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Practice Management > Compensation and Fees

'Client-Centric' Advisors Have 93% Bigger Accounts: Cerulli

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Advisor practices that are focused on a client-centric experience not only have median client sizes that are 93% larger, they also have lower attrition rates and the ability to move upmarket.

New research from Cerulli Associates in its U.S. Advisor Metrics 2018: Reinventing the Client Experience report finds that focusing on providing exceptional client experiences not only provides intangible benefits, such as increased trust on the part of the client, it also pays off in more practical ways.

What makes a client-centric practice? Cerulli cited “technology-driven client segmentation, intergenerational engagement within a team-based model, client appreciation and holistic perspective.”

Client-centric advisors recognize clients’ key life events, commemorate and celebrate their milestones, and host appreciation events, Cerulli says. “It is often the unexpected moments of delight, kindness or thoughtfulness that elicit trust and engender loyalty from clients,” according to the report.

In a time of heightened competition and greater client awareness and concern over fees, the report says, advisory firms have to reinforce their value proposition with existing clients — and focusing on the client is one way to do that while reaping both tangible and intangible benefits.

According to the research, advisory focus on the client experience results in a 93% higher median client size, compared with the industry average of more than $500,000.

And clients also tend to stick with advisors offering them a client-centric experience. An average of 34% of advisors’ asset outflows come from client deaths, moves to a different financial advisor or transfers of assets to a direct/online provider. But when client-centric advisors are in the mix, that involuntary attrition falls to just 24% of asset outflows.

“According to our research, 65% of financial advisors will experience fee compression in the next five years and 42% attribute it to the growth of digital advice competitors,” Marina Shtyrkov, research analyst at Cerulli, said in a statement.

Shtyrkov adds, “In response to this competitive pressure and recognition of heightened investor fee awareness, practices are migrating away from measuring their value based on their investment expertise, which can more easily be commoditized. Instead, they are beginning to think more holistically about the nonfinancial impact they can have on their clients.”

But not everyone is jumping on the bandwagon, with the report pointing out that of all advisors surveyed, just 30% “strongly agree that their practice goes above and beyond to make clients feel special, and that it has a repeatable, consistent client experience.”

For now, Shtyrkov says, “experience-centric practices are in the minority — but practices that adopt and invest in a client-centric mentality will likely cement their value proposition and engender lasting loyalty from clients.”

— Check out How America’s Top Wealth Manager Delivers the ‘Ultimate Client Experience’ on ThinkAdvisor.


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