Eight years ago, I was at a conference and one of the speakers said, “If you provide optimum service to your clients, you’ll have a 98% retention rate, but if you ignore them, it [only] drops to 94.”
While there’s a dark truth to that statement, the flip side is that most firms are only growing as a result of recruiting advisors from competitors or M&A. And that means that millions of people — people who need our help — are refusing to go through the hassle of finding or switching advisors.
But why the inertia?
Just think about what it’s like to meet an adviser for the first time. There are any number of legitimate concerns that will go through a person’s head.
First, there’s a fear of judgment. But just remember, whether it’s reckless spending or loaning money to an unreliable relative, we’ve all done foolish things with our money.
Second, there’s the knowledge gap. Simply, while in all likelihood you don’t know how to fix a car, potential clients worry they’ll be embarrassed about not knowing the difference between a 401(k) and a mutual fund.
Then there’s the concern that an adviser will convince them to do something they don’t want to do, such as purchase an investment they don’t need.
And all that doesn’t even take into consideration the fear that an adviser will rip them off.
With these sorts of concerns, it’s no wonder that most people will put up with lousy service from their existing advisor, or not seek help at all, rather than search for a new relationship.
If you’re an ethical adviser who genuinely cares about the well-being of others, you have a duty to provide quality service to your clients. When a client reaches out to you, you need to respond promptly every single time. You need to treat them with respect and dignity, and communicate reassuringly.
You also need to be proactive with their financial management. Don’t simply wait until a client asks for their portfolio to be reviewed. Stay on top of it and do what is in their best interests 100% of the time.
And when it comes to converting prospective clients, do your best to transform that person into an advocate and not just someone who merely endures. Make their “shopping” experience pleasant, relieve their worries and help them to make the right decisions.
When I was quite young, due in part to cultural icons such as Atticus Finch and Perry Mason, the most ambitious kids spoke proudly about wanting to be attorneys. While practicing law is still a wildly popular profession, to lay people, it long ago became the punchline of a million jokes.
Now financial advisors, who were never depicted as cultural icons, labor against an industrywide reputation that’s as poor as that of the legal profession, and that means that far too many people who could use our help don’t trust us. I for one am sick of it.
Better client care. Less self-interest. Proactive financial management. It’s up to each of us, one client and one appointment at a time, to turn the reputation of our industry on its head.
Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with approximately $16 billion in AUM.