PriceMetrix Inc.

PriceMetrix Inc.

January 13, 2014 09:00 ET

New Report from PriceMetrix Highlights 7 Strategies that Boost Client Retention

Advisors With Higher Client Retention Grow More in Terms of Assets and Revenue Over Time, but Not All Attrition Is Negative

TORONTO, ONTARIO--(Marketwired - Jan. 13, 2014) - A new study from PriceMetrix, a practice management software and data services company, has identified seven strategies for successful client retention among financial advisors. In the study entitled Stay or Stray: Putting Some Numbers Behind Client Retention, PriceMetrix found that advisors who retained 95% of their clients increased total assets under management over the 2010-2013 period grew by 25%, versus a 12% increase for advisors who held on to only 80% of their clients.

"Whether you are planning for growth, succession or simply increased productivity, every advisor needs to have a solid grasp of which client relationships are going to last and which relationships are in jeopardy," commented Doug Trott, President and CEO of PriceMetrix.

Applying its proprietary database of 7 million investors, 500 million transactions and nearly 40,000 financial advisors, PriceMetrix found that the risk of a client leaving is the highest during years two through four of an advisor/client relationship. During the first year of a new relationship, advisors enjoy a 'honeymoon' period during which the probability of retention of their clients is 95%. Afterwards the probability of retention drops dramatically to 74% before leveling off after year four. This suggests that clients who have remained with their advisor for five years have by this time elected to remain for the long term.

"In striving to retain clients, advisors should keep these different stages of each client relationship in mind," noted Mr. Trott, "and redouble their efforts to demonstrate their value to clients during the critical second through fourth years of their relationships."

Not surprisingly, some advisors do a better job of retaining clients than others. The most successful advisors (the top ten percent for client retention) retain over 98% of their clients in any given year, while the least successful ten percent retain only 84% of their clients. The latter group must 'replace' clients at 8 times the rate of the former to stay even, likely diluting their servicing efforts and certainly straining their capacity.

In addition to surviving the first four years of a new relationship, the most successful advisors share a number of other characteristics which have helped them succeed. Advisors with larger client households fare significantly better than those managing households with $250,000 or less in assets. The average household with $100,000 in assets has a retention probability of 87% compared to a household with $500,000 in assets or more with a retention probability of 94%. Interestingly, though, the probability of retention does not increase significantly as assets grow beyond this level. A household with $1 million in assets has only a slightly greater retention probability of 95%.

Pricing also plays a role in client retention. PriceMetrix finds that advisors who price relatively low or relatively high are less likely to keep their clients. The optimal price range lies between 1 percent (revenue on assets), and 1.5 percent.

"These results suggest that advisors who price their services relatively low may be undercutting the perception of their value among their clients," said Mr. Trott, "while those who price relatively high may be creating insurmountable client service expectations."

Different types of accounts also play a role in whether clients stay or leave. Fee-based accounts are slightly more likely to stay than transactional accounts (a 91% retention rate versus 89%). At the same time, hybrid households, those with both fee-based and transactional accounts, are more likely to stay. Hybrid households have a 95% retention probability.

"What this indicates is that the industry-wide move towards fee and managed business should be reassessed," said Mr. Trott. "From the standpoint of client retention, a strategy of moving to a hybrid model, encompassing both fee-based and transactional business, may be better for advisors than one type of account over the other."

Advisors who manage multiple retirement accounts within a household are much more likely to retain the relationship. While the retention probability for clients with one retirement account or none at all is virtually the same (85% versus 86%), the probability jumps to 94% when the advisor manages two or more retirement accounts.

A client's age also comes into play. Older clients are far more likely to stay with their advisors than younger ones. For example, a 30 year-old client has a retention probability of 82%, a 40 year-old client has an 87% probability and a 50 year-old client has a 90% retention probability.

"These findings should give pause to those advisors who might expect or hope that pursuing younger clients will produce long term client relationships," commented Mr. Trott. "While younger clients may have longer time horizons with respect to their financial plans, the data do not support the claim that they intend to spend many years with one advisor."

About PriceMetrix

PriceMetrix is the first choice in practice intelligence solutions for retail brokerages in North America. We help wealth management firms enhance revenue growth by enabling advisors to recapture lost revenue opportunities. By combining industry know-how with powerful aggregated market data, we help our clients increase overall firm profitability.

PriceMetrix directly measures aggregated data representing 7 million investors, 500 million transactions, 3 million fee-based accounts, 7 million transactional accounts, and over $3.5 trillion in investment assets. PriceMetrix combines its patented process for collecting and classifying data with proprietary measures of revenue, assets, and households to create the most insightful and granular retail wealth management database available today.

Founded in 2000 and headquartered in Toronto, Ontario, we service a notable range of retail wealth management firms within the United States and Canada. To find out more, please visit, call us at 1-866-955-0514, or email us at

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