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June 22, 2018 at 02:07 PM
Asset-based pricing and managed money were meant to put the client and the advisor on the same side of the table. Many advisors found they were being paid for doing the right thing — advising clients to sit tight with long-term holdings instead of doing short term trading. Others found they were being paid the same regardless of the amount of attention the client received.
The Seven Deadly Sins
McKinsey/Pricemetrix produced a study analyzing client retention between 2009 and 2013. In those years, 7-10% of an advisor’s clients left annually. Better advisors retained more clients. In 2013, advisors in the 90th percentile retained 98% of their clients while advisors in the 10th percentile retained 84%.
Here’s my personal list of the seven deadly sins some advisors commit that lose them clients while using fee-based platforms.
1. Lack of contact. Some advisors rationalize they will be paid the same regardless of the attention they give their fee-based clients. They are rarely in touch, rarely rebalance and rarely evaluate the performance of the money managers. They might rationalize: “If my clients want something, they will call.”
Meanwhile … Competitors are calling. They might lead with the question: “When was the last time you heard from your advisor?”
2. Assuming clients don’t open statements. When the market is volatile, some advisors don’t want to be accountable. They avoid calling clients to schedule quarterly portfolio reviews. They rationalize: “Let sleeping dogs lie.” and “If it ain’t broke, don’t fix it.” They assume clients don’t open their statements or track performance.
Meanwhile … When a competing advisor calls, they might ask: “How has your advisor done for you lately? Not sure? I would be glad to help by looking over your statements and tell you.” If you don’t discuss performance, someone else will.
3. Thinking, “They know what I do for them.” Human nature is interesting. Clients may be thinking: When the market is doing well, the advisor is simply doing their job. When the market declines, it’s the advisor’s fault. They don’t know you are working just as hard in the background reviewing their holdings and determining if sitting tight or making changes is the best course of action.
Meanwhile … Competitors might say: “In volatile markets we try to have quarterly portfolio reviews with each client to discuss their investments relative to their goals. When was your last quarterly review?”
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” can be found on Amazon.