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What is the key to success in financial planning?

Ask any retail investor and they will inevitably tell you that investment performance is the key to satisfaction with their financial planner.

But often these so-called hard factors, such as price and performance, are a red herring.

So often, companies’ attempts to map client satisfaction turns out looking like a point in time snapshot of the Australian stock market. If the markets are going up, clients are happy, and if markets are going down, clients are unhappy.

The key to successfully measuring satisfaction is to drill beneath the surface by examining the hidden drivers.

Burningpants affiliate CoreData does this for clients on a regular basis, using a commonly used statistical technique known as multiple regression.

A recent survey of some 516 Australians who utilise the services of a financial planner identified the key implicit drivers of overall client satisfaction – that is, those which are not necessarily front of mind when people are asked explicitly about what makes them happy.

Contrary to popular belief, investment performance is not the number one driver of satisfaction; in fact, it is not even among top three.

Rather, it is standard of communication that is the major factor driving client happiness, contributing some 25.8% to overall satisfaction followed by financial knowledge and expertise of the planner (19.6%).

Fees and charges comes in third, driving 14.6% of client satisfaction. Together, these key areas make up three fifths (60.0%) of clients’ overall satisfaction.

Investment performance placed sixth contributing only 7.7% to overall satisfaction behind business relationship and implementation, which both contribute some 10.8%.

So what does this tell us?

While clients may see investment performance as the key measure of the quality of their financial planner, they are much more likely to be satisfied if they are kept in the loop by a planner with considerable knowledge and expertise via high quality, tailored communication.

The key to satisfaction is communication and knowledge – keep your clients well informed and contact them even when times are tough, and they will keep your business in good health.