Research indicates that most clients who defect to another financial advisor do so because they feel unsatisfied with the service they receive or the performance of their investments. But there is much more to the story of client defection, says Julie Littlechild, CEO of Advisor Impact Inc. in Toronto.
The Economics of Loyalty, a report from a recent study by Advisor Impact and the Toronto-based Investment Industry Association of Canada suggests that it is incorrect to assume that “switching behaviour” is always the result of client dissatisfaction. Sometimes the advisor is not to blame.
Littlechild offers the following tips to help you understand and reduce client defections:
> Don’t always blame yourself
Sometimes, you may lose a client through no fault of your own. The Economics of Loyalty suggests client defections can be traced to a number of variables that are often beyond the advisor’s control.
For example, some survey respondents said they were unwilling to follow their advisor to a new firm after the advisor had switched dealers. Other clients left because their advisor had retired, and they had chosen not to do business with the advisor’s successor.
Regardless, it’s important to not assume every client defection is a negative reflection on the services you provide.
Before the client departs, arrange an exit interview, perhaps over coffee, to help you understand why the client has decided to leave.
> Survey your clients
You might think that you are serving all your clients’ needs exceptionally well. Your clients might not agree.
A good way to find out how your clients feel about the products and services you provide is to run a client satisfaction survey.
Whether you run a formal questionnaire or a series of informal conversations, asking your clients for their opinions on the services you provide will give you information you need to maintain or increase client satisfaction. For example, you might find that your clients want access to more alternative investment products or socially responsible investment products than you currently offer.
It is important to take the temperature of your practice roughly once a year so that you can detect any early warnings of potential switching behaviour.
For more on client satisfaction surveys, visit: How to get valuable client feedback
> Develop an “at risk” list
One of the best strategies to prevent switching behaviour among your clients is to create an “at risk” list.
Once you have completed your client survey, check the results to see if they reveal any overall trends. Then look at individual responses, says Joanne Ferguson, president of Advisor Pathways in Toronto, to see if any clients show signs that their loyalty to you is wavering. If so, determine whether there is anything you can do to strengthen these relationships and prevent a defection.
Some clients may still leave, says Ferguson: “Breaking up is hard to do. But you might as well at least know why.”
Tomorrow: “Insuring” your client base.