Client Trust Pays Unexpected Dividends

Cerulli Associates’ new report “U.S. Advisor Metrics 2018: Reinventing the Client Experience” strives to give readers a more granular understanding of the “intangible upsides of providing an exceptional client experience.”

According to Cerulli researchers, a big benefit for advisers in devoting more time and attention to managing client perceptions is a substantial increase in their clients’ reported trust.

“A great client experience also manifests measurable advantages for the adviser’s practice, including a higher median client size, lower attrition rates and the ability to move upmarket,” Cerulli wrote.

The Cerulli research found that practices focusing on the client experience have a 93% larger median client compared with the industry average of over $500,000. In addition, client-experience-centric practices have lower involuntary attrition.

“On average, 34% of advisers’ asset outflows are a result of clients passing away, moving to another financial adviser or transferring assets to a direct/online provider,” the report says. “Among experience-centric firms, however, this type of involuntary attrition accounts for 24% of asset outflows.”

Marina Shtyrkov, research analyst at Cerulli, notes that 65% of financial advisers expect to experience fee compression in the next five years, and 42% attribute this pressure to the growth of digital advice competitors.

“In response to this competitive pressure and recognition of heightened investor fee awareness, practices are migrating away from measuring their value based on their investment expertise, which can more easily be commoditized,” Shtyrkov says. “Instead, they are beginning to think more holistically about the nonfinancial impact they can have on their clients.”
According to Cerulli, advisers can harness the power of their client experience to increase retention, reduce attrition and generate a strong referral system.

“To do so, though, advisers need to restructure their thinking—and their processes,” Shtyrkov recommends. “Of all advisers surveyed by Cerulli, only 30% strongly agree that their practice goes above and beyond to make clients feel special and that it has a repeatable, consistent client experience.”
How are adviser practices trying to be more client-centric? Cerulli suggests advisers are more broadly adopting a combination of factors—such as technology-driven client segmentation and intergenerational engagement and perspective—to enhance the client experience