You've Got the Power!

In 1968, James David Power III struck out on his own to form J.D. Power & Associates. It was an unusual career move for the time. At 36 years old, with a mortgage and three kids, Dave Power had a secure job as director of corporate planning at McCullough Corp., makers of chainsaws and Weed-Eater.

Nonetheless, Power had an ongoing passion for market research, and decided to form his own market research firm. (In the early years, Power and his wife Julie tabulated the results of their customer surveys around their kitchen table.)

J.D. Power & Associates began as a publisher of independent customer surveys that focused on the automobile industry. Power’s big break happened in 1971, when his customer research uncovered a flaw in Mazda’s rotary engine. Writing his first-ever press release on a yellow pad of paper, Power detailed unreported problems by Mazda car-buyers. 24 hours later, the press release hit the front page of the Wall Street Journal…and (as they say) the rest is history.

By 2005, J.D. Power & Associates had grown to 700+ employees with annual sales of $150 million. Dave Power had earned the reputation as the auto industry’s “Mr. Quality.” During that year, Power decided that the time was right to step aside, and sold his company to McGraw Hill. Terms were undisclosed.

For the past 8 years, J.D. Power & Associates have branched out to the financial services industry and have provided ratings for full-service investment firms. In the latest survey, “2010 U.S. Full Service Investor Satisfaction Study” released on July 19, 2010, three firms distinguished themselves with superior ratings: Edward Jones, RBC Wealth Management, and LPL Financial. Edward Jones had the highest investor satisfaction, averaging 769 on a 1,000 point scale.

The study also finds that advisors who perform certain practices see a positive impact upon client satisfaction and the overall investment experience. These activities include:

• Fostering engaged client/advisor relationships that involve the development of an investment strategy,
• Periodic review of investment objectives,
• Regular communication around, and reasons that explain, investment performance,
• A clear explanation of fees and commissions.
  

The study also finds that investor satisfaction has a substantial impact upon several other important criteria: share of wallet, more new client introductions, and higher levels of loyalty and retention.

Also notable is that investors’ positive sentiment regarding their own investment firms have decreased. Overall, an increasing number of investors believe that their firm is more focused on profits…as opposed to them.

The 2010 study is based upon responses from 4,460 investors who make some or all of their investment decisions with an investment advisor. The study was fielded in May 2010.

There are no real surprises in the Investor Satisfaction Survey. Financial advisors know they need to engage their clients and keep them happy. What is relevant is yet another reminder that many clients remain dissatisfied with their current firm. What about yours? Here are some coaching questions that come to mind:

• What are you doing to effectively engage your clients on multiple levels, so they remain satisfied with your level of service?
• Why not communicate the survey’s findings to begin an open dialogue with them about you and your practice?
  
• What is your plan for acquiring new clients in today’s marketplace?
  
• How else might you use the survey’s findings?

You have the “power” to ensure all your clients are satisfied; don’t relinquish that power to someone else.

by Chris Holman

Think for Yourself

Groupthink is a style of thinking that people can engage in when they are deeply involved in a cohesive group. When groupthink occurs, the desire for group unanimity overrides the motivation to realistically discuss and appraise different alternatives.

For financial advisors, groupthink occurs all around. Wall Street is an exceedingly subjective and psychological environment where there is a marked tendency towards groupthink.

For those financial advisors who work with investment committees of foundations or employers, group decisions can lead to significant behavior and psychological biases.

There are several noteworthy pieces that explore this interesting topic.

• For those of you who have read Michael Lewis’ The Big Short, you know the story of how a quirky band of unknowns made hundreds of millions of dollars by thinking differently than the “Wall Street Machine”.
• There is also a wonderful research piece from Vanguard on groupthink called “Group Decision-Making: Implications for Investment Committees.” This is a must-read article for any financial advisor who works with investment committees on an ongoing basis.
• There is also a thoughtful piece on Art Petty’s Management Excellence blog entitled, “Six Steps for Avoiding Groupthink on Your Team.”
  

Many financial advisors are getting sucked into the groupthink philosophy because they are hesitant to break out from the pack. There could be several reasons for this, including compliance rules and regulations, fear of a lawsuit from a client, or worries about hitting their numbers and potentially losing their job if they say or do the “wrong” thing.

It’s interesting to note; however, that some of the most successful investors in the past decades, e.g. Benjamin Graham and Warren Buffett, have achieved their success by avoiding the trap of consensus, groupthink investing. Coaching questions: What about you? Do you participate in groupthink, or do you stand up for what you believe and speak out on your own?

Perhaps Doris Lessing, the 2007 Nobel Prize winner for Literature, summed it up best when she said, “Think wrongly, if you please, but in all cases, think for yourself.”

by Chris Holman

Post-Crisis: Has Investor Psyche Changed?

Capgemini is a global consulting firm headquartered in France that has released the World Wealth Report (in conjunction with Merrill Lynch) for the past 14 years.

In the most recent report, World Wealth Report 2010, they offer some interesting observations with regard to the post-crisis environment. In their view, investor psyche has changed significantly in the past three years. Since their insights run parallel to what we, at ClientWise, are seeing in the industry, I thought that I might share them verbatim:

1. Post-crisis, most high net worth clients have yet to regain their trust in the regulatory bodies and institutions that are meant to oversee markets and protect investor interests. Coupled with ongoing concerns around financial markets, this lack of confidence has long-term implications for investing behavior.

2. Shifts in asset allocation mirror investor caution. High net worth investors are favoring predictable forms of cash flow like those in fixed-income products, and are seeking protection against downside risk, and their search for returns takes place within the broader context of portfolio risks and goals.

3. High net worth investors have seized a more hands-on role in their finances. Above all, they want specialized and independent advice, transparency and simplicity, and effective portfolio and risk management, and are looking for wealth management provider relationships that can clearly demonstrate a more integrated approach to meeting their needs.

4. Emotional factors are a prominent feature of the high net worth psyche today, and wealth management firms and advisors must incorporate those emotional factors into stronger portfolio management and risk capabilities so as to properly support client goals and needs.

5. With billions of assets still in motion post-crisis, wealth management firms are embracing change, leveraging key tenets of behavioral finance to rebuild investor trust and confidence and drive further innovation into their offerings and service models.

Admittedly, many of these changes in investor psyche were happening before the financial crisis. However, post-meltdown they seem to have been exacerbated.

However, the learning for financial advisors is profound. Assuming that you agree with Capgemini's observations, the coaching question is: what are you doing differently now to meet your clients’ needs, communicate more effectively and restore their trust?

Join our Complimentary Webinar
At ClientWise, we’re always looking for ways to help financial professionals improve their productivity and meet their goals. Our latest public webinar, to be held on Thursday, July 15 at 4:30 pm, EST, will discuss the benefits of our new service, the Benchmark Assessment Report (BAR™), which benchmarks your practice against other top advisors.

For more details about how the BAR™ can leverage your strengths to accelerate growth or to register for the webinar, please visit our website at www.clientwise.com and click on the “Knowledge is Power” photo.

by Chris Holman

Generation Gap

There’s a thought-provoking piece in the Harvard Business Review that discusses generational diversity in the workforce and how to manage it.

In many organizations today, there is a diverse group of workers with disparate differences in attitude with regard to: motivating, managing, maintaining, dealing with change, and increasing productivity. Many of today’s organizational leaders are members of the Silent Generation or Baby Boomers. Fast on their heels are Generation X and the Millenials. Although stereotypes are tricky, it seems to be true that each generation demonstrates similar characteristics.

For those financial advisors who work on multigenerational teams, it might be helpful to raise awareness of the differences between generations, as well as to recognize the benefits of cross-generational dialogue. The photo at the beginning of this article is a prime example of the difference between two generations—the older businessman is reading a book, while the younger person seems to be reading a text message from his phone.

The oldest generational group, born between 1925 and 1945, is the Silent Generation. This group values hard work, conformity, dedication, sacrifice and patience. Members of this generation are comfortable with delayed recognition and reward.

The largest group in the work force today is the Baby Boomers. Born between 1946 and 1964, Boomers are characteristically optimistic and team-oriented. They place a high value on work ethic, while also seeking personal gratification and growth.

The smallest sized group is Generation X, also known as the Sandwich Generation because of their position between the two largest groups. Generation X, born between 1965 and 1980, were the first “latchkey kids”. They are self-reliant, global thinkers who value balance, fun, and informality.

Millenials were born between 1981 and 2000, and ultimately will become the largest group. Members of this generation exhibit confidence, optimism, civic duty, sociability, street smarts, inclusivity, collaboration, and open-mindedness. They tend to be goal-oriented.

Multigenerational Dialogue
For many teams, cross-generational understanding begins with dialogue. Indeed, some teams have formalized the conversation by organizing discussion groups that explore the generational differences between them.

Here are some coaching questions that may facilitate a useful exchange of ideas:

• What were some of your generation’s key national and international events?
• What trends, people, and popular culture do you recall from your first 12-15 years?
• Which defining historical event(s) shaped your generation?
• What do you value most about your generation?
• What challenges do you face as a result of being in your generation?
• What perceptions do others have of your generation?
• What are the pluses and minuses of working with each of the other generations?
• How can the members of multigenerational teams work better together?
• What should the mode of communication between them be?
  

Within any team, it is important to openly discuss differences in expectations. Recognizing that the same generation can look very different through the “generational lens” is helpful in understanding that it is normal for different people to react to the same situation in different ways.

Join our Complimentary Webinar
Webinars are a relatively new method of communicating and are commonly used by people from most generations. The benefits are obvious: they can reach a large audience; participants can be located across the country; they’re convenient, they save time and money and increase productivity.

At ClientWise, we’re always looking for ways to help financial professionals improve their productivity and meet their goals. Our latest public webinar, to be held on Thursday, July 15 at 4:30 pm, EST, will discuss the benefits of our new service, the Benchmark Assessment Report (BAR™), which benchmarks your practice against other top advisors.

For more details about how the BAR™ can leverage your strengths to accelerate growth or to register for the webinar, please visit our website at www.clientwise.com and click on the “Knowledge is Power” photo. Members of all generations are welcome.

by Chris Holman