Stay or Stray

Stay or Stray

Putting some numbers behind client retention

Financial advisors who want to grow their business need to pay attention to metrics like client retention and attrition. Whether planning for growth, succession, or simply increased productivity, advisors should have a solid grasp of which client relationships are durable and likely to persist, and which relationships are at greater risk. This issue helps advisors distinguish between the two by analyzing the characteristics of clients who are more likely to stay with their advisor, and the qualities of advisors who can retain a high proportion of their clients.

These are some of the key findings that emerged:

  • the most critical time period for advisors to focus on client retention and attrition risk is from the one-year mark to the four-year mark in a client relationship.
  • small clients are less likely to stay with their advisor and having an excess number of small clients in a book can negatively affect the retention of other clients.
  • low-priced fee-only relationships and high-priced transactional-only relationships are the least likely to be retained.
  • there is no one price that optimizes client retention, rather a range of prices; still, advisors can undermine perceptions of value by pricing too low or too high, as both lower the prospect of retaining a client.
  • despite advisor perceptions, large clients display less price sensitivity than small clients.
  • older clients are more likely to stay, while younger clients are more likely to leave.

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