Client Retention Strategies for Financial Advisors

Published in Blog |

How often have we heard the expression, “Clients are the lifeblood of the business, treat them well and they will take care of you.” Odds are, every one of us has heard it at some point in our financial advising career, either from a manager or on our favorite podcast.

As cliché as this saying may be, there is a great deal of truth behind it. For a financial advisor to be successful, they need to be able to increase their client retention rate.

The Importance of Client Retention

The retention of existing clients should be one of the most important items on a financial advisor’s to-do list. By nurturing current relationships, not only do you increase the chance of retaining the client (and their business) for many years, but you also open the door to using that account as a referral source.

In fact, research shows that more than 70 percent of millionaires are likely to refer other wealthy investors to their primary advisor. On the other side of the equation, if you aren’t providing value to these wealthy clients, one of their friends may have an advisor that will. Retaining these types of clients that consistently pass you referrals can be the difference between achieving your quarterly goals or missing them all together.

Why Clients Leave Financial Advisors

Many advisors are still in the mindset that focusing on bringing new clients in, instead of growing their current book organically, is the best approach to success. However, a study from The Spectrem Group may point advisors down another path.

According to the results, investors with more than $1 million in investments said they’ve left advisors because of the following reasons:

  • 61 percent left because their advisor didn’t promptly return phone calls
  • 53 percent left because the advisor wasn’t proactive enough about reaching out to the client
  • 46 percent left because the advisor didn’t return emails in a timely manner

Client Retention Strategies

As a financial advisor, client retention may seem like a daunting task at first but there are simple tactics you can implement that will go a long way toward keeping your clients happy. For example, communication, transparency, understanding your client, and managing expectations are all great ways to ensure you will have a client for life.

Healthy Relationships Are Built on Communication

The foundation for all healthy relationships begins with frequent and valuable communication. One of the biggest reasons why clients are unhappy with their current advisor is that they never hear from them. Or when they do talk with their financial advisor, they feel that they aren’t being properly heard. You can see how this type of communication can quickly turn a relationship sour and lose you multiple clients in the process.

So, what type of tactics can you work on that will help improve the level of communication between you and your clients? Often it doesn’t take much to keep clients happy. Many just want to be able to have their questions answered in a timely manner. If you have someone who emails you at 5 p.m. on Friday, instead of pretending like you didn’t see it, spend the extra 15 minutes to type out a response.

Other great ways to ensure your clients keep you top of mind could include sending out a monthly email newsletter, a postcard, or a simple phone call. All of these can go a long way in improving your client retention rate.

Keep Conversations and Information Transparent

Transparency and trust are two of the most scrutinized factors in the financial services industry. There have been horror stories of people losing their entire life savings because an advisor made decisions that weren’t in the best interest of their client.

On the flip side, there have also been new advisors who thought they were behaving in the interest of the client but made a mistake. Instead of owning up to the mistake, they try to keep it hidden until the problem escalates to the point that it can’t be kept a secret anymore.

Regardless of the reason, inexperience or selfishness, the actions of some advisors have left a large portion of the community with uneasy feelings toward financial service professionals. It is your job to establish a level of trust with any new and current client, so they feel at ease with your decisions. After all, you are the one person that could make their retirement funds vanish in a split second.

Establishing trust can simply be accomplished by being transparent with everything you do for the client. Walk them through your plan for their finances. If you have gone through the Bucket Plan Process with them, go back through the documentation and confirm everything. Talk to them about their product and investment selections.

Give them the opportunity to ask as many questions as they need in order for them to feel comfortable with you handling their money. Most of all, if something bad happens be upfront and honest with them about it and let them know how you plan on solving the problem.

Understanding Your Client’s Risk Tolerance

One of the first things you should do when bringing in a new client is discuss how comfortable they are with risk. Some people like to play things a little safer and would prefer a plan that has a low amount of risk, while others may want to maximize their return with little regard to the risk involved. Either way, understanding your client’s risk tolerance is important to ensuring you start the relationship on solid ground.

It is also important to set expectations early on so that there are clear deliverables on both sides of the relationship. The client gets the results they are looking for, and you understand what products you can put them in, while staying within their comfort zone.

Investors who tend to be more risk-averse will also need more communication, should there be sudden market fluctuations. It’s a good idea to have notes on every one of your clients, so you can quickly reach out and walk them through your plan to keep their funds secure.

Your Clients Are More Than a Number

A struggle that many new advisors and even experienced planners can often fall into is focusing too much on the investment and not the investor. While it is important to get the highest possible ROI for your clients, it shouldn’t be done at the expense of making them feel like they are only a number. For many people, the money they invest with you represents much more than just an investment. It represents a lifetime of hard work and the funds they hope to live off of later in life.

Showing that you care about the investor’s overall financial situation can lead to an increased client retention rate. People ultimately want to do business with those they trust and who they feel have their best interest at heart. By asking deeper questions about goals, family, and the future, an advisor can quickly move past the investment and get to know their client on a more personal level.

Managing Expectations and Your Role in the Relationship

One of the best client retention strategies to work on as a financial advisor is to manage and exceed expectations. As an industry, professionals in the financial services sector have a poor reputation for not following through on commitments. This might be as simple as telling a client you will call them on Monday and then failing to do so. Regardless if you are busy or not, if you can’t follow through on a prior commitment, it is important that you still communicate with your investor that you need to reschedule.

If possible, delivering on an expectation faster than originally communicated is a great way to show you care about your client and their time. For example, if you tell them you are going to finish the documents tomorrow and email them to them. Go one step further and spend a little extra time the night before and send it over so that it is waiting for them first thing in the morning. Little gestures like that can go a long way in improving a financial advisor’s client retention rate.

For additional client retention strategies and tips, contact our business development team today. Discover how other elite advisors are transforming their financial practice and reaching new heights of business success with our proven processes, training, coaching, and mentoring.