Building a successful fee-based advice practice
Defining a compelling client promise
For investment professionals only – not for retail investors.
This guide builds upon the introductory guide in this series,
Building a successful fee-based advice practice, delving
further into how to define a compelling client promise.
A valuable business
Achieving profitable growth
Value creation
Ensuring client loyalty
Defining a compelling client promise
Keeping your promise
Aligning your people
Contents
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Defining your client promise
What business are you in?
Building trust
What next?
Defining your client
promise
In previous guides in this series we have stressed the importance of
keeping your promises and only making promises that you can keep
in order to ensure client loyalty, which leads to long-term profitable
growth.
In this guide, we explore how to define a compelling client promise
that clients explicitly understand and are willing to pay you to keep.
Defining your client promise
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Controlling the outcome
Implicit promises
Successful advisers have learned to anchor
their service promise on things they can
actually and confidently predict and control.
They have found that basing their client
promise on uncontrollable outcomes, such
as the performance of their chosen asset
classes and managers, can quickly and
easily destroy credibility.
Like all professionals, your own code of
conduct will contain elements that your
clients take for granted, such as:
„„An expectation that you act in their best
interest at all times and will place their
needs above your own.
„„An expectation that you will maintain your
skill and knowledge.
„„An expectation that you will act in a
trustworthy way with disciplined and
prudent procedures.
Your promise to clients should comprise two
elements, implicit and explicit promises.
While the client assumes these values, how
much do you emphasise them in your offer?
While you shouldn’t overplay them as they
should be self-evident and understood by
the client, these values form the foundation
of the trust your client places in you. So
likewise, don’t underplay them.
What are the enduring values of your firm?
What do you stand for? These are elements
of your promise that should hold true
regardless of which representative from
your firm sees the client and regardless of
market conditions or investment fads.
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Defining your client promise
Explicit promises
This is more about the outcome the client
can expect as a result of dealing with you
or your firm. It explains the value you will
deliver to your client through the services
you provide. Note that we say ‘will deliver’,
not ‘hope to’ or ‘try your best to’ deliver.
Only promise what you can and will do.
Only when you deliver your promise on
time, every time, will you build the trust that
underpins long-term client loyalty and value.
One way to understand how you may
best add value is to consider the current
strengths and weaknesses of your practice
[define your business competencies]. Make
a list of both, considering subjects such as:
„„Current perceptions of your business –
What do clients say about you?
„„The quality of your marketing – Is it
attracting the clients you want?
„„The skills and knowledge of your people –
Are they market leading?
„„The quality of your service delivery – Are
you delivering the promised outcome?
„„The quality of your systems and
processes – Do they help your business?
Are your answers based on your own
perceptions or on what your clients think?
Having understood your place in the market,
you can carry out a ‘gap analysis’ to highlight
missing elements in the services expected
by your clients and your firm’s ability to
make a promise around those needs.
Only promise what you can and will do.
Only when you deliver your promise on
time, every time, will you build the trust
that underpins long-term client loyalty
and value.
What business are you in?
Clearly defining what your business offers and how, can set you apart.
This clarity also helps you demonstrate your value. For example, your
expertise may lie in life coaching, financial planning or investment
management. The focus for each of these is quite different.
What business are you in?
9
Focusing on clients you can really satisfy
What is ‘advice’?
When reading an adviser’s brochure a
prospective client should immediately
understand what business they offer and
what they’re promising to do for them.
Typically, words like ‘advice’, ‘investment
expertise’, ‘tax’, ‘counselling’ and ‘product’
pepper the industry’s marketing collateral.
These words provide little clue as to the
ultimate outcome of the service.
Life
coaching
Financial
counselling
Financial
planning
You need to make it absolutely clear to
your client what advice services you will
undertake on their behalf. This includes
what you are promising to provide under
each service, how much each service costs
and what the client can expect by way
of outcome. Quite often, the marketing
commentary focuses on explaining what
you do, rather than how the client benefits
from it.
For example, consider the following ‘service’:
Investment
management
Asset
location
Review
Clients might access each part of this
service discretely, or as part of an overall
package. But when you describe each part,
you should explain how each step can add
value to the client and how they, or the firm,
will ensure that you deliver the service as
promised.
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What business are you in?
For example
Life coaching
We work with clients to uncover their real intent in life and what they really
want to achieve. This allows any further financial planning to have a focal
point to ensure that our other services meet our clients’ true life goals. This
service helps clients understand the importance of money in relation to their
aspirations.
Financial counselling
We work with clients to help them understand the basic rules of investing.
We teach clients the basics about time, costs, risk and emotions on their
investment plans. We help clients understand the basic investment principles
that are the bedrock of their financial plan.
Financial planning
We build a client’s financial plan to meet their life’s real intent. We consider
the amount of time available to meet the goal, the impact of costs over time,
how much risk the client is prepared to accept and how to avoid emotional
investment mishaps.
Investment management
Working from our client’s financial plan, we build an asset allocation and
investment strategy in line with the client’s time, cost, risk and emotional
budgets. This ensures that our clients are able to sleep at night and always
have a sound sense of the ability to meet their goals.
Asset location
We provide advice on the best way to shelter investments from tax and how
best to provide protection for the client’s (or their beneficiaries) assets.
Review
We meet regularly with our clients to make sure that their aspirations and
their plan remain on course. We demonstrate how we are managing their
investments in line with the agreed plan and make adjustments if the client’s
plans have changed.
What business are you in?
The importance of review
Review is worthy of special mention. It’s no accident that successful advisory practices
place a significant emphasis on the review process. In the past, initial client engagement
was perhaps the most significant event, as this established the relationship and was in
many cases, where commission was earned.
Thereafter, ‘review’ meant a cursory check on the client’s holdings and a chance to
uncover further sales opportunities. As the fee-for-service model has grown, bestpractice advisers have come to understand that the client will only pay an ongoing fee
for a valuable service. Only if clients feel they are making progress towards their goals
will they keep paying their adviser. Indeed, demonstrating your ongoing service for the
fee you charge is now a regulatory requirement.
The most successful advice practices don’t just offer a portfolio review service, they
offer a ‘goal attainment’ review service. As a result, the ‘review’ has become more
than just a review of the investment portfolio. It involves a fundamental reappraisal of
the client’s goals and aspirations, with any necessary adjustments to the financial plan.
Advisers can use the review process to reassure the client that they remain on track to
meet their goals.
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12
What business are you in?
Defining the service you offer
Consider each part of your service in turn
and ask yourself these questions:
„„What do we actually do in each part of the
service?
„„What outcome do we promise for the
client?
„„Do clients understand what we’re not
promising?
„„To what extent can I guarantee the client
outcome?
„„How important is the promised outcome
to the client?
„„What happens if we don’t deliver on our
promise?
For example, consider ‘Investment
management’ in the above example model.
What does our marketing
material say?
You may actually mean:
‘We seek to derive an asset allocation
strategy consistent with the client’s longterm need for growth and their time horizon.
We will then select investment managers
we believe will perform to their brief
and deliver the investment performance
necessary to achieve the return needed in
the timescale available’
Your client may think you have promised:
‘Better returns than anybody else’.
Best practice firms regularly conduct an
audit of their client-facing materials and
conversations to check that their intent is
matched by the outcome. The audit is fairly
simple to conduct. Take each part of your
client communication, break it down and run
it through this test.
What do we mean when we
say that?
What do our clients think
we mean?*
*For help on how to gather client feedback, see the guide in this series called
Ensuring client loyalty.
What business are you in?
Does one size fit all?
Your core values should be obvious to each
of your clients. Your values define who
you are and what you stand for. But that
doesn’t mean to say that you have to offer
the same service to each client. One of the
characteristics of successful practices is a
discipline in offering only those services that
a client values and is prepared to pay for.
It is easy to get into a situation where
delineation becomes blurred, where all
clients receive the same service, regardless
of their contribution to profit. Quite often,
the lowest value clients consume valuable
resources. The best practices carefully
segment their clients to understand their
needs, and then work out if a service
‘promise’ can be delivered in a cost-effective
manner. For detailed guidance on how to
undertake such a segmentation exercise,
please see the guide in this series called
Achieving profitable growth.
Some practices may choose to offer a ‘one
size fits all’ approach – or to put it another
way, ‘that’s our promise and price, you
decide’. Others choose to segment their
offering, perhaps using a menu approach.
Another common approach is to have
several tiers of service, say, Gold, Silver and
Bronze.
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‘Activity’ does not equal ‘value’
Don’t be fooled into thinking that the more
you promise your client, the more valuable
they will consider your service. Some firms
confuse activity with value, promising ‘Gold
clients’ a long list of deliverables and ‘Bronze
clients’ a shorter list, believing the length of
the list determines value. In fact, the reverse
may be true. The longer the list of promises,
the less credible it becomes. Which sounds
more credible and realistic, a short list of
clearly defined outcomes, or a long list of
possibilities?
The promise you make to your client is
fundamental to building trust. Each time you
make a promise you have a chance to keep
it or break it. Each time you keep it, you
build trust. Each time you break it, you lose
trust. You build your brand as trusted client
advocate by accumulating a history of kept
promises. The trick in building client loyalty
is easy really:
Make a simple promise and keep it – on
time, every time.
Building trust
The key to building a trusted relationship is doing what you say you
will – every time. Having a gap between what you promise and what
you deliver will result in an unsustainable business model. The viability
of your brand depends on what your clients experience, not on what
you say about yourself.
Building trust
15
Basing promises on your capacity
Successful practices that have built high
levels of customer loyalty, have done so
by ensuring their promise to clients never
exceeds their capability. They carefully
manage the relationship between the
promise to clients and their ability to
guarantee delivery.
Where a task or skill is important to the client
but low on the firm’s current capability, the
firm often seeks to remove the variability
of outcome by outsourcing. Even then,
outsourcing to somebody else to deliver your
promise is a significant step. Where the firm
has a high degree of skill or knowledge in the
practice, this should be leveraged in the client
offering, as it is something you can actually
control. Consider the key deliverables from
your firm and plot them on this graph.
Promise vs Control
High
Remove variability of delivery
and avoid over promising to your
client in this area
Exploit your expertise and
emphasise in your client
proposition
Manage the hygiene factors but
don’t over emphasise
Sell benefits of your expertise
and make a virtue of your service
Importance to
client promise
Low
Control over delivery
High
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Building trust
Getting your people on board
Delivering on your promise requires staff
who are organised and incentivised to
make that promise happen. This requires
motivated and aligned staff and a systematic
approach that ensures a consistent
outcome. It may be necessary to realign
staff and their tasks to ensure that they
deliver the promised outcomes. Teamwork
is essential, with everyone understanding
their critical part in meeting the promise
made to the customer. Recognition and
reward should be focused on meeting the
client promise. You can read more about
recognition and reward in a separate guide in
this series: Aligning your people.
Client proposition checklist
Putting together a compelling promise that
clients will be delighted to pay for is no easy
task. It takes considerable understanding
of your target market at the same time as
successfully setting out what sets you apart
from the crowd. What makes you different?
You need to be authentic, honest and
sincere about your capabilities and what you
can do for your client. Best practices also
spell out what they don’t or can’t do.
Best practices always start from the client’s
perspective. Why should a client use you?
What’s in it for them?
And they focus on several metrics in helping
describe their value:
„„Quality – What can we do better for the
client? (Better than the client themselves
or than another adviser).
„„Quantity – What can we deliver more of
(e.g. relevant plan updates) or less of (e.g.
pointless client communications).
„„Cost – What can we do more cost
effectively for the client?
„„Time – What can we do faster or more
efficiently for the client?
Having worked out the benefits to the client,
these benefits are then threaded through
the client interactions and reinforced each
time. The same messages should appear
when:
„„Prospecting for clients.
„„Contacting clients.
„„Bringing clients on board.
„„Reviewing with clients.
„„Turning clients into advocates.
Building trust
17
Example of a client value proposition checklist:
Have you identified your target client segments? Describe them.
For each segment, do you understand why those clients use the services of others?
Do you understand why those clients don’t buy your type of service?
Do you understand what troubles your target clients (quality, quantity, cost and time issues)?
Do you understand what your client is looking for (quantity, quality, cost and time)?
Do you understand the risks to your client of choosing you?
Have you captured and articulated your firms’ core values? What are they? How are they seen in action?
Have you identified the specific parts of the service you are offering your client? What are they?
If you are promising these to your client, have you confirmed you are in complete control of their delivery?
If you are not in complete control, how certain of your suppliers are you?
Have you linked your services to your clients’ needs? What are the benefits of your services to your
specific client?
Have you checked the competitiveness of your offering (quality, quantity, cost, time) against your
competitors?
Are you able to provide evidence of your success in the things you offer (e.g. client citations, awards)?
Have you identified your key differentiating messages? Are these threaded through your
communications? Are they used consistently by all of your people?
Have you checked that what you want your clients to hear is what they actually hear?
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What next?
With a well-defined and compelling client
promise, you can turn to ensuring you
keep those promises by systematising and
automating your processes.
The best advisory businesses have learned
how to automate a personal approach.
It is also essential that the systems and
process of the business are optimised to
ensure effortless delivery of your promise.
Humans are fallible and should be saved
for the value-adding personal touch to the
relationship. The highly repetitive, mundane
but vital processes should be automated
wherever possible. Machines don’t get
bored.
The next guide in this series, Keeping your
promises, explores this topic in greater
detail.
A valuable business
Achieving profitable growth
Value creation
Ensuring client loyalty
Defining a compelling client promise
Keeping your promise
Aligning your people
We are here to help
We are committed to supporting advisers
and practices through this transformation. If
you found this information useful, you may
want to visit the Adviser Support section of
our website.
Better yet, why not give us a ring? We’d like
to hear about what sort of information or
resources would be most helpful to you as
you work to build a valuable advice practice.
Contact Vanguard Adviser Support
0800 917 5508, or visit vanguard.co.uk.
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