Client retention is job number one

Now that we’re back from the end-of-the-year celebrations, I’d like to draw your attention to a little-known date that should be part of every financial advisor’s calendar. January 2 is the day that most advisors should circle and celebrate – and for good reason.

The vast preponderance of advisors these days are heavily weighted toward fee-based business, and an increasingly large number have migrated to becoming fee-only advisors. Ask any advisor who has been in the industry for a while about their commission-based years, and they will tell you that January 2 was easily the worst day of the year. That’s because advisors wouldn’t have ongoing income coming in to help start the year; they would be sitting at their desks, trying to figure out what product they could sell – and to who – in order to have money coming in. 

When the industry shifted business models to charging fees for assets under management, all of that changed. Advisors who conduct fee-based business can now start the year from a position of strength. They know what assets are on the books, what income is reasonably expected from them, and how their revenue streams will work. The unexpected can still happen (e.g., market movements or legislative changes), but for the most part, fee-based advisors can forecast and plan in ways that commission-based advisors could only dream about. 

Your current clients are the key to this sustainable revenue stream. So, it’s important to take a closer look at your best clients and start paying careful attention to client retention. Not all advisors have a plan or services focused specifically on client retention – instead, these activities may get lumped into a vague “offer excellent client service” category. 

According to the 2024 EY Global Wealth Management Industry Report, 44 percent of clients plan to switch, add a new provider, or move assets in the next three years. While the report doesn’t break out the US specifically, there may be many dissatisfied clients who are preparing to make a move. 

So, to ensure that your best clients remain your best clients for years to come, start implementing the following ideas in 2025.

• Make client retention a part of your business plan. Add client retention topics to your team discussions, and make sure it’s an action item you are thoughtfully and deliberately addressing throughout the year.
• Create a communications strategy. Research shows that client communication can play a heavy role in creating client loyalty. Frequent, non-investment communication leads to greater satisfaction in clients, with the optimal amount being 24 or more contacts a year. How many contacts do your ideal clients currently receive? If you’ve fallen short of your goal in the past, outlining a clear communications plan with specific touchpoints each month can help keep you on track this year.
• Consider client surveys. If you haven’t stopped to ask your clients if they are pleased with the job you are doing, it might be time to gather some information and additional insights. Are there specific things you could do to serve them better? Leveraging surveys will help you gather the answers and data you need to succeed.
• Offer an excellent client experience, not just customer service. There is a difference between those two things, and wise firms are stepping up their game to ensure that their clients aren’t just satisfied—but delighted. That’s how referrals come in: word of mouth from people who are raving fans. The higher the net worth of the client, the more likely they are to approach friends or COIs to ask for a referral to an advisor.
• Beware of triggering events. When people experience big life changes, such as a wedding or divorce, a new baby, or retirement, they typically contemplate making other changes as well (like finding a new financial advisor). Keep your clients’ milestones handy, and pay careful attention to what’s going on in their lives.

While adding new clients to a practice is a goal worth pursuing, retaining your existing clients is vital to the continued health of your practice. Take a thoughtful and deliberate approach to client retention, and make January 2 a day worth celebrating every year.