HiddenLevers Perspective: Best Practices in Client Retention

With the advent of robo-advisors and discount financial advice, advisors are under more pressure than ever to illustrate their value to retain clients. HiddenLevers has always viewed itself as an advocate for financial advisors. Despite the headlines, we understand that technology cannot replace human interaction. So, we pooled together our thoughts from countless hours of conversation with leading RIAs regarding their best practices for client retention.

Don’t Become Robo 3.0

What separates a financial advisor from a computer? A strong personal relationship that goes beyond a simple digital dashboard. Good advisors avoid tip-toeing around the issues plastered on the headlines and ask thought provoking questions that get their clients to open up. Great advisors go one step further and foster strong interpersonal relationships with their clients to strengthen their purpose.

Technology is another great way to take your client relationships to the next level, but advisors should use technology strategically. In fact, some of the automation put in place by advisors is having a negative impact on their retention and they might not even know it. Let’s think about it, post cards sent out by a machine are more of an insult if they aren’t backed up with a very personal touch that makes the client feel valued. Taking the time to pick up the phone and call that client, letting them know that their relationship means something to you, will always yield a better result. A 2014 study by Millionaire Corner found that households with a net worth of $1 million plus are most likely to fire their advisor if their phone calls and emails are not promptly returned, so make sure you leverage your best asset (yourself) and use technology to further augment your services.

Unfortunately, some advisors have adopted the robo 3.0 mentality, adopting so much automated technology their role in their client’s lives is almost non-existent. If your clients can find your same services for less money, they will not be your clients for long.

Why Do Clients Leave?

We’ve sat through thousands of meetings with advisors and one of the most compelling items we’ve taken away is that many advisors struggle with communicating the tradeoff between risk and return. We hear things to the effect of “well that’s what my clients pay me to worry about” or “that’s just too complex for my clients.” Yet, at the same time, we see in the stats that advisors are losing AUM, and the largest complaints from clients is they expected better performance.  Is this the clients or the advisor’s problem?  It doesn’t matter, ultimately both will suffer!

In 2014 The Vanguard Group, Inc. worked with the U.S.-based independent research firm Spectrem Group on a study that found that affluent and high-net-worth investors gave more weight to communication, trustworthiness and transparency than to fees and performance when deciding whether to hire or fire an advisor.



Should a client not expect better performance? Should the advisor build this relationship on performance?  Absolutely not.  It is our responsibility to spend the time necessary to set clear expectations, both for a foundation of our relationship and the risk + reward of all the advice we prepare for our clients.


Keep Being an Expert

As Manish Khatta, President / Portfolio Manager of Potomac Funds, notes:

“Most financial advisors and clients spend a lot of time focused on investment returns. For example, many online retirement calculators ask investors to input their expected return along with their current income, savings, age and planned retirement date. Most mutual fund web sites and fact sheets present annualized returns for their portfolios over a specific period, in addition to yearly returns.

With this laser-focus on investment return, risk is often overlooked. Both investors and asset management firms place heavy emphasis on the total returns achieved, without considering the amount of risk that was assumed to generate those returns.”


It is important to remember what gave birth to the financial advice industry –  an asymmetry of knowledge between advisors and their clients. Financial advisors acted as experts, and their clients paid them for their advice. Advisors should utilize tools that are easy to understand but provide a sufficient degree of depth. If your clients have questions about how much they need to save for retirement, how to best allocate their 401k, or how their fee’s will change after a rollover, they always expect honest and transparent answers. The same thing goes for more complex questions, whether it’s the effect of changing interest rates or the Trump presidency it is an advisor’s job to help address these questions in an easy to understand manner that still considers the intricacies of these issues.

HiddenLevers helps you answer these sorts of questions through visualizations and easy to understand results that focus on Risk + Reward and where the client is vulnerable.  Platforms like eMoney Advisor and MoneyGuidePro can help your clients understand the best pathway to meeting their financial goals and how planning around uncertainty can impact their overall financial plan.

Investors gravitate towards expecting higher returns and taking less risk from their investments. Advisors can utilize HiddenLevers to illustrate the risk + reward tradeoff inherent with investing.  Shining light into the dark corners of tail risk and speaking directly to the concerns your clients have related to what they read or saw on the news.  Having this discussion does not mean we need to change their strategy, it means we have an opportunity to fine tune their expectations and speak to their concerns promptly, honestly and transparently.

Advisors should revisit these conversations to keep their clients on track and deepen their relationships. Get this conversation right and you can reduce your client churn by over a third.

Make Your Clients Indispensable

Many advisors know that not all clients are created equal, and when you gain someone’s trust,  the goal is to retain that client for the long-term.   Long-term relationships and low churn will help build a reputation in your communities and usually result in life-long friendships. By utilizing technology to further humanize your practice, you help your clients have realistic expectations about their investments, improve your bottom line, and create relationships that last a lifetime.

Ready to start measuring risk + reward? Stress test portfolios with HiddenLevers and increase your client retention with our FREE 7-day trial.

Click here.

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