Doing what's right for the client ... always

29 January 2018 | Topical insights


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Commentary by Michael Lovett, head of Vanguard Registered Investment Advisor Group in the United States.

two hands shaking

I spend a lot of time talking to advisers and learning how they provide great service to their clients. From time to time, I like to salute firms that are using best practices as part of their everyday business.

Recently I had the chance to chat to Harold Williams, president and chief executive officer of RIA Linscomb & Williams (L&W), a full-service financial advisory firm based in Houston, Texas, and ask him about L&W's value proposition. What really stood out to me was the firm's approach to client relationships. In 1984, L&W decided it was critical to start acting in a fiduciary capacity and in 1985 changed to a fee-based model.

No extra credit for treating clients right

Since its founding in 1971, L&W has emphasised the importance of building relationships with its clients.

"I've learned that you don't get extra credit for treating clients right," Mr Williams told me. "You get extra credit for proactively communicating with clients and understanding their needs."

L&W's ability to connect with its clients was never more apparent than when Hurricane Harvey hit southeast Texas in August 2017.

Shortly after the hurricane hit, the firm emailed all its clients, but this email was different because it didn't focus on traditional financial topics. It provided helpful links to organisations providing disaster relief, along with tips for filing insurance claims. While things like this have nothing to do with investing, they go a long way to gaining a client's trust and cementing the relationship. The L&W team was personally affected by the storm yet went above and beyond for clients during this difficult time.

Mr Williams told me how one retired client contacted the firm not long after the hurricane to ask whether the L&W team and its families were okay.

"This client has been with the firm since the early 1970s," Mr Williams said. "Like many of our clients, he views us as a trusted friend. You have to cultivate that trust."

Client trust drives business success

By getting to know your clients and what's important to them, you'll increase their level of trust in you.

Vanguard's research shows that clients who have a high level of trust are more than 12 times more likely to recommend their financial adviser to a friend or family member compared with a client with a low level of trust. That's proved true for L&W, with two-thirds of their new clients coming to them through referrals.

I love the opportunity to talk with top firms like L&W. I always learn something from these interactions, and viewing this kind of research reinforces a key lesson.

Investment performance, while important, isn't going to generate client loyalty in isolation. Making the client experience exceptional, proactively communicating with clients, and talking to them about things outside of what's going on with their portfolios are the actions that will form an unbreakable bond.

How do we know this is true? We asked investors, what would break the trust they have with their adviser? These are just a few of the reasons they gave:

  • There was a lack of timely communication.
  • The adviser was condescending.
  • The adviser didn't pay attention to them or their portfolios.
  • The adviser didn't make them feel that their business was important.

"If you only talk to clients when they contact you," Mr Williams said, "they're going to start to wonder 'How long would it be before my adviser reached out to me if I didn't pick up the phone? Would he or she ever? Does the adviser care at all?'"

I believe you, Harold! L&W's track record – spanning almost five decades – more than proves this out.

Michael Lovett Vanguard Registered Investment Advisor GroupMichael Lovett
Vanguard Registered Investment Advisor Group

Important information:

This article is directed at professional investors and should not be distributed to, or relied upon by, retail investors.

This article is designed only for use by, and is directed only at, persons resident in the UK. It is for educational purposes only.

This article was produced by The Vanguard Group, Inc. It is not a recommendation or solicitation to buy or sell investments.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Opinions expressed in this article are those of the author and may not be representative of Vanguard Asset Management, Ltd.

Issued by Vanguard Asset Management, Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.


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