Building trust: The cornerstone of client retention for advisers

Executive summary:

  • More than half of advisory clients surveyed said they left their adviser in 2023
  • These statistics make client retention a key cornerstone of business success
  • Trust is the foundation of building a sustainable relationship with clients
  • There are four components to creating trust: discovery, communication, a personal connection and reliability

Once you've managed to onboard a client, the last thing you want is to lose them! As an adviser, client retention is an important strategy. Regardless of the industry you are in, client retention either becomes a priority or is an ongoing focus in a business plan. That said, recent research1 found that more than half of advisery clients reported leaving their adviser in 2023. Yes, you read that right – half! So, take heart if you're one of those advisers who lost a client last year – you weren't alone. And for those who didn't lose any clients last year – congratulations!

Regardless of where you stood in 2023, it's important to look ahead to 2024. Given such an alarming statistic, making client retention a consistent priority is vital.

Why do clients leave their adviser?

Some of the common reasons include:2

  • They feel neglected or that their adviser doesn't pay enough attention to their unique needs
  • There is a lack of communication or waiting too long to get a response to phone calls or emails
  • The advice they receive doesn't feel like it aligns with their needs or goals

Before jumping to conclusions about how these insights can help us retain clients, I think a good place to start is to ask yourself, "What do you consider when deciding to work with another professional, and what qualities will make you continue that relationship?"

Perhaps you are looking for a personal trainer and nutritionist to help prepare your body and mind for a marathon in six months. Or maybe you need a contractor to help with home renovations. The question is: What qualities will make you sign on the dotted line, hand over your hard-earned money, and commit to working with—believing in, and following—that person?

Whatever those qualities or non-negotiables are, I bet it's the same for investors looking to hire and work with an adviser. I believe that at the top of that list, trust would be the ultimate deciding factor. When we have enough evidence or received enough information that we can trust someone, we are more likely to remain loyal, and we are also more likely to refer that person. To that point, a study3 found that 94% of investors were likely to make a referral when they "highly trusted" their adviser.

Trust – the secret (well, not so secret) ingredient to client retention

If I asked the 54% of clients who left their adviser in 2023 why they decided to switch, I would imagine lack of trust would be a common theme. I think about all my personal and professional relationships, and trust is at the foundation of those where the deepest bonds exist.

Let's look at some tactics and strategies on how we can build and continue to nurture trust to not only attract clients but also keep them:

  1. Understand your clients' goals, circumstances, and preferences through discovery

    "People don't care how much you know until they know how much you care."

    –Theodore Roosevelt

    One of my favorite quotes is from Theodore Roosevelt. A formal discovery process is foundational to your relationships with clients. It's also the first experience a prospect will have with you and your team.

    The initial meeting often starts with a fact-finding discussion that usually focuses on the how (how much money they have) and the what (what they want to do with it). But true discovery is when we get to the heart of the matter, understanding the "why."

    Through a discovery conversation, you allow the client to talk about all they want to accomplish, all of which require planning, money, and time. They will speak to you about their life, the emotional reasons behind their goals, the people who matter most to them, and what keeps them up at night. Money is personal, and for clients (and prospects), sharing all these details will make them vulnerable. And if you are doing discovery with long-time clients, it may make you vulnerable, too. However, taking the time to understand your clients and embracing vulnerability will demonstrate that you genuinely care. Clients will feel seen, heard, and understood, leading to an emotional connection that may create profound trust.

  2. Stop talking and start listening

    "The biggest communication problem is we do not listen to understand. We listen to reply."

    –Steve Covey

    I'm all about pertinent quotes, so here is another by author Stephen Covey. This reminds me of the research we commissioned Professor Jeff Belkora, University of California, to do for us. Jeff and his team were provided recordings of advisers conducting client meetings. The metrics they looked at were:

    • How much of the time did the adviser speak?
    • How much of the time did the adviser ask questions?
    • How many words did the client speak during the interaction?

    The results? Advisers spoke 54% of the time, asked questions 26% of the time, and clients spoke around 1200 words. Now, if I'm trying to learn as much as I can about my clients, I don't think speaking more than half the time will help me do that. So, how do we stop talking? We ask open-ended questions and listen.

    Advisers who were surveyed for the study were then taught better communication styles. The charts below show how their client discovery conversations changed.

    (Click images to enlarge)

    Adviser talking patterns chart


    Adviser talking patterns chart

    Source: SLCT—A process for initiating critical reflection, by Jeff Belkora, PhD., 2015
    *Talk time is measured by the number of characters in the transcript per exchange.
    **Each conversation is considered an exchange.

    Good communication is not just about articulating your words to convey a message; it's also about being a good listener. Think about how it feels for you when someone has shown genuine curiosity about your life, asked you questions, given you the time and space to respond, and really listened to what you shared. It's only natural that you start to trust that person with more and more information.

  3. Make it personal and make that the standard

    "We are all different. There is no such thing as a standard or run-of-the-mill human being, but we share the same human spirit."

    –Stephen Hawking

    Scientist Stephen Hawking's quote resonates here. We often forget how unique we all are. So much of how we live our lives today is personalised based on our preferences. From first thing in the morning (our complicated coffee orders at Starbucks), throughout the day (our Spotify music lists tailored to the songs we love and listen to), and into the evening (watching our personalised Netflix recommended movies and TV shows based on what we stream), the customised experience is something we are used to and frankly, expect.

    Research continues to show that clients expect personalization when working with an adviser:

    • 60% say that more frequent and more personalised contact would give them more confidence in their financial plan.4
    • 85% would consider the frequency and style of communication when retaining services.4

    To support this even further, eight in 10 clients would be more confident (77%), more likely to keep (78%), and more willing to refer (81%) an adviser who communicates more often and more personally. According to the research, this is especially true for clients between 30 and 44 or with more than $500,0001 in investible assets.

  4. Be transparent, consistent, and execute reliably

    "Trust is built through consistency."

    –Lincoln Chafee,
    Former U.S. Senator

    I think former senator, Lincoln Chafee said it best in his quote. It's as simple as that. If you tell your clients that you will email them once a month, follow through. If you tell your clients that someone on your team will always be available to answer their calls, ensure that is the case. If you tell your clients, you will return phone calls or respond to emails within 24 hours – do that. When we don't follow through on the service we have promised our clients, we do more damage than we realize. Be transparent by clarifying expectations, be consistent in the service you provide, and execute on that reliably.

The bottom line

When it comes to client retention, it's critical to first earn our clients' trust and then continuously nurture and strengthen that trust to deepen relationships. By having a genuine understanding of our clients' goals, circumstances, and preferences and being consistent and reliable, we can build authentic and emotional connections that have the potential to last a lifetime.

1 YCharts: Clients Ditched Advisers at Alarming Rates in 2023

2 Financial Adviser Client Retention Strategies

3 The evolution of Adviser’s Alpha®: People with portfolios

4 Based on responses of individuals who currently invest >$500k in AUM with financial advisers and wealth managers surveyed in “How can advisers better communicate with their clients”, December 2019 by YCharts. Total sample size represented 650 individuals across the U.S., Accessed Feb 3, 2021.