"This is loyalty that endures: through down markets, changes in clients' personal and professional lives and even through changes in their own businesses."

Six C's of Loyalty

By John Bowen

When people need professional financial advice, they have plenty of options to choose from. There are tens of thousands of "traditional" financial advisors—registered investment advisors, independent broker-dealer representatives and stockbrokers—and that's just the beginning. A whole range of other professionals are now offering investment advice, from accountants and bankers to insurance agents and even attorneys.

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Despite the plethora of choices people have about the types of advisors they turn to, most remain largely unsatisfied. One industry study by my associate, Russ Alan Prince, found that among the wealthy clients he surveyed, just one-quarter (26.7 percent) rated their advisors as "excellent." More than two-thirds (69.7 percent) ranked them as "fair," while 3.6 percent fell into the "poor" category. This means that, all told, nearly three-quarters of wealthy clients out there are either highly receptive to working with other advisors or are actively looking to switch to another advisor.

With so much competition out there, and with affluent clients so willing to shop around to get what they need, it's little wonder that finding wealthy clients consistently ranks at the top of advisors' concerns in our research. Time and again, our industry studies have found that the overwhelming majority of advisors are focused on this challenge.

But not all. Despite the brutal competition, despite the predisposition of so many clients to switch advisors, there are some advisors out there who don't worry about actively seeking out new wealthy clients.

Why? Because their current clients give them most or all of their assets to manage and regularly provide them with qualified referrals for affluent prospects. Just as important, these advisors keep their clients for decades.

These advisors have succeeded in building true client loyalty. This is loyalty that endures: through down markets, changes in clients' personal and professional lives and even through changes in their own businesses.

These advisors know that, above all else, it's all about the client. They design their businesses and their interactions with their clients to provide them with precisely what they want.

I see many advisors struggle to understand exactly what clients want. Additional research of more than 1,400 wealthy clients pinpointed the six characteristics that most contribute to client loyalty. Together, these six C's—character, chemistry, care, competence, cost-effectiveness and consultation—provide an excellent framework to help you build lasting client loyalty.

Character

Let's start with the personal qualities clients want in their advisors. Integrity is perhaps the most important quality because all clients, to be clients at all, must believe that their advisors are honest. Trust and dependability also rank extremely high. But you can't just tell your clients that you are honest, trustworthy and dependable. You have to demonstrate your good character through your actions.

The best way to do this is through the quality of your conversations with your clients. And the highest-quality conversation you can have with your clients is about their values.

For this reason, an in-depth values conversation should be part of your discovery process with each client. Seek to learn exactly what is most important to them about money. The answer to this question is not "To have my investments make money." All clients want to see their investments make money. You're looking for something much, much deeper and more important: your clients' most precious beliefs and dreams.

Chemistry

Chemistry is the ability to be "in sync" with your clients. You have chemistry when you "connect" with your clients. You know what they want to talk about, and you see eye-to-eye on important issues.

Your discovery process is again crucial to your ability to demonstrate this quality. When you've completed a thorough discovery process—and again, this must be about much more than just financial issues—you understand what is important to them. You know what they care about so you can connect with them on a fundamental level.

Care

You must be genuinely concerned about your clients' well-being. They should be more important to you as people than as sources of money. It isn't enough just to care, however. You have to be able to show clients that you care.

Your best opportunity for doing this, yet again, is during your discovery process. Your discovery should not just find out about your clients' assets, but also their most important relationships (including immediate and extended families) and their most important interests (including community or church involvement, volunteer work and hobbies). Above all, it should uncover their most important goals (and not just financial goals and objectives, but life goals and dreams).

Be thorough with your discovery process. If it stops short of uncovering what's most important to your clients, you'll fail to communicate that you truly care about what's most important to them.

Competence

It's a given that to attract and retain wealthy clients you must be smart, technically capable and a leading expert in your field. Once again, to build client loyalty, you don't just have to be competent, you have to demonstrate your competence. Publish articles for your target market in the appropriate trade or association magazine, and send reprints to your clients. Write and publish white papers that highlight your expertise in solving your target market's financial challenges.

Establish your authority as an expert in your field—give speeches and presentations before select groups on topics that are particularly compelling to your target market. The more that you can demonstrate and communicate your competence, the more loyal your clients will become.

Cost-Effectiveness

Being cost-effective means delivering true value to your clients for the cost of your services and products. Don't confuse cost with value. Affluent clients are generally willing to pay premium prices, but only when they believe you are worth the cost.

How do you prove to wealthy clients that you are cost-effective? By solving their complex financial problems. This is simply the highest value that you can offer. To do so, however, you'll more than likely need to offer a broad array of services beyond investment management. This is why wealth management—delivering multiple services within a consultative framework—has become the winning business model in our industry.

Consultation

Consultation frames the entire advisor-client relationship as an ongoing partnership over time. This makes it the most effective characteristic you can turn to for building client loyalty.

Of course, everyone talks about being consultative these days. Unfortunately, a truly consultative approach is relatively rare. To understand what it takes, let's break it down into its three central components:

• Cooperative orientation. Many financial advisors believe their job is to hold their wealthy clients' hands and take care of everything for them. While this is indeed the case with some affluent clients, the overwhelming majority prefer a more collaborative relationship. After all, most of these affluent clients acquired their wealth through hard work and savvy.

It's a mistake to discount the advisory experience by hand-holding. Instead, work with your affluent clients. Not only will you solve their challenges more effectively, you'll win their loyalty.

• Contact parameters. You will build loyalty among your wealthy clients by contacting them appropriately—and not only about their money. Research has found that the most loyal clients are contacted, on average, 24.1 times a year by their advisors—on non-investment matters. In contrast, moderately satisfied clients were contacted about non-investment matters an average of just 0.6 times a year each. So the content as well as the frequency of your contact is important.

While it should be self-evident that clients want to be contacted about their financial affairs, advisors who have been most successful at building loyalty also know that clients want contact on non-investment issues as well. It is this personal contact—when advisors and clients discuss family issues, current events and the like—that fosters the close interpersonal relationships that are crucial to building client loyalty.

• Customized communications. In general, the wealthy are looking for customized communications. They are not especially interested in off-the-shelf presentations that come across as such.

Remember: It's all about the client. This means you can't rely on a standardized routine for each client meeting, or simply let your computer schedule your client contacts. You need to understand how clients want you to get in touch with them, how often they want to be contacted and what they want to be contacted about. Your ability to do so again goes back to your discovery process, when you should find out each client's personal preferences about communication.

Every single one of these six factors is within your control. By demonstrating your character, chemistry, care and competence, and doing business within a cost-effective, consultative framework, you'll build serious client loyalty-and reap its rewards.