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October 12, 2005 at 08:00 PM
Are you meeting your clients’ expectations? It’s an important question, one which most advisors typically answer by quoting their performance statistics. But is that what investors today actually value the most? According to the results of our most recent AdvisorBenchmarking survey, there’s another attribute that trumps performance. Although clients today want their advisor to be a high performer, they really want someone they can trust.
According to the Rydex AdvisorBenchmarking survey, 61% of advisors believe that trustworthiness is the most important reason why clients selected them, while 53% of financial professionals believe that clients chose them because of their financial performance.
In an increasingly challenging market environment, it’s actually good to know that performance doesn’t reign supreme as the reason your clients first choose you and then stay with you. Trust is the glue that holds all relationships together, and it’s an opportunity for advisors who want to retain their clients in good times and in bad.
Another Look at Performance
Advisors claim that increasing assets under their management is their number one goal. Good news–they’re on the right track. Advisors have seen their assets under management (AUM) and profits rise significantly in recent years. After the sharp drop from 1999 through 2002, advisors in our sample saw their AUM rebound in 2003 to $87 million on median at year-end and further grow to a six-year high of $105 million on median at year-end 2004. Yet it’s important to recognize that advisor asset growth continues to parallel the direction of the stock market, with the S&P 500 up 10.87% in 2004 and AUM growth surpassing it with a 21% increase for the same period (see chart #2 below). If the stock market takes a dip, how will advisor AUM–and consequently, client retention–fare?
Take the Time to Build a Relationship
