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They Love You Now, But Can You Keep Your Clients Loyal in a Downturn?

By Thomas Coyle February 16, 2018

Asset managers are always offering financial advisors unsolicited practice management pointers. Call it "value add" if you like, but many believe it boils down to marketing. So it’s interesting when such insights come from the very core of the firm’s investment philosophy.

In this vein, ACSI Funds tells FAs their profession is in better standing with the public than they might think -- especially if they look to consumer surveys for affirmation. Beyond shoring up egos, the study suggests ways individual advisors and firms might improve their standing with investors whose rosy views might not survive a sustained market downturn.

According to ACSI Funds, advisors get a score of 81 on the 0-to-100 scale of the American Customer Satisfaction Index, which is based on 1,473 customer surveys collected in the fourth quarter of 2017.

That’s on the high side -- on par with results for food makers like Kraft and Kellogg’s and shipping companies like FedEx and UPS. Sectors further up the ACSI scale include breweries, pop makers and TV manufacturers with scores in the mid-eighties. Among those close to the bottom are cable companies and internet service providers, which share a score of 64.

Such rankings are vital to ACSI Funds, an investment firm linked to Ann Arbor, Mich.-based ACSI, which was founded in 1994 by economist Claes Fornell in conjunction with the University of Michigan.

The asset manager provides investors with broad equity exposure to listed companies ACSI research reveals to have high levels of customer satisfaction and retention on the premise that such companies provide strong shareholder return over time. A little over a year old, ACSI Funds only manages about $50 million.

“The true test will come when the stock market declines and financial advisors may have difficulty justifying their fees and holding on to clients.”
David Van Amburg

That said, it recently got on Wells Fargo’s platform and launched an index fund that weights components of the S&P 500 in reverse order in an effort to extract greater growth.

While the idea of being near the top of the reputational heap may be novel for some FAs -- especially those used to scathing reports from consumer pulse-takers like Gallup -- people behind the study think it makes solid sense.

"With the S&P 500 up 19% and the Dow up 25% in 2017, it’s not surprising clients would be pretty happy with their financial advisors," says ACSI managing director David Van Amburg.

But with recent market reversals "as a warning sign for any financial advisor that isn’t fighting to improve their customer experience," Van Amburg also believes "the true test will come when the stock market declines and financial advisors may have difficulty justifying their fees and holding on to clients."

Meanwhile Kevin Quigg of Exponential ETFs, the marketing arm of ACSI Funds, says there are indeed steps FAs can take to make improvements that can pay off in a downturn.

While the ACSI survey says customers are satisfied that it’s easy to open an account, navigate websites and get information on funds, they’re less apt to say firms give them as much face-to-face contact as they’d like and that mobile-device access is up to snuff.

The first of these concerns is something FAs can act on to shore up client loyalty: simply reach out more. The second, mobile access, is likely to come together pretty soon as technology and compliance standards come to terms "as they did for websites," says Quigg.

It’s also fortunate that both these concerns are of particular importance to millennials, who are on the receiving end of "the greatest wealth transfer in history," says Quigg. Satisfy these younger and soon-to-be richer investors on those points, and it’s that much likelier you’ll come out of a downturn intact and with relatively happy clients, he adds.