Increasing Client Retention

By Rod Zeeb

As a financial advisor, retaining your clients is key to your success. However, many advisors focus on making their clients satisfied rather than building deeper relationships. According to studies, 75.5% of clients who left their advisors did so because of a lack of relationship, communication or working rapport. 

Another study by Harvard showed that just satisfying clients isn’t enough, as they’re likely to leave for a cheaper, faster or better advisor. Clients want to have a deeper relationship with their advisors, and that’s how you retain them.

One of the most significant challenges for financial advisors is keeping clients who inherit their wealth. Studies show that anywhere from 70% to 90% of inheritors fire their parents’ advisors as soon as they get the money. The reason is that they have no relationship with the advisor, and if they do, it’s only for the advisor to tell them what’s happening. It isn’t because they have a relationship with them.

Widows are also a group that tends to fire their financial advisors within a year after their husband dies. Studies show that between 70 and 80% of widows fire their financial advisors because the relationship was probably with the husband. So, as soon as the male is gone, the widow who doesn’t know the advisor well enough will go to where one of her friends is going. Therefore, financial advisors must build relationships with their clients that go beyond the account and the numbers.

Retaining clients is essential not just for current cash flow but also for future cash flow. According to some financial advisors, it takes four to five new clients to make up for one long-term client that has left. When you lose a client, you’ll need to get four or five new clients to start over again to make it. On the other hand, if you keep your clients happy, they will refer you to their friends and family, which will help grow your business.

Another way to increase your business is by keeping your clients’ kids as clients. The value of your business or book increases when you have a higher-than-normal amount of multi-generational clients. When you think about multipliers, normally it’s like two to 2.2. However, one of the advisors valued his practice at three because he had a higher-than-average number of multi-generational clients.

In conclusion, building deeper relationships with your clients is the key to retaining them. Clients want to feel valued and understood, and if you can do that, you’ll keep them happy. Retaining clients will help increase your current cash flow, future cash flow, and the value of your business. Therefore, if you want to succeed as a financial advisor, building relationships is essential.

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