Welcome to Financial Advisor IQ

Want to Know How Your Clients Value You? Ask Them

September 1, 2017

This time we hear from David Edwards, president of New York City-based Heron Wealth. He explains how a client survey transformed how he thought of his work.

When I started my career as a financial advisor I was very focused on stock performance. I thought of myself as a stock picker and I defined my value using a very specific mandate: I was an expert in U.S. mid-cap stock picking and growth.

Around 2005 my clients began asking me personal questions that had nothing to do with stock picking. They wanted to talk about getting a divorce, or saving up to send a grandchild to medical school, or buying a vacation home.

At first, I would tell them to call their financial planner, their trusts and estates attorney or their accountant. But that wasn’t the answer my clients were looking for. I was the guy with my hands on their money and they wanted answers from me. I began doing some financial planning and estate planning for my clients but still considered my true value to be my work as an investment manager.

Then in 2007 I surveyed my clients to find out how they valued the firm. As part of the survey we asked clients to rank 10 reasons why they liked working with us. When we tabulated the results, investment performance came in sixth place overall. The number one reason was trust. As one client wrote, “Good news or bad, you will always hear it first from Dave.”

These results completely surprised me. Up to that point I had assumed my job was to beat benchmarks. But the survey showed me I wasn’t in the U.S. mid-cap stock-picking business anymore — I was in the “good advice” business.

That survey changed the way I thought of my job. Instead of delivering performance, I was really delivering objectives — the dream retirement, the second home, the grandchild’s medical school tuition. At the end of the day the client could care less about alpha, beta or benchmarks. That’s not why they hired me.

David Edwards

With this in mind, our firm restructured our entire approach to working with clients. Knowing our clients really wanted wealth advisors we brought in new talent to round out our existing skills. We also rebranded the firm from Heron Capital Management to Heron Wealth. We created a new, streamlined website that has a third as much information as the previous iteration — we trimmed away all the performance data. After the shift, our growth rate in assets went from 10% a year to 40% per year.

I also transformed the way I frame conversations with individual clients.

At the end of last year I met with a client who was very agitated about performance. He had been one of the first clients to sign up with me back in 1996, when he was 35 years old. For many years we outperformed the benchmarks but in the last decade we hadn’t, for various reasons.

Over the past few years we have been systematically dialing down risk in anticipation of his upcoming retirement. During our meeting I asked him a series of questions: Would he rather beat the S&P 500 or have a secure retirement? Would he rather beat the S&P 500 or know that his children’s college tuition is paid for? Would he rather beat the S&P 500 or buy a beach house? By the third question the client said, “Yeah, I get it.” He needed a little help remembering the big picture. Once he did, though, he felt much more secure.

It’s easy to get distracted by quantifiable goals and benchmarks. But my value as an advisor – as this survey revealed to me – is keeping the focus on trust, good advice and tangible outcomes.