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Building trust is essential to retain wealth management clients


As the wealth management landscape shifts, advisory firms need to update their approach to retain clients into the long term. Whereas in-person meetings and monthly reports were once the norm for managing strong relationships, current clients expect more from their financial advisors.

The specifics of what they want are varied, influenced by changing demographics, newer approaches to investment, concerns about security, and communication preferences. However, there is one unifying theme at the heart of all of this – trust.

What retention challenges are advisors facing?

As an industry, wealth management services have enjoyed a high client retention rate in recent years, with an all-time high in 2020 at 94.6%. The previous decade was one characterized by growth and clients were happy to remain with advisors as long as it lasted.

However, in 2022, the landscape began to change. As McKinsey put it, “the year 2022 brought a drumbeat of tough economic news, from slowing economic growth and high inflation to sagging equities and bond markets.”

In times of slower economic growth, firms have to work harder to maintain their relationships with clients. An oft-reported statistic from Bain & Company found that by increasing client retention by 5%, companies can boost profits by 25-95%, depending on the industry. By the same token, an uptake in client churn can have equally devastating consequences.

Now that the context is changing, wealth managers have to work harder to retain the trust of their clients. The decade-long security of steady growth is fading, so where should advisors focus their efforts?

Increased client

company profits

Changing demographic expectations

Look at the great wealth transfer, for example, where around $60 trillion is expected to move from older generations to younger ones by 2060. Whereas once wealth management firms could expect existing family loyalties to ensure a smooth transition, this is no longer the case.

Studies show that 80% of millennials undertake their own research to find new wealth managers once coming into their inheritance. Family ties lose out to offerings with enhanced digital and mobile products and strong service experiences.

Ethic-based investment decisions

It isn’t just a shift in demographics, the way clients make investment decisions is also changing. For HNWIs that are younger than 40, 39% of those surveyed said they’d ask for an ESG score before making an investment decision. The same was true for 43% of ultra-HNWI individuals.

That’s not to say that investment performance doesn’t matter – it certainly does, with 42% of investors stating that positive performance is the primary reason they would consider ESG investing. Even so, being able to offer a broader range of ethical investment opportunities is undoubtedly necessary to remain competitive. What’s more, the clients want to be kept up to date on the impact of their investments in sustainable contexts on an ongoing basis.

The ever-present question of compliance

Of course, security is never far from the mind of wealth management clients, particularly as cyber attacks and data breaches become more common. Financial regulators are also concerned about this issue and are stricter in enforcing compliance regulations, specifically around client communications.

Last year, the Wall Street Journal reported that eleven of the world’s largest banks and brokerage firms had to pay a collective fee of $1.8 billion due to inadequate regulatory compliance. While the advisors are flouting these regulations due to client channel preferences, the cost of a data breach as a result can have significant negative consequences in terms of reputation – never mind the financial repercussions.

Building trust through service experience

All of the challenges above can be overcome by carrying out due diligence behind the scenes and offering a service experience that exceeds client expectations. In other words, there needs to be a strategic shift in how firms operate to accommodate today’s realities.

In terms of client perception, perhaps the most important part of this is the quality of the service experience. Take for example the rise of mobile applications or digital client portals in the financial services industry. They have gone from being a nice “toy” to being the main tool for investors to manage their holdings. Everything from portfolio information to keeping track of tax documentation needs to be there. A total of 72% of millennials use their mobile phones to access account information.

The characteristics of a strong service experience

In this context, the characteristics of what constitutes a strong service experience becomes important. There are several areas we can focus on.

Personalization as an engagement strategy

Today, personalization means tailoring individual product offerings based on data insights. But data isn’t enough on its own. It also needs to be built upon a foundation of efficiency, leveraging Conversational Artificial Intelligence and other automation tools to reduce non-core administrative tasks and increase productive client-facing time. With a more efficient, personalized service, advisors can build the client relationship and engagement.

This issue of client engagement should not be underestimated. In fact, it is overtaking client satisfaction as a marker of overall success. There is a strong correlation between engagement and profitability, which means that this is a key area for advisors.

Secure, compliant, convenient messaging

As mentioned, balancing regulatory compliance with convenience is a mounting challenge for wealth management firms. Overcoming this issue involves embracing secure messaging solutions that mirror and enhance popular messaging apps.

Secure Messenger is a natural touchpoint for client-advisor interactions and is available even in restricted environments. What’s more, it has automatic recording and encryption capabilities to adhere to compliance requirements.

The true value of Secure Messenger is in its convenience, allowing clients to interact on familiar channels in the way that they prefer. However, unlike apps such as WhatsApp or Facebook Messenger, Secure Messenger offers a full omnichannel experience.

For more in-depth financial plans or conversations, clients or advisors can escalate to Co-Browsing sessions and collaborate in real time.

Build trust through client centricity with Unblu

Overall, investors are looking for simplicity in all of their wealth management interactions and advisor-client relationships. The quality of the financial advice or investment advice they receive needs to be delivered using a service model that matches their expectations. Poor communications or infrequent status updates can impact client satisfaction and lead to lower client retention rates. 

This, above all else, is what is going to create a sense of trust. Complex product offering and repetitive processes will turn them off – particularly if their current investments aren’t performing as they once did.

While wealth management firms have substantial strategic challenges ahead of them, offering a seamless client experience will go a long way to building trust and ensuring client retention.

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