When to use a client advisory board

If you use traditional surveys to get client feedback, you should rethink your communication strategy.

Client surveys usually aren’t very useful, says Darren Coleman, senior vice-president at Raymond James in Toronto. “In our experience, response rates have been so low that surveys are a waste of time. Plus, they’re very impersonal.”

In fact, 80% of people abandon surveys halfway through taking them, according to a 2015 report by research firm VisionCritical. And 52% won’t spend more than three minutes on surveys.

A better way to connect with your book instead is to put together client focus groups or advisory boards. These options are useful when making major changes that impact clients, such as introducing a new fee structure or investment process.

Yet, when we asked numerous advisors if they used client advisory boards, none of them did. “We ask key clients on a semi-regular basis about our practice, but I’ve never formalized a board,” says Coleman. “There are risks to doing that, including board meetings becoming long complaint sessions where clients focus on things they aren’t happy about.” And, he says, “I just don’t know if you would get the same honesty from clients if they’re all in the room.”

To avoid those problems, bring together clients who you think will work constructively, and make sure you explain the purpose of the board, says Roy Diliberto. Founder and a senior planner at RTD Financial Advisors in Philadelphia, Penn, Diliberto’s used a client advisory board for more than 15 years. We asked him about how to create a formal client board, and about the pros and cons (see “Dos and don’ts”).

Q: How do you choose the right clients, and how long should people serve?

Diliberto: When we first created our board, we had each of the five advisors involved submit the names of a diverse range of clients. We like each lead advisor to have one or two clients on the board. Each client serves a three-year term. When there are openings, we ask advisors who have lost clients from the board to suggest replacements. Or, we’ll ask all advisors to suggest replacements.

Dos and don’ts of client boards

Do:

• Conduct meetings outside your office; treat clients by choosing nice venues and offering catered meals.
• Create boards that help all advisors at your firm.
• Consult clients on specific issues and major service changes.
• Send agendas prior to meetings to help members prepare.
• Encourage introverted clients to speak up or submit written comments.
• Consider inviting a third-party discussion facilitator if you aren’t confident about directing conversations between clients.
• Record meeting minutes.
• Cover any travel expenses incurred by board members.
• Maintain board diversity by inviting people of different ages and professional backgrounds.

Don’t:

• Mention details about clients’ lives or portfolios during meetings; they can choose to share details if they wish.
• Openly discourage clients who talk more than others.
• Confront clients who seem worried or stressed at meetings; save that for one-on-one chats.
• Share the details of who’s on your advisory board with the rest of your book.
• Offer extravagant gifts to board members.

There’s no assessment period for members because clients’ terms are only three years. Every once in a while we get people who try to dominate the conversation, but we don’t fire people from the board and we don’t put people on the spot if they speak more than others.

We just handle the situation by trying to get other people involved in the conversation. We’ll ask other clients for commentary directly, which is especially important if some people are quieter. On the board, we have included clients who are a range of ages, as well as some who are working and some who are retired. We even include new clients, who may have only been with us for a year. We’ve had people with marketing, technical, legal and psychological backgrounds. And, we have invited former members to attend meetings to address specific issues.

Q: How do you structure meetings?

Diliberto: We meet twice a year at the Four Seasons Hotel. The meetings are usually part of half-day events, so we serve breakfast and lunch. But these aren’t similar to client appreciation events, where clients will mingle. Instead, board members attend meetings to conduct business. Prior to board meetings, we create an agenda that we share in advance, and we focus on specific issues or changes we need input on.

For example, we asked for feedback when we changed our website (see “Handling feedback”). After meetings, we have, on occasion, sent out minutes to all of our clients. This typically occurs when we make major changes to services, and shows all clients that we ran those changes by the advisory board. But, we don’t mention the names of board members or disclose confidential information.

Q: What are the best issues to consult clients on?

Diliberto: We don’t use the client board to get feedback on individual advisors. But, we have asked board members to share, or write down anonymously, what they like and don’t like about our firm. But this has only happened a couple of times in fifteen years.

Sometimes people are reluctant to mention negatives, so they like that feedback can be anonymous unless they choose to share it. We don’t get too many of these comments, but we want to know what we are and aren’t doing well. Client board meetings aren’t about having clients say great things about us. It’s better to consult people about specific topics and to focus on how the firm can best help them.

For instance, we’ve asked for feedback on our performance reporting twice. Before each of those client board meetings, we sent members copies of every new type of report that we could manufacture. And they not only reviewed the example reports, but came in with notes.

When we tweaked our reports the second time, we asked them, “What is it that you want to know?” Clients already get reports on what’s in their portfolios and on their transactions, so we asked what else we could show them. Then, using the graphics they said they preferred, we were able to reduce the length of our quarterly reports. The reports include commentary and other materials, but all of the essential numbers and graphics are now on one page.

We’ve also received feedback on topics, including whether it’s appropriate to ask for referrals, and whether people know we offer services such as helping clients’ relatives who don’t have many assets.

Q: Do clients’ personalities ever clash, and are there any risks?

Diliberto: In any group, you’ll always have people who are more dominant, but clients fighting or competing with one another has never happened. Advisors have to realize that people appreciate serving on boards and they will take it seriously.

Handling feedback

Sometimes clients may provide negative feedback during board meetings, but the key is to take their advice as constructive criticism.

Roy Diliberto of RTD Financial Advisors says that, a few years ago, his company updated its website. They hired a third-party marketing company to redo the site. The process took more than a year, during which they consulted clients.

Before finalizing the website, “We showed a video of what the site would look like to our client advisory board,” he recalls. “And the board was ruthless in its criticism. They commented on things like the imagery that was chosen, which included pictures of people climbing mountains. They said, ‘What are you trying to portray here? We don’t even do that.’

Diliberto adds the images were darker coloured, “so we brightened things up. We changed the entire feel and look of the website, so that it resonated with and worked better for clients.” So, the firm included images of peaceful scenery and of clients working with advisors. Also, they added pictures of couples and families that were representative of the firm’s clients. “The professionals got it wrong and the clients got it right.”

Also, when the firm was in the process of changing its fee schedule, it was going to alter it for all clients. But the board suggested it was important that the firm offer clients a choice between continuing to pay fees based on percentage of assets, or switching to pay flat retainers. The firm listened to the board and allowed clients the choice. Most clients opted to make the change and pay flat retainers.