Successful retention begins with signing on the right clients

There are many things that financial practices can do to deliver a richer and fuller experience to their clients. This observation was shared by Deena Katz, a CERTIFIED FINANCIAL PLANNER® professional, who was presenting to a full house of financial planners on the second day of the 2017 Financial Planning Institute’s (FPI) Professionals Convention, held in Cape Town from 19-20 October. Katz’s presentation was titled ‘Growing your practice through retention – A profitable practice technique’.

Client retention begins with a better understanding of both existing and potential clients. At the outset financial planners must understand that the 21st Century client profile has changed significantly from two or three decades ago. In the past information was scarce and advice was largely product-centric, nowadays people are fully informed thanks to the wealth of information on the Internet. The commoditisation of product, time scarcity and the ‘always available’ nature of online product fulfilment further complicate matters.

Katz observed that both clients and financial planners were lifestyle-focussed. “We cannot really fit a product to a person anymore, we need to look at their entire lives and fit a solution to their unique situation – advice is now the centre of what we do,” she said. Delivering on this expectation is among the most important retention tools and as such it is important for all financial planners to occasionally consider their processes and financial planning offering from the client’s perspective.

What few financial planners appreciate is that the important aspect of client retention begins with selecting appropriate clients. “We trade in a world of abundance – there are plenty of clients and plenty of people who need what you do – why should you be taking on clients that you cannot really serve effectively and who do not appreciate your value,” said Katz.

She added that financial planners were closet social workers who struggled to say no; but that attempting to take on all comers to “protect them from potential harm” would mean taking on too many clients who typically have insufficient means to pay for advice. The value of retaining clients is further underpinned by the fact that it costs up to five times more to find a new client than to retain an existing one.

Retaining clients does not have to be complicated and activities that assist in retention often overlap with those that assist in acquisition. The main reasons why people might refer someone to your practice - such as your brand, your reputation, they know someone who has had a good experience, or they had a good experience – thus also ensure that existing clients stay with you.

Financial planners are also encouraged to consider the subtle links between client satisfaction and client loyalty. “The main reason why a client leaves their advisor is that nobody calls them or gets back to them,” said Katz. “Fewer than 10% of clients surveyed indicated that they will leave an advisor simply for lower fees or costs”.

She used an example of a motor vehicle purchase to illustrate the power of pre-client loyalty. Back when the Mini Cooper launched, clients often had to wait six months to take delivery of their car. Mini used this ‘gap’ to create numerous touch points with the client and ensure that he or she had something to look forward during the wait, hand-holding the client from order all the way through to delivery. “You can do this in financial planning too – an engaged client is a loyal and happy client,” said Katz.

A financial planners’ primary function is to manage their client’s financial expectations. “You must understand and manage your clients’ expectations in a way that will help them to get where they want to be,” concluded Katz. “And always remember – you create relationships based on your clients’ needs and circumstances and not according to what your financial planning process is”.