Financial advisors should take note of two key reasons why affluent clients seek an alternative, to reduce the risk of losing business to rivals, according to newly released insights.
The increasingly competitive wealth management and financial planning space offers consumers far more choice and easier onboarding options than ever before, so advisors must ensure their primary needs are met, the Cerulli Associates report says.
The two priorities for clients with wandering eyes are diversification (38%) and attractive performance (25%). This is exacerbated by communication – positively if it’s the existing advisor effectively sharing information and insights with clients, but negatively if it’s a rival providing attractive opportunities.
“Client retention could be as simple as explaining the short-term performance of a diversified portfolio versus a specific investment—but without ongoing proactive communication, by the time the advisor is aware of a client’s discomfort, it may be too late,” says Scott Smith, director.
The latest Cerulli Edge U.S. Asset and Wealth Management Edition highlights that advisory firms must prioritize ongoing discovery and client relationship building to ensure they truly understand client’s dreams, concerns, and fears, coupled with increasing portfolio values and progression towards meeting goals.
“The responses in our research underscore the difficulty in maintaining client loyalty,” added Smith. “Advisors must balance their desire to offer comprehensive solutions with the potential to overwhelm clients with too much information or too many choices. Even when achieving this balance, advisors face the threat of being left behind for a provider that happens to encounter a prospect at a crucial inflection point.”
Recently, Cerulli revealed that total assets in the RIA channel dipped by 13% over the course of 2022 as the carnage in the broader financial markets filtered through to investor portfolios.
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