Until recently, the financial advisory sector has enjoyed client retention levels unmatched by any other professional group.  However, long periods of client loyalty and low attrition are being disrupted by the unprecedented level of change we’ve seen in financial services in recent years. Clients are really starting to take a hard look at what they want from their advisers.

This is supported by findings from a recent survey of consumers and SME owners who had purchased life insurance through a financial adviser. Consumers and SMEs en masse appear to be seriously contemplating the value they derive from seeing a financial adviser.

The recent MetLife Adviser-Client Relationship Report revealed that 3 in 10 consumers and 5 in 10 SMEs are considering either changing their current adviser or ceasing to use an adviser at all. While some attrition is inevitable in any client services profession, these numbers suggest that loyalty is in no way a given, so financial advisers need to take a far more proactive role when it comes to generating and demonstrating value for their existing clients.

While the intense scrutiny of the Royal Commission has shaken the financial services sector to its core, it has also opened up opportunities for competitive advantage and differentiation for those who look at enhancing customer focus across the board.  

The value of high client retention extends beyond the obvious financial benefits that come with having long term customers. The positive word of mouth that comes with a strong and loyal client base is an essential driver of customer referrals needed to generate growth. With long term clients there is also an increased opportunity to deliver greater value over time. When you factor in the cost of marketing to attract new clients on top of this, the case for investing in client retention is clear.

Many advisers have been working on their retention strategies and commuting through these changes with their clients. Those who don’t act on this now, risk seeing clients move to competitors or worse, look to exit the advice industry entirely.

The right advice is more important than ever.

While the data suggests consumers and SMEs are seeking greener pastures, financial advice is unquestionably becoming more valuable than ever. Australians are navigating a complex financial system with serious implications for their long-term financial health and a glance at the news headlines will tell you that it's a tough environment.

Australians are struggling with falling levels of financial literacy, with OECD research suggesting we lag behind other developed countries when it comes to understanding financial concepts and staying on top of personal finances. Soaring household debt and the fact that millions of Australians are struggling to meet their monthly credit card repayments has many believing we’ve officially reached a crisis point. We’re also dealing with the rising cost of living and some of the highest energy prices of any country across the globe.

Add to that Australia is in the lowest interest rate environment in its history which is particularly problematic for retirees and those planning for retirement. Our current low growth climate means many Australians may consider dipping into their retirement savings in order to maintain their lifestyles.

This should be the time for the industry to shine. But the spotlight of the Royal Commission is yet to fade. Reforms designed to increase openness and transparency across the industry have raised client expectations around the transparency of advice they receive. Our research shows trust is one of the key attributes consumers and SME owners sought out in their advisers.

With people feeling less secure about their finances, it continues to be important that they are equipped to make informed decisions that impact their future, and our research suggests advised clients are more confident in their understanding of, and ability to explain products.

Financial advisers have a critical role to play in connecting these dots to help people to understand and participate in the financial system. If there was ever a time for Australian’s to be engaging with financial advice, it is now. And it’s important that they feel they can trust that advice.

So if financial advice is so valuable, why are clients considering turning away?

To stem potential client losses, financial advisers need to understand the pain points which may potentially be turning loyal clients away in the first place.

Concerns around high fees, a lack of affordability or a lack of contact were the top reasons consumers and SME-owners indicated they were looking to move on. When we delved deeper into these findings, there appeared to be a real disconnect between perceptions of cost and value when it comes to insurance and financial advice.

As with any product or service, if you can’t demonstrate value or return on investment (ROI) to your client, you don’t have a strong business model. The challenge for advisers has always been measuring and communicating ROI in the short term when the foundations of the business are built on delivering long term gain.

We live in a world where we expect and receive instant gratification, from the emails in their inbox, to the likes on their Instagram, to the purchases in their online shopping cart. So in the absence of any immediate gain or reward advisers do risk their clients turning away. That is unless the benefits of seeing an adviser are communicated simply, honestly and regularly.

From the outset of a new client relationship, advisers need to be forming a connection and focused on explaining the value of their advice, the benefits of specific products and being open about fees and commissions. For existing clients, regular reviews are becoming increasingly important and can be viewed as a value-add to strengthen the relationship.  

While there’s no simple answer when it comes to client retention, there are some simple measures advisers can take:

  1. Build genuine connections and foster a relationship based on trust. Adviser-Client relationships need to work like partnerships, where both sides work in tandem toward a common goal.

    Often the most successful advisers are those that work to set realistic expectations around value right from the outset of a relationship. By setting and agreeing on expectations, clients are likely to develop trust early on, which will be continuously reinforced as certain milestones are met.

  2. Demonstrate value through regular communication. Clients need to understand what they’re paying for and why. The importance of regular check ins and routine annual reviews which give clients the opportunity to ask questions cannot be overlooked.

    This also provides insight into clients’ changing circumstances and needs, such as at important times in their lives including buying a house and having a baby. Regular communications and deep understanding of clients also means that they are more likely to recommend their adviser.

  3. Make it personal. In a world where increasing digitisation means consumers are used to a customer experience designed just for them, everyone wants to feel special. So it’s important to invest in providing personalised touches and experiences tailored to their individual needs. That way clients are more likely to derive value and remain sticky.

If there’s a key takeaway from our research it should be that there needs to be an ongoing focus on clients over time. Client engagement should be the number one priority on every adviser’s business plan for 2020.

Those that can successfully do this will be able to capture a competitive advantage in a challenging market.

Read the Adviser-Client Relationship Report 2019

Michael Mulholland
Chief Distribution Officer
MetLife Australia