In the quest to grow their books of business, many financial advisors focus on acquiring new clients. However, while acquisition is important, it is equally important to pay attention to retaining your existing clients with whom you have already established trusted relationships.
"It makes good business sense to give priority to client retention," says Aiman Dally, CEO of Copia Financial Solutions Inc. in Toronto. "You would have spent time and money to acquire them, and they are already a source of revenue and potential referrals."
Effectively, existing clients are an investment worth protecting. And if you don't protect your investment by keeping these clients satisfied, you could very well end up losing them.
"Retaining existing clients is like sticking with certainty vs going after uncertainty at an additional cost," Dally says.
Here are four reasons why client retention should be a top priority.
1. It's cheaper to retain than acquire
Various studies have shown that acquiring a new client can cost five to seven times more than keeping an existing one, Dally says. "Think about the expenses you would have incurred in acquiring your existing clients," he says.
These expenses can include costs for marketing and advertising; hosting seminars, workshops and other networking events; and attending trade shows and conferences. "You do not have to incur these costs for existing clients," Dally says.
2. Existing clients increase in value
You cannot ignore the value of existing clients, Dally says. They are already a source of guaranteed revenue, and the longer they remain clients, the greater their value to your practice. The revenue you earn from them grows as the value of their assets grows. You also can increase the profitability of these clients over time by providing them with additional products and services.
"Existing clients are also a good potential source of referrals," Dally says. Satisfied, longstanding clients are more likely than other clients to provide quality referrals. This enhances their lifetime value, which can be further enhanced when these first-tier referrals provide referrals of their own.
3. They are more receptive to new products
You should already be familiar with the goals of your existing clients. You are therefore more likely to offer them products that are appropriate to their circumstances and meet their needs.
"They would most likely be receptive to your suggestions," Dally says, "because they already trust your recommendations."
4. These client know you
Existing clients already know and trust you, making them easier for you to deal with.
"You can have open discussions with them and get their views and opinions on what works and what doesn't work," Dally says.
It might take years to establish the same level of trust and loyalty with new clients and for them to generate additional value through referrals.
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