Customer loyalty is something sought by companies in all industries, especially in today’s increasingly competitive environment, where loyalty is tested by a myriad of factors, not the least of which is price.
Our newest study, Client Loyalty Among Affluent Investors, finds that Affluent investors tend to identify themselves as very loyal, On a scale of 0 to 100, on which 100 equals “very loyal,” they rank their loyalty to their financial institution at 74 and to their financial advisor at 71.
Loyalty to a financial institution or advisor generally increases with age, which suggests a correlation to the longevity of the working relationship. Older investors are more likely than their younger counterparts to have patronized a bank or worked with an advisor for a longer period. Millennials, for example, score their loyalty to their financial institution at 68 on the 100-point scale, while Baby Boomers and seniors score their loyalty at over 74.
Millennials--ages 35 and under--score their loyalty to their advisors at nearly 65. Baby Boomers at 71 and seniors at 73.
Not surprisingly, loyalty to a financial institution or advisor increases with advisor-dependency. Advisor-dependent investors who rely on their advisor to make all of their financial and investment decisions have the highest ranking on the 0-100 loyalty scale, compared with those who are more self-directed.
Does this loyalty translate to advisor referrals? It does, but not in overwhelming numbers. Six-in-ten Affluent investors report that have referred their advisor. These referrals increase with net worth. Just over half (54 percent) of Mass Affluent investors with a net worth between $100,000 and $1 million (not including primary residence) have referred their advisor to someone they know, while 61 percent of Millionaires and 68 percent of Ultra High Net Worth households with a net worth between $5 million and $25 million, have done the same.
Roughly the same percentages of these Affluent investors across all wealth levels said they are likely to recommend their advisor to someone they know in the next year.
So they do refer their advisor, but how often do they do so? Interestingly, not so much, our study finds. Four-in ten of the Affluent investors we surveyed said they never refer their advisor to others, while only 10 percent they do so often. Just 30 percent said they never refer their financial institution and only 9 percent said they do so very often. In comparison, only one-in-five said they never refer their physician or dentist to others, while 18 percent do so very often.
Why wouldn’t an investor refer an advisor to whom they consider themselves loyal to someone they know? Half of Affluent respondents told us that they don’t feel it’s their place, while one-third said they don’t even think about it. Roughly one-in-five said they don’t want to seem pushy.
Millennials ages 35 and under are the most sensitive to appearing pushy (36 percent) while Baby Boomers and seniors ages 65 and up are more likely than younger investors to express that they don’t feel it’s their place.
Along with client loyalty, referrals are the life blood of a financial advisor’s business, and it is imperative that along with providing service that will maintain their client’s loyalty, they communicate to their clients that referrals to others is appreciated.