Hayes Automates Review Process, Cuts Attrition Risk by 22%

Hayes Automates Review Process, Cuts Attrition Risk by 22%

Executive Summary

New Horizons Financial Planning, a growing RIA firm, struggled with client attrition, often reacting to lost business rather than proactively addressing potential dissatisfaction. Rebecca Hayes, a lead advisor at the firm, implemented an automated client review system triggered by key life events and portfolio performance thresholds. This proactive approach reduced client attrition risk by 22% in the first year, translating to an estimated $75,000 in saved revenue for the firm.

The Challenge

New Horizons Financial Planning prided itself on personalized service, but their client review process was often reactive and inconsistent. Advisors typically initiated reviews based on their individual schedules and memories, leading to missed opportunities to address emerging client concerns. This ad-hoc approach contributed significantly to client attrition, impacting the firm's bottom line.

Specifically, New Horizons was experiencing an annual client attrition rate of approximately 8%. While this was within the industry average, leadership knew they could perform better. A significant portion of departing clients cited a feeling of neglect or a lack of proactive communication as a primary reason for leaving. For example, one client, a retired teacher with a $300,000 portfolio, transferred their assets to another firm after experiencing a significant market dip. While New Horizons eventually contacted the client, it was only after the transfer request had been submitted. This highlighted the critical need for a system that could proactively identify and address concerns before clients considered leaving.

Furthermore, New Horizons recognized that certain life events often correlated with increased attrition risk. For instance, clients experiencing job loss, divorce, or the death of a spouse were more likely to re-evaluate their financial situation and consider alternative advisors. Without a systematic way to track these events, New Horizons was missing crucial opportunities to provide timely support and demonstrate their value. The lack of automation meant that advisors were spending a disproportionate amount of time on administrative tasks related to client reviews, diverting their attention from more strategic activities like client acquisition and financial planning. New Horizons estimated that advisors were spending approximately 4 hours per week per advisor searching for and organizing information that would be relevant for a client review. This represented a significant drain on productivity and profitability. Finally, they projected that without addressing this problem, attrition would impact revenues in the current year by at least $340,000.

The Approach

Rebecca Hayes spearheaded the implementation of a proactive, automated client review system aimed at identifying and addressing potential client dissatisfaction before it led to attrition. Her strategy centered around three key pillars:

1. Defining Key Trigger Events: Rebecca worked with the New Horizons team to identify specific life events and portfolio performance thresholds that indicated a higher risk of attrition. These included:

   • Life Events: Marriage, divorce, birth of a child, job loss, retirement, death of a spouse, inheritance.
   • Portfolio Performance: Portfolio value decline of 10% or more in a single quarter, underperformance relative to benchmark by 5% or more in a year.
   • Account Changes: Significant withdrawals or transfers out of accounts.

2. Automating Review Task Creation: Rebecca sought to integrate the firm's existing technology infrastructure to automatically generate review tasks whenever a trigger event occurred. This would eliminate the need for manual monitoring and ensure that no client was overlooked. She prioritized finding a solution that minimized disruption to existing workflows and leveraged the firm's existing technology investments, reducing the learning curve for advisors.

3. Standardizing the Review Process: To ensure consistency and quality, Rebecca developed a standardized review process that outlined the key steps advisors should take when conducting a client review, including:

   • Preparation: Reviewing client's financial plan, investment portfolio, and recent account activity.
   • Communication: Scheduling a meeting with the client to discuss their financial situation and address any concerns.
   • Action: Implementing any necessary changes to the client's financial plan or investment portfolio.
   • Documentation: Documenting the review process and any actions taken.

Rebecca also emphasized the importance of proactive communication and relationship building. She encouraged advisors to reach out to clients on a regular basis, even when no specific trigger event had occurred. This helped to foster a stronger sense of connection and build trust, making clients less likely to consider leaving the firm. New Horizons provided advisors with talking points and strategies for engaging with clients in a proactive and meaningful way.

Technical Implementation

The automated client review system at New Horizons Financial Planning relies on seamless integration between their CRM (Redtail) and their financial planning software (MoneyGuidePro). The process works as follows:

1. Data Synchronization: Redtail and MoneyGuidePro are synchronized daily to ensure that client data is up-to-date. This includes demographic information, life events, portfolio holdings, and performance data. The integration uses a secure API connection that complies with industry standards for data privacy and security.

2. Trigger Event Monitoring: The system continuously monitors client data for the trigger events defined by Rebecca. For life events, Redtail's tagging and workflow capabilities are utilized. Advisors are trained to tag clients with relevant life events as they occur. MoneyGuidePro provides portfolio performance data, which is used to identify clients whose portfolios have experienced significant declines or underperformed benchmarks.

3. Automated Task Creation: When a trigger event occurs, the system automatically creates a review task in Redtail, assigning it to the appropriate advisor. The task includes a pre-populated note summarizing the trigger event and a link to the client's financial plan in MoneyGuidePro. The system uses a pre-defined task template to ensure that all review tasks include the same essential information and instructions.

4. Review Process Workflow: The Redtail task triggers a workflow that guides the advisor through the standardized review process. This includes steps for preparing for the review, contacting the client, conducting the review meeting, documenting the meeting, and implementing any necessary changes.

5. Performance Calculation: The system tracks the time it takes to complete each review task, as well as the outcomes of the review (e.g., client satisfaction, portfolio adjustments, new business generated). This data is used to continuously improve the review process and identify areas for optimization. Portfolio performance is calculated using a time-weighted rate of return methodology, compliant with Global Investment Performance Standards (GIPS). Benchmark comparisons are made using appropriate market indices, such as the S&P 500 and the Bloomberg Barclays U.S. Aggregate Bond Index.

For example, a client experiencing a 12% portfolio decline in a quarter would automatically trigger a review task. The system would calculate the portfolio's performance against the S&P 500 index during the same period, providing the advisor with a clear picture of the client's relative performance. This allows the advisor to have an informed conversation with the client about the reasons for the decline and potential strategies for mitigating future losses. All data is encrypted both in transit and at rest using AES-256 encryption, ensuring the confidentiality and security of client information.

Results & ROI

The implementation of the automated client review system yielded significant improvements for New Horizons Financial Planning:

• Reduced Attrition Risk: Client attrition risk decreased by 22% in the first year, from 8% to 6.24%. This reduction was directly attributed to the proactive review process, which allowed advisors to address client concerns before they escalated.
• Increased Client Satisfaction: Client satisfaction scores, measured through post-review surveys, increased by 15%. Clients reported feeling more valued and appreciated by the firm, citing the proactive communication and personalized attention as key factors.
• Saved Revenue: The reduced attrition risk translated to an estimated $75,000 in saved revenue in the first year. This was calculated by multiplying the reduction in attrition rate (1.76%) by the firm's average client revenue ($4,261).
• Improved Advisor Productivity: Advisors reported spending 25% less time on administrative tasks related to client reviews. This freed up their time to focus on more strategic activities, such as client acquisition and financial planning. This 25% increase in available time for client aquisition resulted in a 5% increase in new clients to the firm in the same period.
• Enhanced Client Retention: The automation prevented the loss of at least 17 accounts, based on a simple model of historical churn data. The average account value was over $400,000, and the average client's AUM was $440,000.

These results demonstrate the tangible benefits of implementing a proactive and automated client review system. By focusing on client needs and leveraging technology to streamline the review process, New Horizons was able to significantly improve client retention and drive business growth.

Key Takeaways

Here are the key takeaways from New Horizons Financial Planning's success:

1. Proactive is Better Than Reactive: Don't wait for clients to complain or leave before addressing their concerns. Implement a system that proactively identifies and addresses potential dissatisfaction.
2. Leverage Technology: Automate your client review process to improve efficiency and ensure that no client is overlooked. Integrate your CRM and financial planning software to streamline data collection and task management.
3. Standardize the Review Process: Develop a standardized review process to ensure consistency and quality. Provide advisors with clear guidelines and talking points to help them conduct effective client reviews.
4. Track Your Results: Monitor key metrics, such as attrition rates, client satisfaction scores, and advisor productivity, to measure the effectiveness of your client review system and identify areas for improvement.
5. Communicate, Communicate, Communicate: Consistent communication is paramount. Ensure clients are kept informed about their portfolios, financial plans, and any relevant life events. Building trust through communication can significantly reduce attrition.

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