One of the greatest aspects of being a wealth manager is the intimacy one builds with clients. The best wealth managers are able to get their clients to entrust them not just with their money, but also with their fears, hopes and dreams.

The advisor becomes the consigliere, someone in whom the client feels comfortable confiding – so much so that countless industry participants have told me that their clients will tell them things that they will not share even with their spouses.

This intimacy manifests itself from a business perspective in client relationships that are breathtakingly stable. Typical client turnover is less than 3% annually. Many mutual fund managers – who in a good year average 20% to 30% turnover and in bad ones, 50% – would seriously consider sacrificing body parts if it meant that they would average only 3% annual turnover over many years. 

However, no different than with any other personal relationship, keeping the love alive over many years between clients and their wealth managers can be challenging. And a combination of technology, changing client needs and competition is going to make this much harder in the future. 

This article – the fifth in a series on the future economic model of wealth managers – looks at exactly how the best firms are going to expand and evolve their client experience models so they can better sustain their relationships.

The issue of client experience has not been a big concern for most firms to date largely because getting new clients remains fairly easy. The supply of potential new clients still exceeds the capacity of the best wealth managers to onboard them, and this has lulled many industry participants into a false sense of complacency. 

Although no one wants to lose clients, at present it’s not the end of the world because it is not that hard to replace them. But, at some point in the near future, the supply and demand lines are going to cross, and losing clients is going to shift from being something nobody wants to have happen to that of an emergency of biblical proportions.

A big reason why many clients leave is because their relationships with their advisor over time become less meaningful. When they initially became clients – and their advisor was helping them to identify and solve very important problems, many of which they did not even know existed – the relationship was exciting and interesting. But a few years down the road, it is largely in maintenance mode and, so long as nothing big changes or bad things happen, there isn’t much for the adviser and client to talk about. 

One way of measuring the dissipation in a relationship is in the willingness of clients to make referrals. Two of the partner firms in my prior company studied the point at which their clients generated the greatest numbers of referrals. They found – and this is consistent with what several other firms have seen – the vast preponderance came from individuals who had been clients for 11 months or less.

In other words, they were still in the honeymoon phase of the relationship and wanted to tell their friends about the fabulous experience they were having. After that, they remained clients – in many cases, largely through inertia – but were far less excited about proselytizing to others.

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