Communicate With Clients Or Lose Them

YCharts Survey On Client Communication Reveals High Client Attrition Rates Since 2020 And That Clients Want And Benefit From Frequent Communication 

Any counselor will tell you that good communication is the bedrock of a relationship. Without it, you can go to great lengths of sacrifice for another person and they won’t know – they’ll be left guessing about your intentions and your dedication to the relationship.

In the financial advisory world, it’s the same – communication is crucial to the relationship, and importantly, keeps clients from leaving, according to a recent survey conducted by investment research, analytics and client communications platform YCharts, which has over 10,000 users, including advisors, asset managers, individuals, educators and enterprises.

With over three decades of experience in financial services, YCharts President and CEO Sean Brown has helmed the firm almost seven years. We caught up with Brown to ask about the survey results and learn more about client communications.

WSR: How, and how often, do clients prefer to communicate with advisors? How has this changed since the pandemic?

Brown: We surveyed over 650 clients of financial advisors who told us communication frequencies have not changed much since the pandemic started and ended. Around two-thirds said their advisor contacts them “frequently” or “somewhat frequently,” and the remaining third said “infrequently” or “never.”

An optimist might conclude that advisors successfully held their ground. But as a client, wouldn’t you want more touch points, more facetime and more guidance during a historically volatile period in the markets?

However, clients reported bigger changes regarding meeting format. Half of the clients we surveyed said that before COVID-19 they would meet with their advisor in person only, but that figure fell to 28% as of December 2022. Further, one in five now meet only virtually, up from one in eight before the pandemic. And while social media continues to grow as a marketing channel for advisors, clients still prefer more traditional, one-to-one channels like email (73% prefer), phone (45%) or text (35%).

WSR: What are the consequences of not communicating up to clients’ expectations? Is this the driver behind the large numbers of clients switching advisors mentioned in your report? 

Brown: Unfortunately for advisors, the consequences are numerous. Retention rates, referrals and clients’ confidence in their financial plan can all suffer when an advisor’s communication strategy and execution are suboptimal. Eighty-eight percent of surveyed clients said they consider their advisor’s communication style and frequency when deciding to retain his or her services, and almost 90% said the same applies when deciding whether to give a referral. Critically, those percentages were even higher among wealthier clients.

Those statistics appear to align with the number of surveyed clients who reported switching to a new advisor since the pandemic began, or at least considered making a change. Here’s some back-of-the-napkin math: 

Multiply the 88.2% who consider communication style when deciding to retain their advisor by the 34.4% who say they’re contacted infrequently or never, and you arrive at 30.3% of clients being a flight risk. In reality, 21.8% of respondents told us they switched to a new advisor or a robo-advisor and 25.3% considered making that change.

Advisors can’t control the market’s direction and volatility, but they can control communication – and advisors risk a large portion of their book of business if they fail to communicate with clients in an impactful way.

WSR: Why do you think advisors aren’t meeting these expectations? Is it lack of knowledge, or are other barriers interfering?

Brown: The pandemic was obviously not an easy time for any business owner or leader – we were all fighting to stay afloat throughout 2020. Ironically, ours is a business of planning. We surveyed clients, not the advisors themselves, but I’d be curious to see how many advisors had a well-documented communication strategy before COVID-19 versus those who cobbled a plan together when the pandemic began.

To some degree, the market’s historic bull run from 2009 to 2020 caused complacency. Generally speaking, both advisors’ AUM and clients’ portfolio values only climbed higher for a decade. 2020 was a wake-up call for both groups.

On the flip side, advisors did receive generally good marks regarding the clarity of their communication. On average, 70% of the material in a typical conversation “clicks” or resonates for the client, but our survey shows that comprehension suffers when touch points are few and far between.

WSR: What kinds of communications are most lacking? I.e., what do clients feel the need to hear or discuss that’s not happening or not happening frequently enough?

Brown: The industry has largely moved toward holistic planning in recent years, and with good reason. But advisors should remember that investment portfolios are the engines that deliver individuals to their desired destination.

When we surveyed advisors’ clients in 2019, portfolio performance was the third highest-ranked factor for selecting an advisor. In the 2022 edition, portfolio performance leapfrogged “a deep understanding of me and my goals” and “accessibility or availability to me” to claim the number one spot.

A solid financial plan is critical for cash flow management, hitting big life milestones and myriad other reasons. But more conversations centered on portfolios, risk and returns, and allocation decisions could really help connect the dots for clients, building confidence and trust along the way.

Michael Madden, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at mmadden@wealthsolutionsreport.com