To run a successful practice, the most important thing a financial advisor needs is qualified clients. The second most important thing advisors need is client retention. After all, you can bring in all the clients you want, but if you’re not holding on to them, then you have a problem.
Each year, The Spectrem Group surveys more than 25,000 American households to gain better insight on client behaviors regarding investments and their attitudes about financial advisors. The study broke down investor demographics into mass affluent ($100K-$1M net worth), millionaire ($1M-$5M) and ultra-high-net-worth ($5M-$25M). This year’s survey revealed some startling information about why clients ditch their advisors.
First of all, most clients, regardless of their demographic, do switch advisors. According to the study, nearly 60 percent of clients have switched advisors at some point in their investing lives and roughly 25 percent have switched advisors in the past five years. The top five reasons clients may fire their advisors:
Reason 1: The Advisor Does Not Return Calls in A Timely Manner
Reason 2: The Advisor Is Not Providing Me with Good Ideas and Advice
Reason 3: The Advisor Is Not Being Proactive in Contacting Me
Reason 4: The Advisor Is Not Returning My Emails in A Timely Manner
Reason 5: My Portfolio Is Underperforming Compared to The Market
Something becomes apparent when we take a closer look at those five reasons. While two of those refer to the ideas and returns advisors provide to their clients, three of the reasons deal with something easily within your control—how you are responding and interacting with your client on a timely basis.
Communication is Key
Let’s take a look at a hypothetical scenario that could send some clients looking elsewhere. Imagine a client calls into your office early one morning. They have questions about the markets or their portfolio. An hour goes by, and they don’t hear back, then two hours. You plan to return all client calls, perhaps after the markets have closed. Meanwhile, the client is waiting and waiting and waiting. Finally, the client calls back. They want answers on what’s going on and why you haven’t responded. As the lead advisor in your office, you’re tied up in client meetings so you designate an associate to call them back. The associate answers the client’s questions, but a seed has been planted. This client is a candidate to bolt.
What went wrong in this scenario? The study revealed that almost all clients (95 percent) want a return call within 24 hours, but nearly 25 percent want a callback within two hours. Also, 43 percent said they only want to hear back from their advisor, not an associate or other team member.
Frequency of Contact
The study also revealed that clients want at least quarterly, face-to-face contact with their advisor. If you only meet with clients on an annual or semi-annual basis versus quarterly, their overall satisfaction with you drops by more than 15 percent. And, clients much prefer face-to-face meetings over other types of communication they receive from you. Ninety-eight percent of investors gave face-to-face meetings an excellent or satisfactory rating versus newsletters (84 percent), blogs (41 percent), and social media (36 percent).
One way to make a move towards better client communication is to free yourself up as an advisor. As we wrote about in the December issue of our newsletter, you need to ask yourself: Do you want to be an asset manager or an asset gatherer? Time you spend managing portfolios could be valuable time spent meeting with and responding to your clients.
For further assistance on how to implement any of the tips or ideas above, contact your wholesaler today!