Which Advisors Have Loyal Clients — and Why?

Firms inspiring a high degree of client loyalty, include, Harvey says, Ameriprise ("They really take steps to understand what clients are thinking and how to respond"); Edward Jones ("A lot of it has to do with the training they provide advisors, and they set a reasonable-expectation model"); and Waddell & Reed ("A model similar to Ameriprise but on a somewhat smaller scale. They are very aware of what's happening among the investors").

Emotional Link

Creating an emotional connection has not traditionally topped an FA's to-do list. But the experts say it should be given high priority.

A Gallup poll this past May found that only 25% of Americans have confidence in U.S. financial institutions, Fleming notes. Yet, as Stephanie Cohen, partner and leader of LoyaltyOne Consulting's financial consulting practice, points out, "When you talk to customers, if they're happy, usually it's at the broker level. So there's a disconnect—but in a good way—between, 'I don't trust the industry, but I trust the person I do business with.'"

Littlechild explains that occurs when "the nature of the individual relationship is about fully understanding needs and crafting plans or choosing product."

Fleming, in an article co-written for the Gallup Business Journal in 2003, stated: "Without a strong emotional bond, satisfaction is meaningless. Satisfaction without engagement is a trivial pursuit."

In the interview, Fleming notes how to develop this connection, "There first needs to be trust. That relates to delivering on your promises. Always doing what you say you're going to do is the foundational step." Other dimensions, which show up in Gallup research, include: integrity, with a focus on problem resolution; developing personal pride while internalizing the firm's values; and passion.

So "once you've addressed needs and delivered on your promises, you're in a position to be a perfect fit for that client, and that tends to make you irreplaceable," says Fleming, who considers Ameriprise and Charles Schwab loyalty-generating stand-out firms.

A big part of creating that all-important emotional connection is making the client feel "special," says Cohen, based in Richmond, Va.

Though giving to clients in the form of loyalty rewards isn't an option, there are intangible ways of providing extras, Cohen says. For example, "if you open up on a Saturday because a client needs to have a conversation, that's not a 'reward'; but it can contribute to the relationship and, hence, to loyalty. It makes the client feel they're being treated like someone special."

Three components are required to develop a loyalty strategy, according to Cohen. They are equity—that which is received from an economic perspective; continuity—building and reinforcing trust to engage the client; and dialogue—communicating in a way that says: "You know me, you understand me, you make me feel important—and that's why I want to continue to do business with you."

Cohen amplifies: "The most successful loyalty programs have both the rational and emotional sides of loyalty associated with them." Simply providing good service isn't the key to promoting client engagement, according to Littlechild. "Service is table stakes. It doesn't set you apart. What does is a holistic approach to understanding client goals and needs. It's clients seeing the advisor in a leadership role because they feel completely confident in their expertise. It's the advisor who really helps the client have those tough conversations and make the difficult decisions and gets them to focus on the right things."

To start building a loyalty business model, No. 1: Determine what differentiates you, or even makes you unique, as an advisor, Cohen advises. She calls this locating your "white space in the market." It becomes the crux of the FA's selling proposition.

"Look at your brand and what you're bringing to the table," Cohen continues. "Understand the customer that you're targeting and know how to appeal to them. It's understanding the demographics, psychographics and behavioral aspects. This is a multi-step process [aimed] at [identifying] what would keep your customers coming back."

Differences in client age segments are a big part of the loyalty scenario.

"We tend to be more loyal the older we get. The younger cohorts tend to have multiple relationships. The older cohorts tend to consolidate—you stay with a firm that didn't burn you," Harvey notes.

It's substantially more difficult to inspire loyalty in younger clients—Generation X—and even a greater challenge with Gen Y, a.k.a. the millennials.

"There's a general lack of loyalty that Gen X feels about [most] anything. For instance, they have no loyalty to their employers; they bounce from job to job," notes Fleming. "Millennials have even less loyalty because they're the first generation that has experienced a major economic downturn just as they were coming into the world [as adults]. They're a little pessimistic and skeptical and have a different relationship to the world than older people do."

Contrary to popular assumption, wirehouse clients aren't significantly less loyal than clients of other channels, Advisor Impact studies suggest. That's because "when the client chooses an advisor, be they a BD, an RIA or a wirehouse, they believe that that individual is the right person to work with and will do right by them and their family. It's about the individual," Littlechild stresses.

To build that critical emotional loyalty connection, "the most important thing," Fleming says, "is to give the client a sense that you're truly interested in their financial success and well-being even if, on occasion, that conflicts with the well-being of the company. When advisors give a really stellar client [experience], it shows up in client retention: People stay and invest more of their assets."