Montgomery Retirement: 15% AUM Retention Lift via Client Loyalty Program

Montgomery Retirement: 15% AUM Retention Lift via Client Loyalty Program

Executive Summary

Montgomery Retirement Solutions, a leading RIA managing over $275 million in AUM, faced a plateauing AUM retention rate despite its white-glove client service model. To proactively strengthen client relationships and minimize attrition, Claire Montgomery, the firm's founder, implemented a tiered loyalty program offering bespoke financial planning workshops, exclusive market updates, and priority access based on AUM and tenure. The program demonstrably lifted overall AUM retention by 15% in the first year, representing $41.25M retained AUM, proving the power of loyalty-driven engagement.

The Challenge

Montgomery Retirement Solutions, known for its personalized financial planning and retirement advice, had built a strong reputation in the community. However, in recent years, they noticed a concerning trend: while new client acquisition remained healthy, AUM retention had plateaued at around 85%. This meant that despite onboarding approximately $30 million in new AUM annually, a significant $41.25 million was walking out the door.

Further analysis revealed a few contributing factors:

• Competition: The local market had become increasingly competitive, with several new RIAs and wealth management firms vying for the same client base. These firms were often offering introductory incentives and aggressive fee structures, tempting clients to switch advisors.
• Lack of Differentiation: While Montgomery Retirement Solutions offered excellent service, it lacked a distinct differentiator. Clients viewed their services as comparable to other firms, making them susceptible to competitor offers.
• Life Events & Portfolio Performance: Inevitably, clients' life events (death, divorce, job loss) and portfolio performance caused some attrition. While these were unavoidable, the firm recognized an opportunity to mitigate these losses through stronger client relationships. A client who is highly loyal is more understanding of market fluctuations and less likely to move assets during short-term downturns.
• Communication Gap: While regular client reviews were conducted, the firm realized that communication beyond these meetings was often transactional rather than relationship-building. Clients weren't feeling consistently valued and appreciated. An internal survey showed that 35% of departing clients felt the firm only reached out when it was time for a performance review or to pitch a new product.
• Inability to Proactively Identify At-Risk Clients: The firm lacked a system for proactively identifying clients who were at risk of leaving. By the time a client expressed dissatisfaction, it was often too late to salvage the relationship.

The team understood that addressing this AUM retention issue was critical for long-term growth and profitability. A 1% increase in retention was estimated to translate into an additional $2.75 million in AUM under management and associated revenue growth.

The Approach

Claire Montgomery recognized that simply providing excellent service was no longer enough. To combat the challenges outlined above, she spearheaded the development and implementation of a tiered client loyalty program designed to foster deeper relationships and proactively retain AUM.

The program was structured into three tiers:

• Bronze Tier (Foundation): Clients with AUM up to $500,000 or who had been with the firm for less than 3 years qualified for the Bronze tier. Benefits included:
  • Monthly market updates via email.
  • Invitations to quarterly webinars on relevant financial topics (e.g., tax planning, estate planning basics).
  • Access to a dedicated client service representative.
• Silver Tier (Growth): Clients with AUM between $500,000 and $1,000,000 or who had been with the firm for 3-7 years qualified for the Silver tier. Benefits included all Bronze tier benefits plus:
  • Personalized annual financial planning check-up with a senior advisor.
  • Invitations to exclusive networking events with other Silver and Gold tier clients.
  • Priority access to new investment opportunities.
• Gold Tier (Legacy): Clients with AUM over $1,000,000 or who had been with the firm for more than 7 years qualified for the Gold tier. Benefits included all Bronze and Silver tier benefits plus:
  • Bespoke financial planning workshops tailored to their specific needs and goals (e.g., multi-generational wealth planning, charitable giving strategies).
  • Direct access to Claire Montgomery and other senior leaders within the firm.
  • Preferred pricing on select financial products and services.

The program was carefully designed to be:

• Value-Driven: Each tier offered tangible benefits that clients would genuinely appreciate. The focus was on providing valuable content, personalized advice, and exclusive access.
• Personalized: Communications were tailored to each client's individual circumstances and tier level. This made clients feel valued and understood.
• Proactive: The program actively engaged clients throughout the year, reinforcing their relationship with the firm. This helped to prevent clients from feeling neglected or forgotten.
• Easily Trackable: The program was integrated into the firm's existing CRM system, allowing for easy tracking of client engagement and program effectiveness.
• Scalable: The program was designed to be scalable as the firm grew. The use of technology and automated processes ensured that the program could be managed efficiently.

A key element of the strategy was proactive communication. Each client was personally informed of their tier status and the benefits they were entitled to. This created excitement and encouraged clients to engage with the program.

Technical Implementation

The success of the Montgomery Retirement Solutions loyalty program hinged on its seamless technical implementation. They leveraged existing technology investments to create a streamlined and efficient experience for both clients and advisors.

• Salesforce Financial Services Cloud (FSC): This served as the central hub for managing client data and tracking loyalty program participation. Custom fields were added to client records to track tier status, engagement with program benefits (e.g., attendance at webinars, participation in financial planning workshops), and overall loyalty score. FSC also facilitated the automated assignment of clients to appropriate tiers based on AUM and tenure.

• Pardot (Marketing Automation): Pardot was used to automate personalized email communications with clients. Dynamic content was used to tailor messages based on tier status and client preferences. For example, Gold tier clients received invitations to bespoke workshops, while Bronze tier clients received monthly market updates. Pardot also tracked email open rates, click-through rates, and website activity, providing valuable insights into client engagement.

• Integration between FSC and Pardot: The seamless integration between FSC and Pardot allowed for a 360-degree view of the client relationship. Advisors could easily see which benefits a client had accessed, which emails they had opened, and which webinars they had attended. This information was used to inform client conversations and personalize advice.

• Loyalty Score Calculation: A custom loyalty score was developed within Salesforce FSC. This score considered factors such as AUM, tenure, engagement with program benefits, and client satisfaction (as measured through surveys). This score allowed the firm to proactively identify clients who were at risk of leaving and take steps to address their concerns. The score was weighted as follows:

  • AUM (30%)
  • Tenure (25%)
  • Engagement (25%)
  • Satisfaction (20%)

• Data Security and Compliance: Given the sensitive nature of financial data, data security and compliance were paramount. All systems were compliant with relevant regulations (e.g., GDPR, CCPA). Access to client data was restricted to authorized personnel only.

The system used a weighted average method. For example, if a client was in the Silver tier, with AUM of $750,000 (which would be considered 75% to the goal), had been with the firm for 5 years (71.4% to the goal if 7 years is Gold), had engaged with 60% of the offerings available, and scored an 8 out of 10 in satisfaction (80%), their score would be:

(0.75 * 0.30) + (0.714 * 0.25) + (0.60 * 0.25) + (0.80 * 0.20) = 0.6985 or 69.85

Any client with a loyalty score below 50 was flagged as potentially at risk for attrition.

Results & ROI

The implementation of the tiered loyalty program yielded significant results for Montgomery Retirement Solutions:

• AUM Retention Lift: Overall AUM retention increased from 85% to 97.75% in the first year, representing a 15% lift. This translated to $41.25 million in retained AUM (15% of $275 million initial AUM).
• Reduced Churn: Client churn decreased by 40%, indicating that the program was effective in strengthening client relationships and minimizing attrition.
• Increased Client Engagement: Client engagement with program benefits (e.g., webinars, workshops) increased by 60%. This demonstrated that clients were actively participating in the program and finding value in its offerings.
• Improved Client Satisfaction: Client satisfaction scores (as measured through surveys) increased by 15%, indicating that clients were more satisfied with the firm's services as a result of the program.
• Enhanced Cross-Selling Opportunities: The program created new opportunities for cross-selling additional financial products and services. Advisors were able to identify clients who were interested in specific offerings based on their engagement with the program. Cross-selling revenue increased by 10%.
• Increased Referral Rates: Clients in the Gold and Silver tiers began referring new clients at a higher rate. Overall referrals increased by 25% compared to the prior year.

The initial investment in setting up the loyalty program, including technology integration and staff training, was approximately $50,000. The program generated an estimated incremental revenue increase of $206,250 from the retained AUM (assuming an average advisory fee of 0.5% on AUM), giving the firm a 4.125x ROI in the first year alone.

Key Takeaways

The success of Montgomery Retirement Solutions' client loyalty program offers valuable lessons for other RIAs:

1. Go Beyond Basic Service: In today's competitive landscape, simply providing excellent service is not enough. RIAs need to proactively build stronger relationships with their clients through value-added programs and initiatives.
2. Personalize the Experience: Clients value personalized attention. Tailor communications and offerings to each client's individual circumstances and needs.
3. Leverage Technology: Technology can play a crucial role in managing and scaling client loyalty programs. Invest in tools that allow you to track client engagement, automate communications, and personalize the experience.
4. Track Results and Iterate: Continuously monitor the effectiveness of your loyalty program and make adjustments as needed. Track key metrics such as AUM retention, client churn, and client satisfaction.
5. Tiered programs are effective: Tiered programs offer tangible ways to recognize client loyalty and commitment.

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