Beginning with last year’s market meltdown, there have been a series of alarming pronouncements predicting that advisors were about to get dumped en masse by their clients.
For instance, Russ Prince & Associates released a much-quoted study in March 2008 that warned nearly two-thirds of wealthy clients were likely to fire their advisors. That same month, the Spectrem Group published another survey that portrayed affluent investors as “fickle:” Sixty percent professed to be loyal to their financial advisors, but only 33% said that they would follow them to a new firm.
The dire forecasts on client loyalty continued this year as the market cratered. One well known advisor practice management coach opined to the Dow Jones Newswire that only 25% of assets move with the advisor to the new firm, 25% stay with the old firm and 50% are “up for grabs”
Our experience is quite the opposite. In fact, we’d say that the turmoil of the past two years has reinforced the value of competent advisors in the eyes of their clients. Loyalty is as strong as ever.
To be sure, the market meltdown caused many clients to re-evaluate their relationships with their financial advisors and their investment programs. That’s typical in any bear market; in fact, clients switch advisors all the time regardless of market conditions.
Our experience of the past two years has shown that advisors have commanded customer loyalty comparable to the bull market era: Eighty percent or more of desired clients and assets followed them to their new firms and within the first few months.