From the May 2008 issue of Investment Advisor • Subscribe!

May 1, 2008

Whither Client Loyalty?

Are you certain that your clients will follow you where'er you roam? According to new research by Spectrem Group, clients may not be as steadfast as Mary's little lamb. While the majority (60%) of affluent investors say they are loyal to their financial advisors, just 33% would follow them to another firm, according to the report--Client Satisfaction Versus Loyalty--conducted in late 2007 among more than 500 affluent investors, defined as having over $500,000 in investable assets. This is down from 55% who said they would have followed their advisors in 2006. Moreover, just 18% of affluent investors are likely to consolidate all of their accounts with a single advisor. For those who might, the decision would be driven far more by investment returns (29%) than personal relationships (7%). "Financial advisors can no longer count on the fact that their 'loyal' affluent clients will follow them when they switch firms," said Spectrem President George Walper in a statement. "While this may have worked in the past, today just one-third of affluent investors would quit their financial services firms to move with their advisors," he noted.

Furthermore, those with less wealth show more loyalty than those with greater wealth, highlighting the importance of proactively serving wealthy clients. Spectrem suggests this may be the case because wealthy investors have more advisory firms trying to entice them, and may also demand a higher level of expertise, products, and services.

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