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Securing the Trust and Loyalty of High-Net-Worth Clients

November 19, 2015

Advisors of all stripes are under increasing pressure to add high-net-worth investors to their books of business. But while it’s difficult to attract affluent clients, it’s even tougher to keep them.

As a result, advisors should examine the factors that increase the trust and loyalty levels of these investors. After all, these investors provide advisors with increased stability, more assets under management, greater profitability and a steady flow of referral business that enables a practice to flourish.

We measured various characteristics and interactions between advisors and their clients to help find predictors of lifetime loyalty. These indicators include the following.

Easy accessibility. The client can reach the advisor when needed. This does not mean frequency of meetings or communications, as those alone do not necessarily lead to greater loyalty. It means prompt responsiveness and the client’s deep confidence he or she can immediately reach the advisor in a time of need.

Conversations focus on retirement. Clients who regularly consult with their advisors about retirement planning are more likely to want to work with their advisors for the long term. This is especially the case when these clients are compared to investors who are not as engaged on retirement matters.

High exposure to a single advisory practice. Loyal investors will have at least 50% of all assets with a single advisory practice. Additionally, these more loyal investors will frequently use the same advisor for more than 10 years.

Most of these predictors are fairly obvious, but the prominence of retirement-income planning might be surprising at first glance.

Our research shows increased engagement with retirement-income planning starts a chain of positive events that are not evident when engagement is minimal or nonexistent. In every category of confidence and satisfaction measures, retirement-income planning creates a positive impression.

For example, the majority of affluent clients with a formal retirement plan are very confident they will be able to live the retirement lifestyle they want, twice as many as those without a formal plan. (Our study looked at investors at three asset levels: over $3.5 million, $1 million to $3.5 million, and those under age 55 with assets of $500,000 to $999,999. This group of affluent consumers makes up only 8.2 million households but owns nearly $22 trillion in financial assets.)

Without question, formal planning will strengthen client-advisor relationships. The advisor learns about a client’s retirement goals and aspirations, knows where the assets are and receives more shares of consolidated assets. Further, advisors are better positioned to recommend an asset-allocation model that can achieve the client’s desired lifestyle in retirement. Remember, investment performance alone does not ensure client trust and satisfaction. Those qualities are based on in-depth retirement-planning activities.

Ultimately, loyalty plays an important role when advisors switch firms. We found that 40% of affluent clients would follow their advisors if they switched firms. This loyalty explains how brokerage firms can lure a block of advisors from their rivals. Indeed, advisors with a higher number of loyal affluent clients will be better able to monetize their practice in the future.

With all the positives that come from formal retirement planning, how big is the opportunity? We have found that only half of affluent clients have created a formal plan with their advisor. The challenge is for advisors to ensure they are equipped for this planning process and to become experts in retirement solutions. Those who do will find extensive retirement-income planning for affluent clients opens the door to improved client satisfaction, increased trust and lifetime loyalty.