Clients attached to advisors, not firms: study

When it comes to loyalty, a trustworthy face is more important to clients than a company name

Clients attached to advisors, not firms: study
When an advisor decides to switch firms, who will keep the clients? Will the client stay with the firm, or will they follow the advisor? According to a recent study, investors tend to stay loyal to their advisors rather than stay with the practice that was left behind.

After surveying 3,000 respondents with a net worth of over US$100,000 excluding their primary residence, consultancy firm Spectrem Group found that clients trust their advisors more than a personal attorney or accountant, according to Financial Advisor IQ. Spectrem also found that trust to be on par with that of a primary care doctor.

The length of time for which clients have been with their advisors also reflects their loyalty. Around 38% of the high-net-worth respondents reported having been with a primary advisor for between three and 10 years; nearly a quarter have relationships lasting at least 15 years. The length of time tends to grow with the client’s age.

Sam DeGennaro, a senior partner and managing director at Snowden Capital Partners, joined his current firm just last year after a long career at Merrill Lynch. When he switched firms, a vast majority of his clients followed — which he attributes to his relationships with them as well as his decision to be upfront about his transition.

“Clients want to know their needs are being addressed first,” he told Financial Advisor IQ. “And as long as we were positioned that way, there wasn’t as big of a hurdle … They had to have some assurances about why I was moving and what it would mean to them.”

Honesty and trustworthiness are prized by clients; 28% of the respondents in the Spectrem survey identified their impression of an advisor as “honest and trustworthy” as a top factor in choosing a new one. Making the effort to protect client interests is also a leading trust factor for 81% of men and 84% of women.

What this means for advisory firms is that keeping all parties satisfied is critically important. For Matt Cooper, president of Beacon Pointe Wealth Advisors and Beacon Pointe Advisors Private Client Services, this entails one simple principle. “Take care of the employees” — by empowering them with tools, compensating them fairly, and making them feel appreciated — “and they’ll take care of the clients.”

Still, most advisory practices would need to strike a healthy balance: advisors need autonomy, but the firm’s objectives should still be prioritized. Beacon Pointe accomplishes this by assigning clients a senior wealth advisor, a junior wealth advisor, and a business development advisor.

In the end, it’s all down to the feeling of connection. “The more connected an investor feels, the more likely they will choose [the] relationship with their advisor over the comfort level of staying with their financial firm,” the report from Spectrem said.

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