Client engagement: do it or die

06 December 2017 | Webinars


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Despite the rise in demand for advice, only a minority of clients are genuinely engaged. What to do?

According to Neil Cowell, head of UK intermediary sales, the solution is to adapt the proven techniques of business leadership to capture the trust, loyalty and enthusiasm of clients, setting the path to growth and success.

Leo Schulz, senior investment writer, speaks to Neil Cowell about the importance of client engagement.

This is an edited transcript of their conversation.

Leo Schulz:  Client engagement – do it or die. As financial advisers face increasing competition from automated robo-advisers, the human engagement of their client becomes ever more important. My name is Leo Schulz – I’m delighted to have with me today Neil Cowell, head of UK intermediary distribution at Vanguard.

Despite Neil’s youthful good looks, he has been in the industry for many years and has seen financial advice evolve from something of a frontier sector in the 1990s, through RDR, to where we are today, looking at the rise of fintech and automated services.

I think it’s fair to say that over the years Neil has put a great deal of thought into how advisers interact with and engage with their clients, and why this matters.

For our live listeners, you should now see a box come onto the screen in which you can type questions. I’d like to give Neil time to go through his presentation and we’ll take as many questions as we can at the end. We do have well over 100 participants on the call today, so if we don’t get to you personally, we will definitely follow up.

The webinar entitles listeners to 30 minutes’ CPD. To collect your certificate, either contact your usual representative, or email

Neil, we think of the challenges to financial advice, greater regulation, greater competition, but the reality is that there’s a big opportunity here, isn’t there?

Neil Cowell:  Yeah, I think that’s absolutely right, Leo, if we look at this first slide, I think that demonstrates that very clearly. This is platform data, but you’ll see that over the last eight years, UK advised assets have grown by an average of 160% every two years, so that’s terrific growth.

That’s also supported by some recent data from Cerulli, who looked at the extent to which younger people were now prepared to pay for advice, and that’s significantly on the up – in fact, this is Vanguard’s own US data – we’re seeing the same thing. Over the last ten years our direct-to-customer business has grown by a factor of three, whereas our advised assets have grown by a factor of six over the same period, so whichever way you look at it, there’s clear evidence that the need for advice is growing.

Leo Schulz:  There’s real demand there, isn’t there, and when we think about the complexities of people’s financial lives, the extent to which those complexities have multiplied in recent years, having to think more about our retirement, having to think more about the cost of housing, pension freedom and so on, there’s a real need for advice there, isn’t there? So the question is to what extent are advisers capturing that opportunity?

Neil Cowell:  I think that’s absolutely the question, yeah. So we did some work with Adviser Impact about three years back, and produced several white papers looking at this very subject – the extent to which clients were engaged, and the extent to which advisers therefore were maximising or capturing that opportunity.

This chart here is really quite telling, actually – we interviewed with Adviser Impact 1,500 clients who were paying advisers’ fees, so working very closely with advisers. And we were asking them questions around their levels of engagement, the extent to which they valued the service, and there was clear data emerging that only 15% of advised clients were engaged.

Now there’s an interesting element to this slide. If you look at the two bubbles in the middle there, nearly 70% of clients were in the category ‘OK’ - they were fairly content, they were perhaps even complacent, so they weren’t going anywhere - but they certainly weren’t engaged.

And when we actually drilled down, I mean if you look at this word engagement, what does it actually mean? Well I did some research of my own in the English Oxford Dictionary, and when we talk about engagement, we’re talking about people that are committed, they feel involved, they’re participating, they’re sharing, and I think these are attributes that we’re really trying to identify now, you know, because if we can get to that, there’s a real benefit in it for advisers.

And I think if we just have a look at this next slide, we can see why it matters, I mean the first question that emerges is, with only 15% of clients engaged, I guess we have to challenge ourselves as an industry, you know, are we holding ourselves to a high enough standard? And are there benefits to engagement?

Again, you know, clear data showing from the Adviser Impact research, and it was a very, very big sample – 1,500 people, all of whom were paying fees, and three things emerged where we saw this engaged segment. One, they were staying with their adviser longer, two, and this is very important, they were giving them a far greater share of wallet, and three they were referring regularly to that adviser firm. I would make the point, referring not to do the adviser firm a favour, but referring because they wanted to do someone that they cared about a favour, so I guess the question is why wouldn’t adviser firms want that?

Leo Schulz:  So it makes a real difference, doesn’t it Neil? Looking at those two middle bubbles, as you say, about people who are kind of OK, and that is the vast majority, in fact, of clients - what’s the matter with being OK, what’s the matter with the fact that people are getting along, they’re getting some advice, things are kind of working out? But there is a real difference, isn’t there, between being OK and actually being engaged?

Neil Cowell:  I think you’re absolutely right, and I mean maybe we’re using the wrong metrics here, I mean if being OK means we’re not losing clients and we’re not losing revenue, then that’s fine, but being OK and not being engaged means we’re not getting the benefits of that greater share of wallet, we’re not getting that longevity, and we’re not getting the referrals as regularly as we might, so there is a difference, and a meaningful one in terms of bottom line.

Leo Schulz:  I mean long term you need to grow to survive, don’t you?

Neil Cowell:  Absolutely

Leo Schulz:  And so that’s where engaged clients are really going to make the difference.

Neil Cowell: This data that we’re looking at is directly taken from the Adviser Impact work we did - we’re talking here about longevity, greater share of wallet, and referrals – that’s the prize.

Leo Schulz:  So let’s look a little bit more, Neil, if you don’t mind, about what action can advisers take to start to make a difference with their clients.

Neil Cowell:  It’s a good question, I mean I would make the point here that key to the conversation we’re having, is this equation, Leo that you know, Gallup, who do a great deal of work on employee engagement, is very, very clear on – where they see outstanding leadership, they see engagement, and where they see engagement, they see compellingly different results, positive results.

So you know, when you think why the companies, Vanguard included, why the companies spend many, many millions each year with companies such as Gallup, with surveys, with work, trying to identify and drive their own staff engagement, they, I suggest, don’t do it out of a sense of altruism, but they do it because there’s hard economic benefit to doing that, and that’s the Holy Grail – trying to find this formula to drive engagement.

So I think it’s clear that, let’s not lose sight of that equation – I’ll repeat it, you know, outstanding leadership equals engagement of crew, of staff, and where we see that engagement we see results back to the adviser world here, by results we’re talking about greater wallet, we’re talking about longevity of relationship, and we’re talking about referrals.

Leo Schulz:  So, meaningful differences.

Neil Cowell:  Meaningful differences, and to your question, I mean there are many commentators on the thing that leadership, people will have read Porter, people will have read Collins I’m sure. I mean I personally read much from Kouzes and Posner over the years, and for the simple reasons that Kouzes and Posner, their research is experiential, it’s simplistic beyond belief, and very importantly, it’s actionable.

Kouzes and Posner interviewed around 10,000 people in different industries across the globe, and their premise was quite straightforward – they went to places where they saw high performing teams, and simply spoke to the team members and said why do you think you’re so successful, what’s happening, what’s your leader doing to drive this success?

And across those 10,000 hours, they just got five continual things repeated, and those things were, our leader sets a clear direction, we never doubt what’s expected of his team, or what’s expected of us as individuals. They said that our leader recognises us and rewards us appropriately, we feel valued, the third thing that came out was they said we’re never asked to do things that the leader doesn’t role model themselves, there’s a clear value role modelling going on.

The fourth point was our leader talks inspirationally, he’s very, very open, she’s very, very open about this business, its place in society, where we’re going, what the mission is. And fifth, and very importantly, the feedback from the Kouzes and Posner research was our leader spends time with us. You very often hear in industry I’ve got an open door policy – that’s not enough, 50% of the time great leaders spend with their people are either one-to-one, or in teams.

So Kouzes and Posner have done their whole work, there are many books by them, but their whole premise around great leadership is set around those five clear leadership behaviours. And I guess what we’re saying here is why can’t there be parallels between those five leadership behaviours, and what adviser firms might be able to introduce into their own businesses. So rather than the relationship being between the leader and their staff, why can’t this relationship be translated into an adviser firm with their clients? The same principles must exist.

Leo Schulz:  So let’s look at that idea, Neil, perhaps we could just go through each of those five principles individually and think about how they might translate from running a business to interaction between the advisers and their clients. So if we start at the top, setting a clear direction.

Neil Cowell:  Yeah, so here, and I would start by saying adviser firms, Leo, will clearly have their own ideas about how to translate this, what works for them, what they think about, any of these themes. So these are just some suggestions, you know, that can be used tactically, but we would encourage adviser firms to think it through in terms of their own particular style.

But certainly I would say on number one, are clients clear about a firm’s purpose, their adviser firm’s purpose? You know, if you like their firm’s reason for why they exist, what should clients expect from them. Is that evident to them, you know, is it through websites, through stationery, through regular communications, is it very evident that the clients’ goals are clearly in view and are kept there? So it’s back to this direction – does the client feel assured that they’re going in the right direction, and that direction is firmly understood by the adviser firm?

Leo Schulz:  OK, and the second principle then, recognising and rewarding.

Neil Cowell:  Yeah, I think this is a little bit about communication as well, you know, are clients regularly communicated with in terms of being on track for their goals, about how are we doing, and is their loyalty recognised? It’s easy to think a half-yearly review is enough, but what other comms are taking place, in what other ways do adviser firms make clients feel valued?

That is about communication, it is about reassurance, it is about confirming to them that their goals are understood and are clearly in view.

Leo Schulz:  So this might be some of it one-to-one as it were, so for a half yearly review for example, but media is also something which firms can use, emails, social media…

Neil Cowell:  Yeah, agreed, you’re absolutely right, there’s a multi-channel approach here, and there is overlap - ultimately what we’re saying is great leaders are visible, great leaders communicate with their clients, keep them reassured. And you’re right, that will obviously take place in one-to-one sessions, it can take place with client councils, it can take place using webinars, it can take place and use all sorts of different media, you’re absolutely right.

Leo Schulz:  It’s all about being a bit creative isn’t it, and thinking a little bit outside the proverbial box. And the third principle, Neil, and I think this follows very naturally from the second, doesn’t it, role-modelling their value…

Neil Cowell:  Yeah, I mean again, the successful adviser firms are very clear about why they exist, and that clarity transcends through to the staff of that firm. So I guess what we’re saying here is how comfortable and confident are adviser firms that their employees are completely behind that reason why?

Because there are so many opportunities, multiple touchpoints for members of the teams, staff, whatever within that firm, who are regularly communicating with clients, regularly touching those clients, many opportunities there to remind clients of that firm’s mission, where they’re going, and keep them in touch, you know, call it being inspirational, call it being communicative, call it what you will, but don’t lose that opportunity of making sure that the staff of the firm are behind the reason why.

Leo Schulz:  Yeah, very important, I’m sure that most people would agree, the fourth principle, Neil, talking inspirationally, it feels like a big ask – is that something which people can learn, is that something which can only come naturally, what does that involve?

Neil Cowell:  Yeah that’s a good question, Leo, and by inspirationally we don’t mean people here performing on stage, or anything of that nature, we’re talking about regularity, we’re talking about rhythm, we’re talking about multi-channel.

We’re talking about adviser firms finding many opportunities to be out in the media, whether that be through webinars, through blogs, through trade journal articles, through their own newsletters, it’s just keeping in front of clients – it’s just reminding them of what the firm is, what it stands for, where they’re going, its place in the industry. So it’s just reassurance really that the firm is very clear about its direction and it’s regularly communicating.

Leo Schulz:  The fifth behaviour, Neil, spend time coaching people, and this does really seem important.

Neil Cowell:  Yeah, it does, and if you go back to the Kouzes and Posner work here, you know, they are very clear and hard-hitting in their research that if leaders aren’t spending 50% of their time with their people, then they need to question what they’re doing. And as I said earlier on, having an open door policy is not enough – that needs to be deliberate, it needs to be one-to-one time, it needs to be in team meetings etc.

So again, thinking about here how can adviser firms find parallels with that connectivity with clients, it’s not just about the one-to-one review, it’s about thinking about connecting with the wider family, the inter-generational aspect of it, are children a core part of the relationship, if not, why are they not? It really is just about finding as much opportunity for physical time with clients as you can, ultimately that’s what makes them feel valued.

Leo Schulz:  So if we then, I think those are really great insights, Neil, so if we just sort of bring that to a conclusion then, if we go back to our bubbles, what are we looking to achieve?

Neil Cowell:  The aim here is to take those two middle bubbles of around 70%, that are sitting somewhere in comfortable, maybe even complacent, and see to what extent we can move that towards engaged. We’re hoping to demonstrate here that, and again I would stress it would be up to each firm to decide what this means for them and to think of their own tactical solutions or strategic solutions, but we’re hoping to demonstrate here that engagement matters.

It’s not a high enough standard to say that because clients are OK and they’re not leaving it’s fine - it’s not fine. What we should be seeking here is that engagement factor, which drives longevity, wallet, and referrals, that’s the Holy Grail, really.

And so the aim is to move from this situation where only 15% of the clients are engaged, to an environment, or to a future state where the majority of clients are engaged – there’s no reason why that can’t be. And I think that requires thought, it requires some deliberate actions, and it requires maybe some process as well, there’s no doubt about that, but there is definitely a worthy goal here to be had at the end of it.

As I say, it’s up to each firm to think about what this might mean for them, but we’re very clear that there has to be parallels here between what we see globally in the industry, and outstanding teams and outstanding results coming from leadership, there has to be parallels here for advisers to use, we think.

Leo Schulz:  I think that’s a really interesting insight, Neil, and I really like the way that you break it down into those behaviours, which are very practical and actionable ideas that you can interpret as you say in their own circumstances.

Just before we come to a conclusion, I’d just like to think a little bit more about how this fits into some wider market conditions, because we’ve kind of got these two things going on, which we touched upon at the beginning, on the one hand, the market is expanding, more people are looking for advice, on the other hand of course there are other ways of obtaining advice, particularly through automated services, through robo-advice, which I’m sure for a certain number of people is perfectly adequate. And I’m just really trying to dig in a little bit to think about how do advisers emphasise or leverage what it is that they do above and beyond what an algorithm can do.

Neil Cowell:  Yeah it’s a good question, I think our Adviser’s Alpha research clearly shows the balance required here, I mean advisers that are familiar with our research will know that of the 3% per annum advantage that we think an advised client has over someone that’s self-serving, 50% of that benefit comes from the personal touch, it comes from the adviser acting as the behavioural coach, it comes from the adviser acting as that emotional circuit-breaker, the relationship-builder, none of which can be done by algorithms as you say.

But we would also say that rather than seeing technology as a threat, it has to be embraced because that other 50% of value-added is going to come from embracing technology. The adviser firm of the future will have to be embracing technology to be keeping costs low and maintaining profitability, there’s zero doubt. It’s about blend, it’s about using technology smartly where you can, but it’s also about not losing sight about what drives engagement, and that piece that’s required of that human touch element.

Leo Schulz:  So the technology is also an opportunity, isn’t it?

Neil Cowell:  A hundred percent.

Leo Schulz:  In that it’s the way to reduce costs and to remove from the adviser work which is relatively routine, just to think a little bit more Neil about that human relationship, which is driven by and depends upon client engagement, talking about behavioural coaching, the circuit-breaking, is that because, it’s not obvious, is it, what is a good investment behaviour, it’s not something that you’re just born with?

You see the market rallying massively and you think I should be buying into that rising market, or you see the market falling rapidly and you think I should be selling, there’s a kind of intuition, which is often a good investment behaviour is quite counter-intuitive to your first response.

Neil Cowell:  Yeah, we talk a lot about this idea in the Adviser’s Alpha framework, and I guess the essence of what you’re saying is a great investment plan starts with being very clear about a goal, why you’re investing, what you’re seeking to achieve, without which you could argue it’s very difficult to do anything more, you know, that goal is critical. But having put that goal, having established that goal, then it’s about getting those right risk characteristics, finding the right asset allocation, ensuring that rebalancing is done, all of those things are perhaps counter-intuitive.

I mean rebalancing requires you to sell from the highest performing asset and buy the one that isn’t, for example, so that by definition is counter-intuitive, market volatility, you know, causes a response from a client perhaps, and that’s back to the adviser’s role as an emotional circuit-breaker, so yeah you’re right, lots of market conditions generally will drive responses in clients, that a great process and a great relationship will navigate through quite easily.

Leo Schulz:  And I think that’s the critical conclusion, isn’t it, that if you’re going to provide that service, then engagement is key to it, isn’t it?

Neil Cowell:  Absolutely, Leo, yeah.

Leo Schulz:  The nature of financial advice is changing, that’s only to be expected as client needs evolve, but with change comes opportunity, and the key to that opportunity in 2018 is in the right engagement with your client.

I will be back next month at 2pm on Tuesday 20 February, my guest will be James Rowley, one of Vanguard’s foremost experts on index fund investing: what is the future of indexing, can we continue to expect indexing to offer low-cost, broad market access for our clients long into the future?

Jim Rowley will be here to tell us what is to come. Just as a reminder, the webinar entitles listeners to 30 minutes’ CPD. In order to collect your certificate, contact your usual representative or email

That is everything for today, thanks to Neil Cowell, and thanks to our listeners, may 2018 bring you health and wealth.

Investment risk information

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

Important information

This document is directed at professional investors and should not be distributed to, or relied upon by, retail investors. It is designed for use by, and is directed only at, persons resident in the UK.

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

The opinions expressed in this material are those of the individual speakers and may not be representative of Vanguard Asset Management, Limited.

This material was produced by Vanguard Asset Management, Limited. It is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.

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

© 2018 Vanguard Asset Management, Limited. All rights reserved


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