Apr 23 2022
How to create sticky relationships
By Bryce M. Sanders, BS, MS
It took ages to turn your prospect into a client. So how do you get that new client to stay when many investors already have multiple advisory relationships, other advisors are prospecting for them, and online investment platforms are encouraging people to eliminate the middleman?
One way to build long-term relationships is to make leaving difficult for your clients. The term for that is sticky relationships. When I was an advisor and interest rates were higher, I had a manager who shared the following observation. “When you get a prospect to buy a bond, you may think you have a new client, but you don’t. You merely have a prospect who owns a bond.”
So how do you create sticky relationships?
1. Get them to own different products
This approach can be applied to the prospect who owns just a bond. If that client also owned mutual funds, bonds and insurance, the relationship becomes more complex. This complexity can protect you from competitors who might perform one service very well but not necessarily all of them.
2. Financial planning makes sense
Introduce financial planning. Create a road map so the client is emotionally invested in reaching a goal. If the client has more than one goal or need, more products can be part of that road map. Your plan is going to help them progress toward those ends, while another firm trying to win their business would have to repeat the road map that’s already in place with you. So why would the client move?
3. Tax consequences are an issue
Years ago, many firms offered proprietary products that weren’t transferable between firms. When clients moved their money to another firm, they had to sell those products, which triggered a taxable event. Today, if the client owns stocks and the competitor has a fee-based account platform like yours, the transfer shouldn’t involve selling securities. But the competitor is unlikely to tell a prospect to keep their portfolio; rather, they would suggest selling securities to raise cash for buying other securities. In taxable accounts, this move usually triggers a taxable event. In that scenario, why change firms?
4. Spectacular service
Relationships matter. If your clients find you anticipate their needs before they pick up the phone, they are impressed. If you schedule and conduct periodic portfolio reviews, they see that you are paying attention. When you talk about their progress to goals, they feel you are taking their dreams and desires seriously. When your clients have someone who really cares, why would they give that up?
5. Client recognition and events
It’s amazing, but people love free food. When I was an advisor in New York years ago, I had a client who went to Florida for the winter. They would hear about dinner seminars organized by our firm’s Florida offices. They called me and asked if they could attend these functions because, “After all, we are clients of the same firm.” The bottom line is simple: If the account relationship includes client events and recognition, the relationship becomes stickier.
6. Get to know the spouse
You’ve seen it before. An advisor in the office has a great client who generates plenty of business and follows advice. However, one person is the primary contact for the couple as the spouse says, “I don’t get involved in that.” So, the advisor focuses all their attention on the other partner. When the primary contact dies, the advisor now has a prospect rather than a client who inherited lots of money. Statistics show those assets often leave the firm with the widow within months if the advisor didn’t have a real relationship with both parties. An advisor needs to treat each person as an equal. If you do so, in my experience, a spouse will say, “I leave all that to him, but I really appreciate you taking the time to explain it to me.”
7. Sell up, sell down
There was a lot to like about “Downton Abbey.” I especially enjoyed the family retainer concept. Lord and Lady Grantham’s lawyer, accountant and financial people had a history of working with the family for generations. Advisors should actively seek business with the client’s parents along with aunts and uncles. College savings accounts are a logical way for their children’s names to get onto accounts. But you want to physically meet them. A good rationale for the advisor is to try to meet them during the holidays under happy circumstances.
8. House calls
Another “Downton Abbey” takeaway was Lord Grantham didn’t need to drive to London and find parking to see his professional advisors. They came to him. Try to have the kind of relationship where you are agreeable to meeting your clients at their homes for portfolio reviews. Imagine if competitors approach your clients about moving their account and your client tells them, “My advisor comes to the house if I need them.” They won’t look good if they respond, “We don’t do that.”
Having a long-term financial services relationship isn’t the same as buying gasoline. You don’t just look for the place with the lowest prices at the pump. There are many factors involved that can keep clients doing business with the same firm for a very long time.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides high-net-worth client acquisition training for financial services professionals. His book “Captivating the Wealthy Investor” is available on Amazon. Contact him at firstname.lastname@example.org.