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Going into the new year, financial advisors need to take stock of their business and determine the one critical aspect they need to focus on that could make or break their year or even their career. Acquiring new clients is always a top priority, but there is even a higher priority for advisors hoping to break through to the next level. That’s because if you can’t retain the clients you have, you’ll find yourself in a deep hole, trying to claw your way out.
Why clients leave and what it costs you
According to a widely published survey by Financial Advisor Magazine, the number one reason clients cite for leaving their financial advisor is poor client communications. The survey puts that percentage at 72%. Only 34% say they would leave their advisor due to poor investment performance. Think about that. Most clients are willing to give their advisors the benefit of the doubt when it comes to managing their investments, but only one in four can tolerate poor communications.
Our last two posts discussed the importance of having a systematic client communication strategy and outlined a framework for developing one. If you’re not yet convinced this should be your highest priority in the coming year, consider this:
According to PriceMetrix, the average financial advisor loses 5 to 10% of their clients each year. It’s worse with clients who have more than $100,000 in assets. They have a 13% likelihood of leaving their financial advisor in a given year.
For a financial advisor earning $100,000 a year, that 13% likelihood could mean lost income of as much as $13,000 per year. That’s just the average. It could be far higher.
Of course, you can always replace that lost income by getting two clients. But at what cost? According to a study by the Harvard Business Review, obtaining a new client can be as much as 25% more expensive than retaining an existing client. How do you ever get out of that hole?
Put yourself in your clients’ shoes
Many of your clients are successful business people or professionals who understand that solid communication is the essence of relationships and trust. When they experience a breakdown of communication in one of their own professional relationships, it’s an immediate and telling indication of the quality of the advice or service they are receiving. Would you tolerate poor communications in any of your professional relationships? Probably not for long.
What, when, and how you communicate is your greatest differentiator
Client expectations have never been higher. It’s no longer enough just to meet your clients’ expectations because they know they have a choice in how and from whom they can receive financial advice. If you’re not constantly striving to exceed your clients’ expectations, you risk lapsing into mediocracy. How long can your clients tolerate that, especially when they hear about the exceptional service their friends or colleagues are receiving?
The greatest challenge for financial advisors right now is finding ways to differentiate themselves, whether for acquiring new clients or retaining existing clients. The quickest path to differentiation is delivering what clients want most from their advisors—consistent, personalized, and meaningful communication—that makes them feel engaged and valued. You do that, and your client retention will soar.
If it is to be, it is up to thee
You understand the importance of a systematic communications strategy. And you have a framework for developing one around your book of business. Now it’s time to execute. You may not have the time or resources to implement an entire strategy at once. So, break it down by its components and build it incrementally, focusing on making each component work well.
Whether your first step is creating a newsletter campaign, setting up an autoresponder, starting a blog, whichever step you choose to take first, start now. Make providing exceptional client communications your highest priority and watch your business thrive.