Holding on to clients in any market

"Beware the Ides of March." One year ago, William Shakespeare’s words seemed to presage the chaos to come. Market volatility in March 2020 was quite literally off the charts, with the worst one-day drop, one-week plunge and one-quarter drop of all time. Things seemed grim, and many advisers were rightly worried about their clients.

What a difference a year can make! Fast forward to today, and the market has set a new all-time high. Although it’s a relief to have that bleak period behind us, it’s important to pay attention to the lessons we learned.

WHAT'S YOUR CLIENT RETENTION STRATEGY?

So do you have a business or marketing plan that specifically details your client retention strategy? Your goal is to retain clients not just in a down market, but in all markets. You might have elements of a plan (i.e., communication) in various places, but if you don’t have a separate plan or activity tracking specifically aimed at client retention, you probably should.

What percentage of your business is devoted to fee-based business? The more fee-based business you do, the more imperative it is to focus on current clients and your ability to hold onto them.

Research published in the Harvard Business Review, entitled The Value of Keeping the Right Customers, found the following:

• Acquiring a new customer is five to 25 times more expensive than retaining an existing one.
• Increasing customer retention rates by 5% increases profits by 25% to 95%.

So keeping current clients is a better use of your time and energy. And yet I receive far more prospecting questions than anything related to retention.

LEARN FROM YOUR CLIENT LOSSES

Retention is crucial to your firm’s success; after all, isn’t much of your business planning and revenue forecast from a stable base? If you lose clients and revenue unexpectedly, your other business plans might be jeopardized.

Go back and look at your business metrics over the past few years and track how many clients you lost. When you did lose clients, were the circumstances easily explained, such as death? Were you upset to lose a good client? It can be tough when a client leaves, but if you approach it right, you’ll uncover valuable information that will help you keep your other clients.

There are more reasons to focus on retention, especially this year. Recent studies indicate many people who work with financial advisers aren’t happy and plan to move.

• According to a 2019 EY global research study of wealth management clients, one-third of clients have switched providers or moved assets in the past three years, and another third plan to do so in the next three years. These shifts are happening across client wealth levels and demographic profiles. That’s a lot of money moving around.
• Let’s look at what investors actually did in 2020. According to Fidelity Institutional's December 2020 research, Client and Prospect Engagement During These Challenging Times, 20% of advised investors switched advisers during the pandemic.
• Additionally, Fidelity Investments research indicates 28% of millionaire clients are at risk to change advisers.

Of course, your clients aren’t among those numbers — they’re happy, right?

If you haven’t surveyed your clients recently, put this on your priority list. The world changed in 2020, and it’s highly likely your clients have new needs or attitudes. Clients might want to do full financial planning now or wish to cover long-term care costs. Or they might like the convenience of Zoom meetings on occasion, even if they would have resisted a year ago. If you don’t know what your clients want, you should learn; you can’t meet needs you aren’t aware of.

TAKE BUSINESS AWAY

Clients are willing to move to get what they want, which presents an opportunity for you to take business away. On the other hand, there are many advisers who would love to take your clients, so be sure that your first focus is retaining all your existing clients. Surveying clients is a great first step to position your practice for retention — and success.

[More: Communicating what’s really important]

Kristine McManus is vice president and chief business development officer at Commonwealth Financial Network.