Frustrated Investors Are Firing Advisors Who Don’t Provide 360-Degree Service

By Scott Martin, Senior Editor, on Tuesday, January 24th, 2012

Big opportunities for wealth managers looking to gain referrals and add to their assets -- as long as they can keep their current clients happy.

Years of Wall Street scandals, fiduciary failures and a sagging market have gotten under the skin of wealthy Americans.

According to a recent survey, a full 60% of investors are currently considering firing their advisor and 44.7% have already terminated a relationship with an advisor in the past -- interestingly enough, the exact proportion giving referrals. (For a more in-depth analysis of the results, ByAllAccounts will be hosting a webinar on 3/1 at 2 PM EST entitled "Why Investors Hire and Fire Financial Advisors. To Register, CLICK HERE!)

These numbers reveal that if advisors are looking for an average of 16 new clients this year, they’re going to get them from each other -- and that they’ll have to fight for every prospect.

“A lot of advisors get clients from referrals, but over 25% of the investors surveyed surprisingly said that their advisor had never asked them for a referral” explains Barbara Kotlyar of ByAllAccounts, which co-conducted the survey with Paladin Registry.

“This represents a huge opportunity for advisors who are confident in their practice to gain more business using their existing clients and networks by simply asking for an introduction or a referral."

Earn your clients’ loyalty and then meet their friends

When asked why they terminated the relationship, the top 5 reasons investors gave were:

1.)  Poor performance
2.)  Too expensive
3.)  Slow response times
4.)  Lack of accessibility
5.)  Inadequate reporting

The data reveals that what differentiates winners from losers in today’s advisory market is the ability to overcome the fragmentation your clients feel.

A typical wealthy family can easily have three or four advisors, several bank accounts, interests in one or more business entities, trusts, IRAs, other qualified savings vehicles and even a brokerage account or two.

The statements come in at different times and are usually a month or two behind the news, so they always feel a little disoriented and off-balance.

Click Here for Full Survey

They need a quarterback, a head coach, someone with one eye on breaking developments and another on the long term.

They want what ByAllAccounts calls “holistic” service and other firms are calling “integrated” or “household-level” advice.

And as it turns out, 98.3% of the investors who get that all-inclusive perspective on their finances are happy with the level of service they’re getting, and 85% of them say there’s a zero percent chance they’ll fire their advisor this year.

Those figures are admittedly extremely high, but other components of the survey support the conclusion: advisors who can give their clients a top-down view of all their assets and liabilities retain their clients a lot longer, inspire more confidence and get more referrals.

Retention generates revenue as well as growth

And of those investors who are sticking around, 25.8% are being increasingly stingy with their referrals, arguing that their current advisor simply “haven’t earned” the right to get an introduction to their friends, families and professional colleagues.

Since almost half of all investors still find their advisors via referrals, advisors with ambitious growth plans absolutely must make sure their current clients are happy.

Retention comes first, then growth. If clients aren’t incredibly enthusiastic about what you’re offering, find out what they actually want.

You might be able to give it to them. Then, when they’re feeling good, ask for those referrals.

Success breeds success, and as Barbara Kotlyar has discovered, it’s paying off in the here and now.

“Advisors with the ability to monitor and advise on assets that aren’t under their direct management are charging for the service,” she says.

“The 401(k) or other account stays right where it is, but they’re asking the client to pay between 50 and 100 basis points on those assets. And they’re getting no push back at all.”

Scott Martin has been tracking various aspects of the financial industry since 2001 for publications like Research, Buyside and Institutional Investor. Previously, he was a market writer for CNN. As an advocate for the trust industry, he has testified to the Nevada Senate Committee on Commerce, Labor and Energy on issues of national competition. He is also active as a marketing and editorial consultant for registered investment advisors.  

You Might Also Be Interested In:

Q4 2011 Investor Survey Executive Summary (National Survey Results)

Why Investors Hire & Fire Financial Advisors (Upcoming Webinar)

What Do HNW Investors REALLY Want from their Financial Advisors? (On-Demand Video)

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