When we work with our affiliated advisors on their financial advisory practices, our Practice Management consultants often have discussions about the financial metrics of their firms, such as operating or investing capital. Increasingly, we are having conversations about relationship capital. Seldom do advisors want to discuss the quality of their relationships with clients and centers of influence (COIs), but we are finding that those conversations can be game-changers.
The Covid-19 pandemic significantly altered how we do business. Pre-Covid, if clients didn’t hear from their advisor for months, it wasn’t worrisome since they could catch up with the advisor at a quarterly review meeting or attend a client appreciation event. But post-Covid, the twin factors of an extended physical absence from our clients’ day-to-day lives, combined with the increased preference for working virtually, has put many client relationships in a tenuous position. So your relationship capital is more important than ever to develop — and retain.
But what exactly is relationship capital? It’s the value advisors create by building and maintaining close relationships over time. It’s the belief that your client relationships are at the core of your success, not ancillary to it. You may be familiar with the concepts of intellectual and human capital; we think that focusing on relationship capital is equally important. Like any capital, there are real returns that can be measured and affect the bottom line. According to Morningstar research, 21 percent of clients fired their financial advisor due solely to the quality of the relationship, so it’s safe to say that relationship capital is a metric worth noting.
Here are two ways to build relationship capital with your clients:
Below are two ways to maximize your relationship capital to achieve success:
Building and retaining your relationship capital is a must for every advisor, and leveraging it is the key to growth. To do this, it’s essential for you to continually assess the quality of these client relationships and maintain them. By paying careful attention to what’s important to your clients, you can position yourself for long-term success.
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