How to avoid losing a client’s trust

If your client thinks he hasn’t received his CRM2 report — even if he has — he might trust you less.

Read: Advisors who don’t discuss fees risk losing clients: survey

That’s a finding from a BCSC study on CRM2, which tracked investor knowledge and behavior before and after receiving the new reports. The finding highlights the importance of having a clear CRM2 discussion with your client.

Among investors who report receiving their new CRM2 statements, advisor trust dropped only three percentage points after receiving the report, to 83%, finds the study.

Trust dropped more dramatically for investors who report not receiving the new statements (though chances are they probably had in fact received them). In those cases, trust in advisors dropped 10 percentage points, to 73%. These investors also had a 15% decline in satisfaction with the overall relationship with their advisors and a 20% decline in satisfaction with advisor communication.

Clients know more about fees, but care most about performance

The study finds that investors’ overall familiarity with direct and indirect fees increased over the course of the study, with net familiarity rising 15%.

More investors said they were familiar with the total direct fees they paid (net agreement with this statement increased to 35%, up 8%) and with the indirect fees paid by third parties to advisor firms (net agreement increased to 9% from 0%).

Read: Confusion about fees persists despite CRM2

Probably unsurprisingly, the study finds most investors care about performance more than anything else, with 57% saying performance is the most important consideration when making an investment decision. Only 9% cited fees. Less than a third cited how an investment fits within their portfolios (30%).

As Advisor.ca reported last week from IFIC’s annual leadership conference, where some of the study’s results were shared, confident, knowledgeable investors took action following the receipt of the new reports:

• 25% made a change to their fees or mix of investment products,
• 16% engaged in new communication with their advisors and
• 11% changed their firms or advisors.

The BCSC has tools to help investors navigate and understand the new reports, including a video and fee calculator.

Read: Investor education initiatives to leverage

For all details, read the full BCSC study.

Beyond CRM2, IIROC reps can further build client trust with the SRO’s enhanced resources for investors, including an updated brochure explaining how IIROC-registered advisors must meet industry standards.

About the study: Conducted by Innovative Research Group Inc. from November 2016 to June 2017, the three-part longitudinal study tracked a panel of investors who work with advisors.