The wealth management industry is one that lives and dies on the strength of relationships with clients. One of the reasons why these relationships are so poorly understood, analysed, measured and leveraged is down to poor research.

The wealth management industry is one that lives and dies on the strength of relationships with clients.  One of the reasons why these relationships are so poorly understood, analysed, measured and leveraged is down to poor research.

We’ve taken the lessons we’ve learned from studies done on behalf of our clients, and from our recent 2008 Satisfaction Study and come to a number of conclusions.

First, there are number of ways that customer satisfaction should not be measured:

Rely on informal feedback from clients.  Relationship managers tend to scoff at Customer Satisfaction studies, as they believe that clients will let them know immediately and directly if something isn’t working.  However, our 2008 Satisfaction study showed that when something had gone wrong, only two in five let the bank know.  One in three did nothing, with the remainder telling us they were moving funds away and/or looking for a new manager.

Another failing is defaults to postal or online questionnaires.  Clients are not stupid, however, since the effort to which the bank will go to understand them reflects on how important they are to the bank.  Postal or online studies are cheap; telephone or face-to-face interviews require professionally trained researchers.  Postal and online have low response rates, so rely on large volumes of invitations; telephone or face-to-face are more individualised and have higher response rates.  In the

UK this year, Ford and Hilton use a postal or online questionnaire for their client feedback; Rolls Royce and Claridges use one-on-one interviews.  Which of these brands would hope your clients equate you with?

On the other hand, here are some ideas on how to measure customer satisfaction. For a start, ensure everything is done on the client’s terms.  If this is done correctly, clients enjoy giving feedback.  After the initial satisfaction study, we get a very high proportion of clients saying that they are willing to help the bank out in future research, showing just how much they enjoyed it (in studies where Ledbury has interviewed over 500 clients per bank, the average re-contact permission is 84 per cent in 2008).

Also, recognise that the findings are important to all parties internally.  Not only are the results critical for management and the regulator, the analysis needs to be bought into by the front line.  The most effective way of doing the latter is to set up flags amongst the client base, flags that have a tactical use.  For example, we can identify those clients very likely to add more assets from their other managers, or those who want to become brand evangelists.

Do not delay. Do it now.  Clients, especially higher-asset clients, are a demanding group – in the 2008 Satisfaction Study those with between £0.5 million and £1 million were 53 per cent more likely to be happy with their bank than those with over £3 million.  Not only are higher value clients harder to please, they are also more likely to have had something go wrong recently.  We have found that getting things wrong is much more damaging than getting things right is helpful.  Our 2008 study showed negative moments of truth are 2.5 times more powerful an influence on satisfaction than positive events.

If possible, use professionals to do these surveys.  Use individuals or an agency who you are comfortable understand your clients, their financial needs and their lifestyles outside finance; professionals who are able to reflect your brand appropriately.

Historically, client satisfaction has been seen as an onerous exercise, imposed by a regulator or overbearing management; an exercise pilloried by relationship managers for being at best useless and potentially damaging to their business.  However, client satisfaction surveys and other engagement should be seen as an integral part of building and improving your client relationships, especially more so in today’s climate.

James Lawson leads the wealth management practice at Ledbury Research.