For better or for worse, we talk a lot about client satisfaction in this industry.
Since 2009, when Absolute Engagement began tracking satisfaction among high net worth clients, it has been consistently high. Advisors should feel collectively good about the 92 percent of clients who say they are somewhat or very satisfied.
That kind of data makes us feel good, which has some benefits. And it allows individual advisors to identify those few relationships that may be at risk. As a result, measuring satisfaction will never be a bad thing.
Today, however, I want to make the case that measuring ‘self-confidence’ is a better way to manage risk, differentiate the experience and uncover opportunities to engage.
Defining Self-Confidence
Let’s start with a definition. While the ideal of ‘self-confidence’ seems open to interpretation, we don’t do vague at Absolute Engagement.
We created a proprietary index that is a composite reflection of four things - the extent to which clients (or prospects) feel financially secure, along with the ‘three C’s’ – confidence, clarity and control when it comes to defining and reaching financial goals.
The four factors that contribute to self-confidence are based on in-depth analysis. Simply stated, we let the data tell us how best to define it.
Self-Confidence Over Satisfaction
Since 2020 we’ve tracked the Absolute Engagement Self-Confidence Index at an industry level and have calculated a score for thousands of individual prospects and clients on behalf of their advisors. That analysis has led us to a conclusion.
Measuring and responding to self-confidence can transform relationships.
So why is self-confidence such an important metric? Simply stated, self-confidence is not only a more robust indicator of risk, but provides advisors with more meaningful insights to take action and drive engagement. Let’s look at both.
A Leading Indicator of Risk
We believe that satisfaction is a lagging indicator of risk and self-confidence is a leading indicator of risk.
- Satisfaction is a helpful metric in identifying clients at risk. Based on our research, eight percent of clients are at risk because they are ‘neutral’ or ‘dissatisfied’ with the relationship.
- Self-confidence is highly correlated with satisfaction, loyalty and Net Promoter Score. That means that the extent to which I feel confident or in control of my financial future has a positive, or negative, halo effect on my relationship with my advisor. As a result, self-confidence is an indicator of future risk. Based on our research, almost a third of clients may be at risk because they are low or moderate on self-confidence.
The difference between the two faces of risk is important. Self-confidence is a hidden, and ultimately more insidious, form of risk for advisory firms. When a client is low (even slightly) on self-confidence they are telling you how they feel; that sentiment is an important signal. They may not be dissatisfied today and they are giving you the opportunity to support them in a way that will drive loyalty and engagement in future.
Simply stated, you can’t manage risk through a rearview mirror. Satisfaction is about the past; self-confidence is about the future.
A Leading Indicator of Need
While assessing risk is important, the real benefit of measuring self-confidence is the opportunity to create a differentiated experience and to drive deeper engagement.
Self-confidence tells you something about the person and how to help.
- Low satisfaction signals a need to improve the service you provide.
- Low self-confidence is more about the client than about you.
As such, low self-confidence it is not an indictment of the service you provide, but an opportunity to support a client in need. Their level of confidence may have as much to do with their money history, relationships or mindset as it does with the service you provide.
The Problem with Human Beings
The beauty of measuring self-confidence is that it provides you with a short-cut to identify client needs – a clue or a signal to dig deeper. Perhaps more importantly, it provides clients with a simple way to communicate how they are feeling.
It turns out that clients aren’t terribly good at understanding or communicating how they feel. If you asked a client about their level of self-confidence, you’d be met with a blank stare. But if you ask them to consider specific aspects of their financial future, they can respond easily. How they respond can highlight significant concerns or small cracks in the foundation and either is important.
You may find that your clients haven't fully shared how they are feeling about the future. More often than not, that’s because they can’t, not because they won’t. Having a way to measure self-confidence makes the process of understanding their feelings easy and unobtrusive. That understanding helps the client as much as it helps you to help the client.
Using Self-Confidence to Drive Engagement
So how can you use a self-confidence measure to drive deeper engagement?
Let’s look at a few options.
- Open up a deeper conversation. If confidence is very low, you can play a fairly obvious role in supporting the client. However, knowing a client is feeling a little ‘out of control’ or is ‘lacking some clarity’ when they think about their goals also gives you an easy way to open a deeper conversation. A lower rating on just one of the self-confidence factors is an opening to learn about the client or prospect and to help them learn about themselves. Your job is to create a safe space to examine how they are feeling, why that is the case and what it would take to feel differently.
- Engage couples. If there is a difference in self-confidence within a couple, there is an opportunity to go deeper and understand how that impacts their approach to money and the future. As importantly, examining the gap means you will more actively engage both partners.
- Identify changes in perspective. If self-confidence changes over time, there is something going on in the client’s life that is worth examining. Even the client may not have pinpointed the change and digging into why their responses changed can provide you – and them – with new insights about what is important.
- Linking self-confidence to the plan. Self-confidence is often driven by mindset, emotion and external factors, but the financial plan plays a pivotal role in grounding the conversation. Once clients or prospects have been given the space to examine and articulate their views, you can shift the focus to the plan as a way to close the self-confidence gap.
Taking Action
The action here seems obvious enough and that is to track self-confidence on an ongoing basis. Consider the following.
- Invite prospects to share input that allows you to calculate their self-confidence index score and share that back with them in advance of meeting.
- Track self-confidence with clients over time and in advance of each review to ensure you are focusing on the right issues.
- Share a client-level “<INSERT YOUR FIRM NAME HERE> Confidence Index” update with clients as a way to demonstrate the value you are delivering (focusing on change over time).
- Ensure you are measuring self-confidence as part of any process to measure satisfaction or Net Promoter Score.
Related: Is ‘Surprise and Delight’ an Effective Client Experience Strategy?