Why client education matters today more than ever?


Why client education matters today more than ever


Over the weekend, I stumbled upon an article talking about how a mix of three basic Vanguard index funds (referred to as the Bogle Model) outperformed some of the best and brightest institutional investors managing college endowment funds.

It’s staggering that such a simple strategy could match (and even outperform) some of the top institutional investors in the world. The article is titled “A lesson in investing simplicity: Why the Bogle Model beats the Yale Model”, and you can read it here.

This led me to contemplate the truly important aspects of financial and retirement planning.

I’ve been hearing from advisors that their clients have a hard time understanding the value of financial planning. Clients are often unimpressed with long, complex financial plans that are rarely reviewed and never updated.

Advisors wish there was a simple way to show their clients useful concepts or illustrate why one approach is better than another – often interactively, right in front of their clients’ eyes.

There is a way to do it, and many successful advisors have figured it out.

As I thought more about this, I noticed that all successful financial advisors for whom client meetings seem to come easily and whose businesses are thriving are the ones who focus on simply educating their clients.

The value of client education

Is investing in client education worthwhile?

Our experience at Snap Projections and my conversations with hundreds of advisors prove that it is.

It turns out educated clients are typically more satisfied clients. Satisfied clients become long-term, loyal clients. These are also the clients who tend to generate referrals.

There is even industry research on this topic. Ontario-based Credo Consulting Inc. released a report revealing that “the likelihood a client will provide a referral to his or her advisor gradually grows with that client’s increasing levels of financial literacy” (Investment Executive, February 2017, p.10).

“The takeaway is that spending time educating clients on financial matters is valuable and worthwhile because the more clients understand, the more likely they are to recommend you.”, according to Brandon Bertelsen of Credo Consulting Inc.

Why is client education more important today than ever?

Because nobody is doing it.

A lot of advisors like to focus on complexity when justifying their value, and it backfires.

What they need to do first is start educating their clients on the basics.

Clients may be embarrassed that they don’t understand simple things about their retirement.

That’s a great place to start adding value.

Show them how they can fund their retirement by layering various income sources, or what would happen to their retirement cash-flow if they deferred their CPP and OAS.

Help them understand if their current spending is sustainable or if they need to save more, and how their current spending and saving habits will affect their estate.

If you educate your clients, it will benefit your clients and your business.

If you want to see the impact of client education done well, you may want to read Diane’s story. In less than 10 months, Diane managed to increase her client retention by 100% and boost referrals by 10%, all while saving a lot of time. She used the exact approach I see many successful advisors using. Here’s a link to her story.

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