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Client acquisition and retention are the two pillars of success for any financial advisor’s practice. As every financial professional knows, it can take a major investment of time, energy and financial resources to bring good clients on board. But, it may be even more important to dedicate resources to retaining your clients over the long term.
This has always been true, but it has taken on new importance with the shift from transactional compensation to fee-based advising. In a transactional world, maintaining strong client relationships might bring the client back for more transactions — certainly a worthwhile business goal. However, in a fee-based practice, retaining long-term clients can lead to more substantial continuing revenue. Consider a client with $1 million of assets under management at a one percent annual fee. Over the course of 20 years, that client could generate $200,000 in revenue.
A Retention Plan
Given the potential rewards for a financial advisor who retains “clients for life,” it’s essential to develop and execute a sound, comprehensive retention strategy. Here are some tools and techniques to consider.
Stay in touch. Maintain 12 to 18 meaningful client contacts per year. It may be most effective to use a variety of formats:
A PriceMetrix study of client retention found some interesting dynamics that are worth considering as you apply a comprehensive retention strategy to your practice. Although some of these findings may seem to point in one direction or another in terms of clients and pricing, remember that every practice is different. You need to find the right approach to client retention for your practice.
Be a Farmer
In order to establish and maintain a successful financial practice, an advisor has to play a variety of roles throughout the client lifecycle. At first, you’re a salesperson as you work to turn prospects into clients. Then you are a manufacturer as you set up new clients and produce an appropriate suite of financial products for each client.
In the long run, however, you are a farmer, nurturing your clients and helping them reach their financial goals. And when you are a good farmer for your clients, you are also a good farmer for your practice. Growing clients for life may be the surest way to maintain a thriving, lifelong financial practice.