Building Trust: The Cornerstone of Client Retention for Advisors

Why do clients leave their advisor?

Some of the common reasons include:²

• They feel neglected or that their advisor doesn't pay enough attention to their unique needs
• There is a lack of communication or waiting too long to get a response to phone calls or emails
• The advice they receive doesn't feel like it aligns with their needs or goals

Before jumping to conclusions about how these insights can help us retain clients, I think a good place to start is to ask yourself," What do you consider when deciding to work with another professional, and what qualities will make you continue that relationship?

Perhaps you are looking for a personal trainer and nutritionist to help prepare your body and mind for a marathon in six months. Or maybe you need a contractor to help with home renovations. The question is: What qualities will make you sign on the dotted line, hand over your hard-earned money, and commit to working with—believing in, and following—that person?

Whatever those qualities or non-negotiables are, I bet it's the same for investors looking to hire and work with an advisor. I believe that at the top of that list, trust would be the ultimate deciding factor. When we have enough evidence or received enough information that we can trust someone, we are more likely to remain loyal, and we are also more likely to refer that person. To that point, a study³ found that 94% of investors were likely to make a referral when they "highly trusted" their advisor.

Trust – the Secret (well, not so secret) ingredient to client retention

If I asked the 54% of clients who left their advisor in 2023 why they decided to switch, I would imagine lack of trust would be a common theme. I think about all my personal and professional relationships, and trust is at the foundation of those where the deepest bonds exist.

Let's look at some tactics and strategies on how we can build and continue to nurture trust to not only attract clients but also keep them:

1. Understand your clients' goals, circumstances, and preferences through discovery

One of my favorite quotes is from Theodore Roosevelt. A formal discovery process is foundational to your relationships with clients. It's also the first experience a prospect will have with you and your team.

The initial meeting often starts with a fact-finding discussion that usually focuses on the how (how much money they have) and the what (what they want to do with it. But true discovery is when we get to the heart of the matter, understanding the "why."

"People don't care how much you know until they know how much you care."

–Theodore Roosevelt

Through a discovery conversation, you allow the client to talk about all they want to accomplish, which requires planning, money, and time. They will speak to you about their life, the emotional reasons behind their goals, the people that matter most to them, and what keeps them up at night. Money is personal, and for clients (and prospects), sharing all these details will make them vulnerable. And if you are doing discovery with long-time clients, it may make you vulnerable, too. However, taking the time to understand your clients and embracing vulnerability will demonstrate that you genuinely care. Clients will feel seen, heard, and understood, leading to an emotional connection that may create profound trust.

2. Stop talking and start listening

I'm all about pertinent quotes, so here is another by author Stephen Covey. This reminds me of the research we commissioned Professor Jeff Belkora, University of California, to do for us. Jeff and his team were provided recordings of advisors conducting client meetings. The metrics they looked at were:

• How much of the time did the advisor speak?
• How much of the time did the advisor ask questions?
• How many words did the client speak during the interaction?

The results? Advisors spoke 54% of the time, asked questions 26% of the time, and clients spoke around 1200 words. Now, if I'm trying to learn as much as I can about my clients, I don't think speaking more than half the time will help me do that. So, how do we stop talking? We ask open-ended questions and listen.

"The biggest communication problem is we do not listen to understand. We listen to reply."

–Steve Covey

Advisors who were surveyed for the study were then taught better communication styles. The charts below show how their client discovery conversations changed.

Good communication is not just about articulating your words to convey a message; it's also about being a good listener. Think about how it feels for you when someone has shown genuine curiosity about your life, asked you questions, given you the time and space to respond, and really listened to what you shared. It's only natural that you start to trust that person with more and more information.

3. Make it personal and make that the standard

Scientist Stephen Hawking's quote resonates here. There is no such thing as a standard or run-of-the-mill human being, but we share the same human spirit." We often forget how unique we all are. So much of how we live our lives today is personalized based on our preferences. From first thing in the morning (our complicated coffee orders at Starbucks), throughout the day (our Spotify music lists tailored to the songs we love and listen to), and into the evening (watching our personalized Netflix recommended movies and TV shows based on what we stream) - the customized experience is something we are used to and frankly, expect.

"We are all different. There is no such thing as a standard or run-of-the-mill human being, but we share the same human spirit."

–Stephen Hawking

Research continues to show that clients expect personalization when working with an advisor:

• 60% say that more frequent and more personalized contact would give them more confidence in their financial plan⁴
• 85% would consider the frequency and style of communication when retaining services.⁵

To support this even further, eight in 10 clients would be more confident (77%), more likely to keep (78%), and more willing to refer (81%) an advisor who communicates more often and more personally. According to the research, this is especially true for clients between 30 and 44 or with more than $500,0006 in investible assets.

4. Be transparent, consistent, and execute reliably

I think the former senator said it best. It's as simple as that. If you tell your clients that you will email them once a month, follow through. If you tell your clients that someone on your team will always be available to answer their calls, ensure that is the case. If you tell your clients you will return phone calls or respond to emails within 24 hours – do that. When we don't follow through on the service we have promised our clients, we do more damage than we realize. Be transparent by clarifying expectations, be consistent in the service you provide, and execute on that reliably.

"Trust is built through consistency."

–Lincoln Chafee,
Former U.S. Senator

The bottom line

When it comes to client retention, it's critical to first earn our clients' trust and then continuously nurture and strengthen that trust to deepen relationships. By having a genuine understanding of our clients' goals, circumstances, and preferences and being consistent and reliable, we can build authentic and emotional connections that have the potential to last a lifetime.

^1,6 YCharts: Clients Ditched Advisors at Alarming Rates in 2023

² Financial Advisor Client Retention Strategies

³ The evolution of Advisor’s Alpha®: People with portfolios

^{4, 5} Based on responses of individuals who currently invest >$500k in AUM with financial advisors and wealth managers surveyed in “How can advisors better communicate with their clients”, December 2019 by YCharts. Total sample size represented 650 individuals across the U.S. https://go.ycharts.com/hubfs/YCharts_Client_Communications_Survey.pdf, Accessed Feb 3, 2021.

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