Factors Impacting Advisor Loyalty

11/2/2022

 Investors have many choices when it comes to their financial advisor, and they often are solicited to change advisors or consolidate their assets. What keeps investors from continually changing advisors, besides the hassle, is loyalty to their current advisor. How loyal an investor is to their advisor is dependent upon a wide variety of factors. Each person has to decide just how loyal they will be to their financial advisor. There are many factors, however, that investors agree impact loyalty to an advisor.

The biggest impact to client loyalty is when the financial advisor understands an investor’s risk tolerance, according to recent research from Spectrem Group. Risk tolerance impacts every component of an investor’s portfolio, and when an advisor does not understand their client’s risk tolerance they are showing that they do not understand the client’s unique needs and situation. There are many other factors that impact risk tolerance in addition to knowing risk tolerance.

An advisor that quickly responds to phone calls also has a significant impact on client loyalty. This is not surprising given that an advisor not returning phone calls or emails are consistently the top two reasons why an investor would consider changing an advisor. Knowing risk tolerance and being responsive, while of critical importance in impacting loyalty, are not the only factors that impact loyalty.

Investor loyalty is also impacted through the advisor providing comprehensive wealth management services. Those advisors who provide the level of wealth management that investors are looking for, which is very in-depth and comprehensive, will be the advisors that see an increase in their client’s loyalty. Loyalty and trust go hand-in-hand, and you can’t have loyalty if you do not trust the advisor. The recession has caused many investors to change how much trust they have in their advisor.

Forty-four percent of investors feel that their trust in their advisor has increased since the start of the recession. A similar percentage, 43 percent, feel that their level of trust in their advisor is unchanged since the start of the recession, while 11 percent of wealthy investors feel their level of trust in their advisor has gone down. Most investors are trusting their advisor more because the advisor is helping them through a challenging time in the economy and the stock market.

Every investor must decide what will drive their loyalty to an advisor, and determine how they can best communicate those expectations to their advisor.