Opinion: Advisers don’t know their clients well enough

According to financial adviser coach Tony Vidler, many advisers don’t understand the importance of using a Customer Relationship Management (CRM) database to understand their clients and boost the profitability of their practice. He explains the reasoning behind it:

An adviser who plans on being in the business for another couple of decades asked what the point is in paying for a fancy CRM database. He has a list of clients in Outlook and has the clients' home addresses, phone numbers, and sometimes email addresses - "what more do you need, right?"

The power of having detailed information, and knowing your client well – without having to rely on the fallible human mind alone – would seem to be a good argument in itself to me. Clearly that isn't enough for some, so we spoke about information creating value.

Most of the real value in an adviser's business lies in the lifetime value of the trusted relationships. Clients tend to do business with advisers they trust, and who know them well, and who are looking to help the clients achieve their objectives.  The more you know about their objectives, their situation, and their likes and dislikes....the more valuable the adviser is to the client.  And the more valuable the client is to the adviser.

The peculiar thing is that advisers know this, yet ignore it.  They spend a significant part of their resources on getting new clients knowing that the future earnings are far more valuable than any historic income streams.  Their eagerness to purchase another adviser’s business is more often driven by the latent opportunities that business presents for them to create new revenue.

The gap between how advisers perceive the value in their own business, and the higher potential value they perceive in another book of business is often because they do not actually have organised knowledge about their own clients.  That is, they don't value the opportunity that sits inside their own business as much as they value the opportunity that they perceive exists elsewhere because they only think they know their own client base.

Even many of the advisers who invest in good data management and have a very capable CRM system use it only to manage their workflow with a client when a piece of advice is being provided.  So even many proficient and diligent professionals are not maximising the opportunity that good data management presents.

Certainly the CRM system can help manage workflow, which creates efficiency and reduces business risk as it enhances the probability of providing fully compliant advice processes.

Typically though, advisory businesses are poor at collecting all valuable data while they are managing the advice process.  Sure they capture data in forms, and then scan and keep the forms electronically in the CRM record. But those documents are usually not searchable content and the key information that will help you understand the client’s needs and objectives is not captured in a useful method.

While it is good that information is collected and stored, it is rarely understood in any meaningful sense, and its worth is therefore negligible in terms of assessing future opportunities, or building deeper relationships with clients.

There is no doubt that a good CRM system containing pertinent information about clients can help to improve your client service or support functions.  There is no doubt that it can improve your marketing efforts.  There is no doubt either that increased service levels, together increased marketing impact, with people who trust you provides better sales opportunities.

It is best to leave the advisers behind who do not quite see the importance of running a business efficiently and knowing their clients’ needs well, and being able to respond to their clients’ needs at a deeply personal level.  Outlook will probably serve those advisers well enough for their short sales careers.

For the professional advisers though, a good CRM system that captures all the pertinent data that can strengthen your advice process AND the client relationship is critical to your success.  It is the true reservoir of future value that will underpin the value of your commercial enterprise.

To get the most out of it though you have to be clear about two key areas:

1.  What the purpose of the CRM system is for your business

2.  What your advice, service and marketing processes are; and how the CRM system can improve all these areas.

If you are clear in your thinking in these two areas then you have a very high chance of business success, and maximizing future business value.