issues you promised to consider and let them know what action, if any, you plan to take. If you plan on taking no action, explain what you found in researching the topic, that caused you to decide not to pursue it. In our board meetings, the second agenda item after a brief firm update is to report back on the topics from the prior meeting.
Receiving feedback from clients and failing to act on it is worse than never having asked for feedback in the first place. Even if you take action on it, take the extra step of letting the board know. Sometimes, the change is not readily apparent to the board members. They may not realize you utilized the feedback. I have heard participants express frustration in not getting follow-up when the firm did not explicitly update the board. Omitting follow-up makes board members wonder how seriously you are listening, and whether participation is worth their investment of time. If they get the impression you’re not doing anything with their feedback, their loyalty to the firm may suffer, and it certainly will not cause them to refer more clients.
In the end, this is actually the biggest risk of conducting a client advisory board: obtaining the input of clients, and then not doing anything with it. If you are not committed to diligently considering how you might evaluate the guidance of clients and possibly implementing changes based on it, you are best advised to avoid convening an advisory board in the first place.
Let me reiterate that this does not mean you have to do everything your advisory board recommends. It means that suggestions and recommendations endorsed by the majority of your board warrant good faith consideration by you and your team. Upon examination, many ideas will prove to the impractical or unworkable. But discussing and evaluating them honors the board input. I have had many clients report back to their boards that, after some due diligence, they had decided not to pursue some of the board’s recommendations. I have yet to see those boards respond poorly, especially if accompanied by reasons for taking a pass on the idea. But it’s critical to have the explicit follow-up communication back to the advisory board to explain the outcome and the decision.
Giles Almond, of Matrix Wealth Advisors in Charlotte, NC, had a challenge I am sure you will find familiar. The prior two years had seen growth in only a couple of asset classes. In one of those years, the only index that had generated an appreciable return was the S&P 500 – and all of its gains could be traced back to a tiny handful of companies. In short, any advisor who allocated assets in a well-diversified manner underperformed the index that clients heard about on the news every night.
A few clients had complained in review meetings about their lackluster returns. Some had expressed a little frustration about the return on investment given their fees paid to the advisor. Did all their clients feel this way? Would their dissatisfaction lead them to start looking at other firms?
Almond had put together a presentation showing the long-term benefits of diversification and identifying the anomaly that was causing that one index to make people think the market had done better that it actually had. Walking a client through it would take between 10 and 15 minutes.
We had been making plans to conduct the firm’s first client advisory board. I suggested that Almond hold off from including that presentation in client review meetings until we had an opportunity to talk through the issue with some of the firm’s best clients as a part of the upcoming advisory board meeting.
The question on the client advisory board agenda was “when portfolio returns differ from your expectations, what has helped and what do you think has been lacking in your review meetings?” We had the new presentation ready to go and anticipated that the board would share with us their concerns and give us feedback on how well this new information would restore their confidence.
We never needed it. The unanimous feedback from the board was that they understood the benefits of diversification, that the markets of the prior year or two or not the norm, and that they trusted the firm’s expertise in managing portfolios. The experiences Matrix Wealth Advisors had had in those individual appointments turned out to have been either outliers or misinterpreted. There was no need to dedicate a quarter of clients’ review meetings to explaining an issue they were not overly concerned about.
Having an ongoing structured conversation with your best clients offers you insights on improving your client experience that lead to increased loyalty and more referrals. There are very few downsides to these kinds of conversations. Keep in mind the keys to success above, and you can make sure your firm and your clients get the maximum benefits from your client advisory board.
Michael’s Note: If you’re looking for further guidance on how to create an advisory board, what advisory boards do, or want some ideas on improving the client advisory board you already run, click here for further information from Steve Wershing!
So what do you think? Do you think a client advisory board is an effective way to grow your business? Do you have any best practices for engaging an advisory board? Please share your thoughts in the comments below!