Many financial advisors are missing a growth opportunity well within their reach: Asset Retention. As advisors plan for 2017, we think the topic is worth revisiting. The benefits of an effective client retention strategy are many, including sturdier growth for expanding advisory practices and less pressure for mature practices to find new clients.
We think this subject will only rise in importance in the coming years. Baby boomers will soon pass trillions in wealth to heirs and other beneficiaries. But there are numerous reports of advisors losing 70 percent of their assets in wealth transfer.
Lopsided statistics such as the above sometimes convince advisors that asset retention efforts are fruitless. We see it differently. An advisor who loses a significant percentage of clientele due to deaths or changing family circumstances would see a large benefit with as little as a five percentage-point improvement in client retention. We think low retention rates are more usefully viewed as a product of less-than-optimal retention efforts than a factor shaping retention strategies. Here, we present five actionable ideas for advisors who aim to retain more of today’s business.
Lay the right groundwork with heirs. Many advisors believe they are taking the necessary steps for heirs to remain in their care after a client passes away. But a reality check of this perception often reveals otherwise. For instance, we find that many advisors fail to ask clients one simple, direct question: “Is it important to you that your assets remain under my care when they are passed to your children?” The question is rarely asked.
A “yes” answer is an opportunity to engage clients in a meaningful discussion on how and when to connect with children and/or preferred charities and beneficiaries. The discussion often leads to a clearer focus on the priorities and concerns of both parents and heirs. Meanwhile, a “no” is useful for different reasons: It would provide clarity and direct an advisor’s efforts to other situations where asset retention is a possibility.
Knock down perceived geographic barriers. Geography is not the barrier it used to be. Changing communication norms and technology mean that relationships can be developed even with far-flung heirs. Maintain a presence on clients’ preferred social media platforms so that both clients and their children can observe you regularly in a low-commitment, largely passive manner. Geography has not been a limiting factor for robo-advisors, which have been adept at marketing their services via social media. Advisors arguably enjoy a head start when reaching out to heirs, since they have pre-existing relationships.
Consider a comprehensive beneficiary audit. Besides essentials like market and portfolio performance reviews, consider a planning exercise which goes beyond the conventional “org chart.” A beneficiary audit aims to map out the plan for all heirs and charities. It can help an advisor understand how to change a client’s wealth distribution plan in order to serve the client’s most closely held priorities. Understanding what a client deems essential will bring clarity to planning between generations. Orchestrating this review allows an advisor to build a bridge to heirs as much as it helps meet the client’s financial goals.