Will Your Clients Follow You?

Financial advisors are on the move. Of course that isn’t something that takes us by surprise, but the amount of assets that switched hands within the brokerage industry this year alone may … a whooping $59 billion. With the year just a little more than half over, the amount of assets in motion is even more astounding when looking at the production level of some of the advisors transitioning. At least 26 of them were advisor teams, each with more than $500 million in client assets, and seven of those teams managed more than $1 billion in client assets.[1] With top advisory teams taking the lead, more are sure to follow.

Why this rash of movers? Rueters cites the reason for some being concerns about raising account fees, the pressure to cross-sell their firm’s products and worries about the health of the company. Of course, for those who made the move to an independent broker dealer, it was the lure of higher payouts, having more control over their practice and less stringent compliance oversight.

For others it was a timing issue. They had reached the end of the payback period for previously awarded retention bonuses, causing them to re-examine their options.  Do Retention Bonuses Work? Whatever the motivating factors, moving to a new firm can be stressful, and getting clients to follow can create it’s own set of problems.

It’s estimated that when advisors moves to a new firm, 60 percent to 90 percent of their clients will stay with them. Looking at the lower end of the spectrum – 60%, lack of client retention can be detrimental to an advisor’s financial situation. And, because retention bonuses are predicated on the percentage of clients that move with the advisor, their earning potential may even further be affected.

While advisors often assume their clients will follow, some are finding it is not an easy task to convince them to do so. Some clients may feel more secure with a firm they have become familiar with, and others may find any change too stressful to deal with. However, advisors who report having the most success with getting their clients to transition with them, stress the importance of these two factors: 1) strength of the client/advisor relationship, and 2) preparing clients for the move.

Are your client relationships strong enough to withstand the pressures of a move? Do this simple exercise to assess how you would fair with getting your top clients to move to a new firm with you:  Without looking at client files, write down the names of your top five clients and their spouses. Then, write down the five key areas of concern for each of those clients. If you don’t have any idea what issues your clients are concerned about, you have failed the empathy test. And, if you can’t even name your top five clients, you’re in a world of hurt. If you can do both, bravo to you! Continue to work your way down the list. This will give you a good idea of how strong your client relationships are.

How do you prepare clients when moving to a new firm? First, you need to have a good reason for the move and why the move will be beneficial for them. Here’s a simple exercise to help you get started: Step into your client’s shoes and ask yourself these questions:

1)   Why are you leaving?

2)   How will the move affect my account?

3)   What does or doesn’t your new firm provide that the current one does?

4)   Does this affect how you are getting paid?

5)   What will I have to do to ensure my account is transitioned smoothly?

An astute client may even ask if you are receiving compensation to make the move and if this is a key factor in you making the move. Be prepared to answer this question and any others that may come up.

Transitioning to a new firm can be stressful. However, by continually developing strong client relationships and, preparing your clients by creating a Client Transition Plan, your move will be much easier.