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Practice Management > Building Your Business

The Six Cs of Client Loyalty

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Do you want a more profitable business — not just a “practice,” but the advisory business that you’ve always wanted? Most advisors are too busy working in their business to work on their business, to pay attention to the deep fundamentals that will enable them to do well for themselves as they do good for their clients. It’s important, then, to slow down and understand — through their eyes — what your clients are really looking for.

At CEG Worldwide, we have found that client satisfaction is the single largest driver of advisor profitability, and in turn, client loyalty is the single best measurement of client satisfaction. What, then, do we know about client loyalty, both what it is and how to build it?

Measuring Client Loyalty

A study by CEG Worldwide’s Russ Alan Prince of 1,417 affluent clients with between $500,000 and $5 million of investable assets, and a net worth of between $1 million and $10 million dollars, found five primary determinants of client loyalty:

o Whether the advisor was given additional investable assets

o The number of qualified referrals given

o Whether additional services or products were purchased

o Whether investable assets were taken away from the advisor

o Whether the advisor relationship was terminated

As Figure 1 shows, loyal clients gave their primary advisors an average of $376,000 of additional assets each in the previous year. For satisfied clients, the number was less than a tenth of that, at $23,000, and for moderately satisfied clients, just $17,000. The study also found that the future outlook was just as positive: 94.5 percent of loyal clients said they were extremely or very likely to give their primary financial advisors additional investable assets in the next year, while only 33.5 percent of satisfied clients and 13.4 percent of moderately satisfied clients said this.

The number of qualified referrals given also shows the importance of building client loyalty. As Figure 2 shows, loyal clients on average provided 11.8 referrals to their primary advisor in the previous year, while the number dropped to 2.1 referrals from satisfied clients and just 0.1 referrals from moderately satisfied clients.

The Six Cs of Client Loyalty

What’s the best way to build client loyalty? We’ve found that advisors must have the following qualities to generate maximum loyalty:

Character — or integrity — is what clients look for first. Interestingly, while most clients have a low opinion of our industry generally, they tend to have a high opinion of their own advisors. This makes sense, because why would anyone choose and continue to work with a primary advisor whose trustworthiness, character or integrity was in doubt? Moreover, character tends to come into play and be tested only when times are tough — that is, there’s no such thing as “bad integrity” during good times. Character, then, is an attribute that you must have to even get into the game, and that you must continuously demonstrate when markets fall and panic ensues. Since you really can’t “fake” character, it’s important to make trustworthiness, honesty, and integrity an ever-deepening part of who you are as an advisor.

The second quality is chemistry, the connection that people either do (or don’t) have with each other. Chemistry either happens or doesn’t — you can’t force it. Chances are that if you wake up sweating over a client in the middle of the night — if you are worried about them because your attempts to effectively communicate about some ongoing issue have failed — then chemistry is probably missing. And if chemistry is missing, consider whether it even makes sense to keep them on as a client, because it’s unlikely that you’ll ever be able to gain their loyalty.

Caring is the third quality, and includes not only knowing the client’s goals and objectives but diligently working in concert with them to achieve those goals. Caring, however, should not be confused with being a hugger or a toucher, since these external manifestations just aren’t part of everybody’s style. Instead, caring is demonstrated by a client-first attitude and follow-up behaviors that clients perceive as showing that they really matter to you. Sincerity, like chemistry and character, cannot be faked, and most people can tell right away whether or not you really care about them.

Next comes competence. To be successful, financial advisors must demonstrate and communicate that they are extremely technically competent on everything from investment management to providing timely statements. There is a high bar here: Clients will automatically expect you to demonstrate unquestionable competence. Simply, they need to know that you know what you are talking about and what you are doing, or they’ll be gone quicker than you can say “Six Cs.”

The fifth quality is cost-effectiveness. Don’t confuse this with “cheap.” When questioned about this subject, loyal clients responded positively to the notion that “their advisors are not inexpensive, but are worth the cost.” Clients, especially affluent clients, are more than willing to pay for high-quality services. Ultimately, it’s a value proposition issue, not a dollar and cents issue.

The sixth quality is whether the advisor fosters a consultative approach and relationship. Clients want a partner, not someone who will tell them what to do or treat them in a condescending manner. A consultative relationship can only be built through a series of on-going, in-depth meetings where advisor and client work closely together to bring forth all essential client information, from assets and advisors to goals and dreams.

In addition to having a cooperative orientation — for example, only contacting your clients in ways they say it is OK to contact them — a consultative relationship requires making a large number of client contacts. Research shows that the most highly satisfied clients were contacted between 24 and 28 times a year, a majority of which were not focused on investments or portfolio considerations. You must know your client well enough, and have enough in common other than your business relationship, to make this number of contacts in an easy and non-strained fashion. A consultative relationship also requires customized communications: Off-the-shelf presentations and reports just won’t cut it (no less build loyalty) with affluent clients.

Ultimately, if you want loyal clients, you must excel in all six qualities. Ask yourself how you can build the systems and processes, and have the right people in place, to deliver to your clients a consistent client experience that builds loyalty — and that demonstrate that you, personally, are just the kind of person in whom loyalty is justifiably placed.


PATRICIA J. ABRAM is a senior managing principal with CEG Worldwide, a research, training and consulting firm.


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