Turn Client Focused Reforms into a Win-Win

Recently, I asked a successful advisor what he thought about the new Client Focused Reform (CFR) rules – yet another change impacting our industry. He said, “There is no point resisting if you are planning on being in this business for a long time. You have to embrace the new rules so you can continue doing what’s best for your clients. Ultimately, doing what’s best for your clients is going to be best for you and your business.” 

Game-changer or non-event?

I’ve been in the industry just over ten years now, and in that time, I have seen two significant regulatory changes – first CRM2 and now CFR. CRM2 was touted as a game-changer as it would provide clients with more fee transparency. At the time, industry pundits believed CRM2 would lead to a large exodus of clients once they realized how much they were paying their advisors. This prediction never materialized because most advisors were already disclosing fees to their clients. In fact, time and time again research shows that most clients are very satisfied with their advisors.

The net effect of CRM2 can be likened to the net impact of Y2K. A lot of hype, but essentially a non-event. It’s likely CFR will be another non-event as most advisors already act in their client’s best interest. What CFR can be is an opportunity for advisors to demonstrate their value further and create a better overall client experience. 

Here are some ways you can turn the new CFR rules into a win-win.

1. Show your full support for the changes

Your positioning of the new regulations with clients will be critical to creating a win-win. So start by explaining to clients that you are fully supportive of the new rules and believe they will lead to better outcomes. Reinforce that you have always put them at the centre of everything you do, but now some new rules require you to provide more details on how you make your recommendations. I have developed a sample positioning statement which is part of a presentation called Client Focused Reforms – How to make CFRs a win-win for you and your clients. Ask your CI Sales Team how you can view it.

2. Actions speak louder than words

Demonstrate your commitment to the new rules by formalizing your processes and incorporating the latest changes. Then review the updated procedures with your clients. You can always use visuals to validate. Be sure to point out any additional steps you may be taking above and beyond what the regulators require.

3. Engage with clients in meaningful interactions

Rather than approaching your regulatory obligations with a checkbox mentality, view it as an opportunity to build stronger relationships with your clients by spending more time with them and having deeper conversations. Ask a lot of curious, exploratory questions about all aspects of their life. You can also develop your listening skills to make your clients feel like they’ve been heard. 

These deeper discoveries will help you better understand their personal and financial circumstances, including potential risks and future goals. Subsequently, having more information about your client’s life will let you provide more tailored advice, leading to better outcomes and more committed clients. Research from Advisor Impact shows that committed clients give their advisors more referrals and more of their assets to manage, and they are far less likely to leave.

“The only constant is change” – Heraclitus

Paraphrasing the advisor I quoted earlier, resisting these changes is counter productive for future-minded advisors who are committed to serving their clients to the highest standards. If you apply some of the best practices in this post – such as showing your full support for the new rules through your words and actions, and engaging with clients in meaningful interactions – you can turn CFR into a win-win for everybody.

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Published August 4, 2021