Hopelessly Devoted

April 4, 2008

Affluent Americans have typically been vocal about the quality of service they expect in their leisure activities. In recent years, an increasing number of high-end hotels, restaurants and other venues have begun catering to those tastes with client service models based on customization and personal interaction. When it comes to advisory services for the wealthy, research shows that the emphasis should be on much the same-enhancing the client relationship at a personal level while still providing demonstrated investment expertise.

To better understand what high-net-worth clients want from advisors, Janus Labs, an advisor-focused arm of Janus Capital Group, recently partnered with private wealth industry expert and Private Wealth editor Russ Alan Prince to survey more than 900 affluent investors (see sidebar for methodology).

The survey revealed surprising information about wealthy investors' expectations, preferred client service experience and the primary drivers of their loyalty. Understanding what motivates affluent clients can translate into a quantifiable, repeatable process that helps advisors build their practice and tailor their efforts to the unique needs of a high-net-worth client base.

Loyalty Is The Glue

Survey results indicated that the surest way to achieve this goal is by cementing loyalty with clients. Survey respondents considered loyal to their financial advisor displayed distinct client actions. Most notably, 87% of loyal clients intend to bring more assets to their primary financial advisor, versus only 23% of satisfied clients. Also, these loyal clients:

Provided four times more referrals.
Took away fewer assets.
Took money from other advisors first.
Sought nontraditional or value-added services from their advisors.

The survey results provided valuable insight into what does and does not build loyalty and underscored that successful advisory relationships are not solely performance-based.

Investment Performance Is Not Enough

While the affluent primarily seek top-notch investment performance from their advisors, in many cases performance that exceeds affluent investors' expectations does not always translate into a sustained relationship. To address this issue, we first divided our sample of respondents based on whether the investment performance provided by their primary investment advisor (the one who's managing the majority of their investable assets) was below, matched or exceeded their expectations (Figure 1).

We then compared these three segments on a variety of client behaviors that translate into an investment advisor's success (Figure 2).

The key takeaway is that when comparing affluent investors with differing perspectives of their portfolios' performance, there was little difference in previous actions or future intentions.

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