How advisers can get genuine client feedback
While most would agree that getting good client feedback is desirable, it can be difficult for a financial adviser to know what their clients actually think. Clients could feel uncomfortable giving direct feedback to their adviser, and advisers could understandably feel uncomfortable asking for it. Things could get particularly tricky when the feedback is personal, such when it relates to how much a client trusts their adviser.
What clients really think could remain unsaid for other reasons too. For example, research shows that when communicating complex and sometimes ambiguous information, people can suffer from the ‘illusion of transparency’. This refers to the over-inflated sense that both parties to a communication often have that their messages have been received by the other party precisely as they intended.
More than just nice to know
Of course, what clients actually think isn’t just nice-to-know; for Australian advisers it’s deeply entrenched in both their legal and ethical obligations. There is a potential breach of these obligations if there isn’t a match between how clients understand the advice they have received and what the adviser believes they have explained. This is because advisers are required to have reasonable grounds to be satisfied that their clients understand their advice. Having simply provided an explanation might not be sufficient (if, say, that explanation was likely to have been misunderstood or ignored).
Another potential breach can occur if there are things that the adviser doesn’t understand about their client but should. At the very least, advice that is provided with a warning that it might not be appropriate for a client's circumstances is a poor substitute for appropriate advice that is provided on the basis of all relevant information ... especially if all that the adviser needed to do was to ask a couple more clarifying questions.
Similarly, if a client has outstanding advice requirements that the adviser doesn't discover then there is a possibility the advice has been inappropriately scoped, or that additional advice opportunities have been missed. Uncovering hidden information, misunderstandings and miscommunications is likely to benefit both the client and their adviser.
Do you understand my advice?
Of course, these problems are not going to apply to all clients and all advisers equally. As trust builds in an advice relationship, communication barriers can reduce. But even then things can remain hidden from both the client and the adviser. For example, this can happen when the client falsely believes that they understand something. Their lack of genuine understanding can remain hidden if the adviser asks questions like ‘do you understand my advice?’ An affirmative response could mean that the client merely thinks that they understand the advice, or that they are too embarrassed to admit that they don’t.
Similarly, ‘are you comfortable with my advice?’ sounds like the type of an empathetic question that advisers are encouraged to ask their clients. However, it can still be ineffective if the client doesn’t understand the advice in the first place. There is little point in clients feeling comfortable right up to the point at which they confront a harsh reality that they weren’t expecting.
In contrast, misunderstanding are more likely to be revealed and addressed by advisers who supplement their explanations with requests for their clients to reiterate aspects of their advice back to them. Doing so allows the advisers to identify any discrepancies between their clients’ reality and their own. The adviser can then judge whether the client truly understands their advice, rather than relying on the client to make their own (often flawed) assessment.
Asking for feedback
In many cases it will be appropriate for advisers to ask for feedback from clients directly, as an integral part of their advice conversations. However, in other cases this is less likely to be the case. When clients are asked to provide direct feedback, that feedback is likely to be skewed – it’s more likely that feel-good positive feedback will be provided and that much-needed but uncomfortable-to-hear constructive criticism will be withheld.
An alternative approach to receiving feedback is via a client survey. Surveys have the benefits of scale and quantification, and are relatively easy and cost-effective to implement. However, great care must be taken in how questions are framed. Small changes in their wording can sometimes make a big difference to how people respond. There is a risk that the survey results are held hostage by a few poorly chosen words.
There are other traps to avoid in interpreting survey responses too. For example, research shows that people are notoriously poor at predicting their future behaviour. They are often also poor at understanding and articulating the true motivations for their decisions and actions. This is relevant when asking clients about what they might do in the future or why they did something in the past. Client responses taken at face value can easily be misleading, and misleading feedback might be worse than no feedback.
A third option is for a trusted third party (ie someone who is knowledgeable about the relevant advice issues, but who is not the client’s adviser) to undertake client interviews with a representative selection of an adviser's clients. Using this approach, clients are no longer as constrained by the awkwardness of having to provide feedback directly to their adviser. Neither are they boxed in by the specific options they can choose from in a survey. Rather, as part of an interview their responses can be more openly clarified and explored. What this approach lacks in terms of its lack of scalability it makes up for in the richness and increased reliability of the insights received. A few potential topics for client interviews are outlined below.
As each approach to receiving client feedback has its strengths and weaknesses, and as each is suited to different types of feedback and to different clients, advisers might wish to use them in combination.
Appendix: Potential feedback discussion questions
1. How well would you say your adviser understands you? What don’t they fully understand about you that you think they should? What makes you say that? [Explore gaps in relation to the adviser’s understanding of the client’s advice needs / their circumstances / their goals & objectives / their preferences, etc]
2. How well would you say your adviser has met your advice needs? What do you still need advice on? What do you think has prevented you from receiving this advice? [Explore the advice they initially sought / the advice the client needs but did not explicitly ask for / how adequately the adviser explained the scope of the advice provided / whether the broader needs of the client’s family have been addressed, etc]
3. How well would you say your adviser has explained their advice? Do they ask you to articulate your understanding? Do they pause to allow time for questions? Do they use terms you don’t understand? Do you sometimes feel foolish asking questions? [Explore examples of how the adviser explained complex concepts, the use of visual aids, diagrams, questions, etc]
4. How much would you say that you trust your adviser and their advice? Do you feel it is easy to talk to your adviser about sensitive issues? Do you feel your adviser is frank with you at all times, and is willing to tell you things that they think you should know but might be difficult for you to hear? Do you feel they always act in your interests, or that they have ulterior motives in any of their advice? Do you trust that their advice is accurate? [Explore relevant examples of each]
5. What do you value most about the advice you receive? What do you value least? What makes you say that? Can you explain how your adviser charges for their advice, and what commissions and other payments they might receive? Do you consider your adviser’s fees to be fair? [Explore how they understand and assess value across different advice & services]