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Your success as a financial advisor depends on your ability to cultivate client loyalty.
It has never been easy to win new clients, but in today's economic climate it's more difficult than ever. Many successful advisors are now seeking to grow their practices by intentionally drawing dissatisfied clients away from their competitors.
As a financial advisor, you simply can't afford to lose clients. No matter how many new investors walk through your front door, you'll never be able to grow your business if you're losing dissatisfied clients out the back. Client loyalty is crucial to profitable growth.
Four ways loyalty increases profitability
Advisors who focus on client loyalty will experience the following tangible benefits:
- Higher retention rates. Loyal clients provide a steady stream of revenue and profits through their uninterrupted relationship with your firm. The Harvard Business Review reports that a 5% increase in customer retention can increase profits as much as 85%.1
- Greater revenue per client. Loyal clients are much more likely to consolidate all of their assets with one highly trusted provider. They are also more likely to respond to cross-sell opportunities because they trust you and value your recommendations.
- Lower servicing costs. Providing customer service to loyal clients is less expensive because they are familiar with how your firm operates and comfortable working with you.
- Increased referrals. Because of their trust in you, loyal clients are more likely to generate referrals — staking their own credibility on your ability to deliver results.
To build loyalty, you must build trust
When you take a genuine interest in your clients' welfare, you build trust. You must move beyond simply being a service provider, or even a recognized expert, to becoming a trusted partner. When investors put their full trust in you, they will naturally be loyal to you.
Cultivating trust is a not quick or simple process. It demands consistent, honest attention to your clients' needs and concerns over a period of months and years. You must build personal rapport over the long term by delivering value beyond what your clients expect, and your actions must be genuine. Clients will see right through manipulation.
Clients are always evaluating you, whether you realize it or not. Every interaction with you and your team either builds or undermines trust and loyalty. There’s no middle ground. While it’s easy to become complacent with relationships you feel are loyal, taking clients for granted is a habit you want to avoid.1 Reicheld and Sasser, Harvard Business Review (1990)
