There is a growing problem within the financial services industry. Customer serial switching is at a record high of 67% and the client retention rate is at a 10-year low. As these statistics get worse over the years, financial institutions are becoming increasingly worried about their client base. This is because the financial services industry is moving towards becoming a perfectly competitive market, where client cannot differentiate the value of placing their wealth at one firm to another.
There are multiple reasons as to why this problem is persisting. Common complaints among clients about their advisors include a lack of communication, misjudgment of their needs, and overpromising returns. As these complaints continue, it shows that the market is missing a sense of brand loyalty within their clients.
By taking an in-depth look at these complaints, it can uncover the driving factors of the serial switching phenomenon.
1. Lack of Communication
Clients want to know what’s happening with their money.
Failure to communicate with clients is rampant in the financial services industry. According to a survey of 650 clients, 69% of small account holders and 47% of large account holders said that there is infrequent communication with their advisor. Additionally, 66% of those clients who were infrequently contacted said that more frequent and personalized communication would give them more confidence in their financial plan. This shows that just a simple increase in communication can result in a drastic increase in client satisfaction with their advisor. In fact, it’s more common for a client to leave their advisor due to a lack of communication instead of their actual portfolio performance. Although this is surprising, it shows how a simple necessity is being overlooked.
2. Misjudged Needs
Let the client speak to what they need.
Advisors often misjudge what a client needs to maintain their lifestyle. Although it is challenging for them to pinpoint exactly what their client needs, they often skip the most crucial step to understanding them – listening. These common misjudgements can be avoided if the advisor attentively listens and comprehends what their client is communicating to them.
3. Overpromising Returns
Don’t promise and not perform.
There’s nothing worse than being promised something to find out it didn’t go as expected. Overpromising returns is the worst thing an advisor can do to their business as it can make great returns look mediocre or inadequate. This is simply because when an advisor does not perform as they said, clients view their service as unreliable. To avoid this, advisors should always look to keeping their promises within a range that is acceptable and can be realistically accomplished within the year.