Advisor Loyalty Among Retirees



We all understand the meaning of the word “loyalty’’. But the practice of loyalty is different depending on the relationship being tested.

We all understand brand loyalty. We buy automobiles from the same automobile maker. We have preferences in our dining choices. We know who makes the best chocolate chip cookie.

Loyalty carries a different weight when it comes to the relationship between financial advisors and their clients. Loyalty is shown when clients turn over more assets to their advisor, or refers their advisor to another potential client. Investors can show loyalty to their advisor when the advisor moves to another firm, or display loyalty to the firm when their advisor moves on by staying with the company and working with another advisor.

The relationship between an advisor and a client is tested a number of ways beyond just rate of return on investments. Communication habits from the advisor do not match the communication needs of the client, or there is a lack of understanding of the client’s risk tolerance. When money is involved, relationships can be challenging, and loyalty plays a significant role in such relationships.

Spectrem’s study Advisor Relationships and Loyalty: What Makes A Client Loyal?* shows how investors demonstrate loyalty and how they define the term. Retired investors, whose relationship with their advisor is often much different than a relationship between a working investor and an advisor, sometimes value and demonstrate loyalty at a much higher rate than others.

Here are some key highlights from the report related to advisor loyalty among retirees:

·        Retired investors are more likely to have a primary financial advisor (63 percent to 51 percent among working investors) and on average turn over more of their assets to the management of an advisor (46.46 percent of assets managed compared to just 33.33 percent among working investors).

·        Retired investors rate their overall level of loyalty slightly higher (84.92) than working investors (81.24).

·        They rate their loyalty to their advisor higher than do working investors. Sometimes, the rate of loyalty difference is slight, but in some cases it is significant. For example, retired investors rate their loyalty to their family office representative at 90.33 (the highest loyalty rating of any type of advisor), while working investors rate their loyalty to a family office representative at just 56.43, one of the lowest rated types of advisors.

·        It is unusual, however, that retired investors are slightly less likely than others to refer their advisor to friends, family or acquaintances. There is, perhaps, a sense of ownership involved, although 65 percent of those retired investors who do NOT refer their advisor say they don’t feel it is their place to tell others who to work with.

Among the attributes which build loyalty for retired clients, the top three are good service, an absence of errors and component (competent?) personnel. Retired investors have less interest in account features or online platform details, and they are not impressed by client appreciation events.



*This research is part of your Spectrem subscription.




©Spectrem 2020

Keywords: loyalty, retirees, retirement, investors, advisors, Spectrem