A 2% increase in client retention has the same effect as decreasing costs by 10%.
While most IFAs grow their business by acquiring new clients, retaining existing clients is also equally important to achieve sustainable growth in advisory business. In fact, a white paper released by the Trust Company of America (TCA) has found that a 2% increase in client retention has the same effect as decreasing costs by 10%.
Last year, a report jointly published by Spectrum Group (a consulting & market research firm based in US) and Vanguard revealed five key reasons why HNIs fire their advisors. The reasons are – not returning phone calls in a timely manner, not being proactive in contacting clients, not giving good advice and ideas, not returning emails in a timely manner and underperformance compared with market. Of the five reasons, four were related to communication.
Cafemutual, with inputs from TCA’s whitepaper, picked four of the most important things to retain clients. Keeping these simple rules in mind during every life cycle stage of any client-advisor relationship will considerably impact client retention. Here are the four ways to retain clients:
Build relationships: Showing that you care about a client’s overall financial situation helps retain clients. In fact, a PriceMetrix survey shows that advisors who show such concern are 9% more likely to retain clients.
Convey the sense that you are not seeking to cultivate clients but rather relationships; take a personal interest in people and get to know them.
Also, telling a prospect about a feature of your product or service is a great start but explaining how the feature will benefit your lead is much more effective.
Risk management and setting right expectation: Before recommending anything to your clients, make sure you understand their risk tolerance. You can use various software tools available in the market to assess risk or use your own questionnaire. This will ensure you build portfolios that always contain the right amount of risk for each client.
Also, a lot of it also comes down to psychology. Hence, setting the right expectations in the beginning of any relationship will help you retain clients in turbulent times.
Stay in constant touch: Send out emails about the latest news or trends that may impact your clients. However, avoid drafting long emails; instead, giving an attractive headline with link works well.
Also, how often are you reaching out to your clients or meeting them? Some clients may like to meet once a quarter while some don’t like to meet for years. You can simply ask them as to how often they would like to meet you.
Value added services and offerings: It is not enough to just offer more in terms of financial planning for the future. Wealthy clients tend to demand greater control over their assets. It is important to find out what else your clients want. They might not be interested in a typical mutual fund.You can help your clients through add on services like tax planning or estate planning or else you can expand your product offerings by adding products like hedge funds, alternative investments to cater to HNIs clients. You can tie up with a subject expert if you don’t have expertise in a particular area.
Try to use these tips and share your feedback with us. We’d love to hear from you!
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