The new benchmark: Service trumps performance, says Krawcheck

Former Merrill Lynch boss claims clients looking for solid relationship, holistic planning

Nov 9, 2012 @ 11:46 am

By Jason Kephart

Good news, job seekers: There’s a bull market in financial advice, and it has nothing to do with the markets.

The financial needs of consumers have gotten so complex in recent years that the investment part of the client-adviser relationship has taken a back seat to planning and relationship building, Sallie Krawcheck, former head of Merrill Lynch Global Wealth Management, said at the InvestmentNews NextGen Virtual Career Fair on Friday.

“There’s a need for financial advice right now to a degree we’ve never seen before,” Ms. Krawcheck said. “It’s become much more about planning and understanding clients’ goals — and helping them reach them — than it is about beating a benchmark.”

When it comes to what a client values most, Ms. Krawcheck said that trustworthiness, understanding goals and needs, keeping the client regularly informed, charging a fair price, and being upfront all rank higher than investment performance. In fact, the No. 1 reason clients leave advisers is because they don’t return calls fast enough, she said.

That doesn’t mean clients don’t care about performance at all. “It has to be there, it can’t be hideous,” Ms. Krawcheck said. “But it really is about client service.”

The shift away from focusing solely on performance is just one of the changes the industry is currently undergoing that future advisers need to be aware of, Ms. Krawcheck said. “One-size-fits-all is not going to work in the industry from here on out,” she said.

For one, the face of the client is changing, with women in particular becoming a much more prominent client base. With that change, advisers have to be able to change the way they think about attracting clients. “Women approach investments differently, and choose an adviser much more slowly and carefully,” she said. The good news: Female clients tend to be more loyal over time.

The use of technology is also growing, and the smart advisers are using it to help them increase business. “Technology is taking away from some of the routine tasks in the business. Smart financial advisers will leverage and be able to do more for their clients, and more for more clients,” Ms. Krawcheck said.

Young people set on breaking into the industry would be best served by focusing on firms that offer the best mentoring programs and track records of working with aspiring advisers — rather than just taking the first job available.

“Be choosy,” Ms. Krawcheck said. “Don’t go into business with teams and people you don’t want to be with, just because it’s a job.”


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