Aging is different today than it was a decade ago and financial advisors need to have a good relationship with clients to help them navigate those later-in-life years, according to Joseph F. Coughlin, founder and director of MIT AgeLab, a research institution.

Having in-depth conversations, even with the restrictions imposed by the Covid pandemic, is key to creating and retaining clients, said Kevin Hogan, executive vice president and CEO of AIG Life and Retirement. The two discussed client retention and trends in the financial industry in an interview today.

“The business of the financial advisor has not changed from including basic financial planning, but the new currency to achieving effective planning is conversation,” Coughlin said. “Clients are benchmarking their relationships with their advisors the same as they benchmark all of their relationships—they judge their advisor by whether he or she ‘gets me.’”

Advisors need to understand their clients if they are to retain them, he added, and that fact applies even more to millennials than other age groups. “Clients, especially younger ones, want to know the advisor personally cares about them,” Coughlin said

“While performance remains a prerequisite for client satisfaction, personal connection is key to retention,” according to AIG's "The Future of Client-Advisor Relationships" report. “Twenty-five percent of clients would leave their financial advisor due to lack of personal connection. Broadening conversations beyond money management helps advisors better serve their clients, build trust and ultimately increase retention.”

The report's research was based on feedback from 2,038 adults between the ages of 30 and 75 who work with an advisor and have at least $50,000 in annual income or $50,000 in savings.

According to the research, 40% of clients ages 30 to 45 said they view their advisor as a life coach and 35% said they consider their advisor a friend. In addition, younger clients said their financial advisor’s network of professionals and personality are key drivers of their satisfaction with the advisor. Younger clients also communicate with their advisor far more often than older clients. Forty percent communicate with their advisor more than once a month.

“The definition of what a financial advisor is to a client was evolving even before Covid-19,” Hogan said. “There was an increasing awareness of the clients’ physical, mental and financial health.”

The pandemic helped propel the use of technology, Coughlin added. “It is those technologies and new platforms that are giving advisors more time for frequent conversations with clients.” He noted he has interviewed more than 100 advisors recently and found most of them are taking advantage of the opportunity for solidifying connections that technology can provide.

“The more the advisor can understand the client, the better the financial planning will be,” Hogan said, adding that advisors of the future will be multi-channel advisors using a variety of technology to maintain conversations with clients. Both Hogan and Coughlin agreed that technology is going to continue to improve and advisors, and others, will not return to work as they knew it before.

“This is an amazing opportunity for advisors” to cement their relationships and retain clients, Coughlin said.


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