HNW investors see themselves as very loyal to their financial advisors. But that loyalty has limits, and understanding those boundaries can help you retain valued clients. That's can be especially helpful in the event that you decide to leave your firm and join another.
In a survey by consulting-and-research firm Spectrem Group, two key trends emerged:
HNW client loyalty increases with age. Older HNW clients are more likely to stay with their advisor if he or she relocates to another firm.
HNW women are more likely than men to move with their advisor to another firm.
Among generational groups, the most loyal HNW clients are the oldest.
53% of people who lived through World War II told Spectrem they would keep their financial advisor even if the advisor left his firm for another one. World War II investors are age 71 and older, Spectrem says.
Baby boomers were close behind, with 50% pledging to follow their advisor if he took a job with another firm or left his current firm to start another of his own. Boomers range in age from 53 through 70.
Client fidelity falls sharply for Gen Xers, who are ages 36 through 52. Only 42% would move with their advisor.
Millennials are the least steadfast by far, with only 27% saying they would move their accounts with their advisors.
Why the big differences among age groups? Different age groups will drop a financial advisor for different reasons.
Nearly two-thirds of HNW World War II investors — 66% — told Spectrem they would fire an advisor who does not return phone calls promptly.
65% of boomers cited prompt phone callbacks as their main reason for dumping an advisor. 58% of Gen Xers said that would be their primary reason for saying bye-bye. And 52% of millennials said that's why they would let go.
Two shortcomings that matter more to younger investors are investment performance and a perception that your financial advisor does not understanding their risk tolerance.
36% of millennials said they would get rid of a financial advisor who guides their portfolio to losses over a span of two years. That prioritization falls for each generational group, bottoming at 27% for World War II investors.
Those percentages were roughly triple or higher the rates of dissatisfaction for investment losses over a single year.
And while 41% of millennials said they would change advisors if theirs does not understand their risk tolerance, that sensitivity declines for each generational group.
Only 34% of World War II investors would kick a financial advisor to the curb for that reason.
The lessons for financial advisors who want to preserve and build their HNW client ranks are clear:
Return client phone calls promptly, especially from older clients.
Avoid losing money for clients for two years or longer.
Makes sure you understand your clients' risk tolerance.
HNW women generally profess greater loyalty than men to a financial advisor. 54% says they would relocate with an advisor to a new firm vs. just 46% of men overall.
And, like men's, women's willingness to change advisors jumps once investment losses reach two years.
29% of women say that time span would prompt them to abandon ship, vs. only 10% for losses over the course of a single year.
In addition, 66% of HNW women say a financial advisor's failure to return phone calls in a timely fashion is enough of a no-no to make them shop for a new advisor.
They feel almost as strongly about not returning emails fast enough, with 51% saying that would make them look for a new financial advisor.
Both of those percentages are slightly higher than the portion of HNW male clients would drop a financial advisor for those reasons.