Aging is different
today than it was a decade ago and financial advisors need to have a good
relationship with clients to help them navigate those later-in-life years,
according to Joseph F. Coughlin, founder and director of MIT AgeLab, a research
institution.
Having in-depth conversations, even with the restrictions
imposed by the Covid pandemic, is key to creating and retaining clients, said
Kevin Hogan, executive vice president and CEO of AIG Life and Retirement. The
two discussed client retention and trends in the financial industry in an
interview today.
“The business of the financial advisor has not changed from
including basic financial planning, but the new currency to achieving effective
planning is conversation,” Coughlin said. “Clients are benchmarking their
relationships with their advisors the same as they benchmark all of their
relationships—they judge their advisor by whether he or she ‘gets me.’”
Advisors need to understand their clients if they are to
retain them, he added, and that fact applies even more to millennials than
other age groups. “Clients, especially younger ones, want to know the advisor
personally cares about them,” Coughlin said
“While performance remains a prerequisite for client
satisfaction, personal connection is key to retention,” according to AIG's
"The Future of Client-Advisor Relationships" report. “Twenty-five
percent of clients would leave their financial advisor due to lack of personal
connection. Broadening conversations beyond money management helps advisors
better serve their clients, build trust and ultimately increase retention.”
The report's research was based on feedback from 2,038
adults between the ages of 30 and 75 who work with an advisor and have at least
$50,000 in annual income or $50,000 in savings.
According to the research, 40% of clients ages 30 to 45 said
they view their advisor as a life coach and 35% said they consider their
advisor a friend. In addition, younger clients said their financial advisor’s
network of professionals and personality are key drivers of their satisfaction
with the advisor. Younger clients also communicate with their advisor far more
often than older clients. Forty percent communicate with their advisor more
than once a month.
“The definition of what a financial advisor is to a client
was evolving even before Covid-19,” Hogan said. “There was an increasing
awareness of the clients’ physical, mental and financial health.”
The pandemic helped propel the use of technology, Coughlin
added. “It is those technologies and new platforms that are giving advisors
more time for frequent conversations with clients.” He noted he has interviewed
more than 100 advisors recently and found most of them are taking advantage of
the opportunity for solidifying connections that technology can provide.
“The more the advisor can understand the client, the better
the financial planning will be,” Hogan said, adding that advisors of the future
will be multi-channel advisors using a variety of technology to maintain
conversations with clients. Both Hogan and Coughlin agreed that technology is
going to continue to improve and advisors, and others, will not return to work
as they knew it before.
“This is an amazing opportunity for advisors” to cement
their relationships and retain clients, Coughlin said.
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