Which clients will jump ship?

By Staff | January 13, 2014 | Last updated on January 13, 2014
2 min read

Set your fees wisely and pursue wealthier clients to keep book turnover down, says a report by PriceMetrix.

PriceMetrix looked at advisors’ client retention rates between 2009 and 2013 and found at least 90% of households stay with their advisors year-over-year. The report notes retention was slightly above 90% between 2010 and 2012.

But retention rates can vary widely between advisors. The median advisor in 2013 retained 94% of her clients while the bottom 10% of advisors lost almost 15% of clients.

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The good news is, the more assets a household has with an advisor, the more likely those clients are likely to stick around, reports PriceMetrix.

While a household with $100,000 has a probability of retention of 87%, a household with $500,000 in assets has a rate of 94%. The threshold for higher retention is $250,000.

“The implication, then, is that business development aimed at larger households will yield better results over time, as they will require less replenishment,” PriceMetrix notes.

Read: Keep clients devoted

The report also indicates advisors who aim for a return on assets between 1% and 1.5% are most likely to keep their clients. Price too low and clients undervalue advice; too high and clients have unrealistic service expectations.

Households with $250,000 or more in assets show the least price sensitivity, so advisors should stop giving price breaks to major clients. “Reducing one’s price with the goal of holding on to client business is ineffective and costly,” the report concludes.

Advisors who do both transactional and fee-for-service work have better retention rates than their colleagues who use solely either style. Those least likely to retain clients are low-priced, fee-only advisors, followed by high-priced, transactional-only relationships, says the report.

“The industry-wide move toward fee and managed business should be reassessed,” PriceMetrix adds.

Read: How to undo fee discounts

Advisor.ca staff


The staff of Advisor.ca have been covering news for financial advisors since 1998.