Optimized Communication Cadence Reduces Client Churn by 8%

Optimized Communication Cadence Reduces Client Churn by 8%

Executive Summary

Inconsistent and infrequent client communication was leading to uncertainty and an unacceptable level of client attrition for a prominent wealth management firm with $510 million in Assets Under Management (AUM). Golden Door Asset helped the firm develop and implement a structured communication cadence, ensuring regular and meaningful contact with clients. As a result, client churn decreased by 8% within the first year, leading to the retention of approximately $40.8 million AUM and significantly improved client satisfaction.

The Challenge

The wealth management firm, a well-established practice serving high-net-worth individuals and families, was experiencing an alarming rate of client churn. Analysis revealed that clients cited a perceived lack of communication and proactive engagement as a primary reason for seeking advisory services elsewhere.

Specifically, a client survey indicated that:

• 72% of departing clients felt they didn't hear from their advisor frequently enough.
• 58% of these clients stated that their financial goals and investment strategies were not consistently revisited or updated.
• The average client touchpoint frequency was 1.8 times per quarter, significantly lower than the industry benchmark of 3-4 times.

This lack of consistent communication led to client uncertainty about the performance and management of their portfolios, especially during periods of market volatility. For instance, during a Q1 market correction, several clients expressed anxiety about potential losses, and the absence of proactive communication from their advisors amplified these concerns. One departing client remarked, "I only heard from my advisor when they wanted to discuss new investment opportunities. I needed reassurance and guidance during the downturn, but that wasn't provided."

The firm’s annual client churn rate was averaging 10%, representing a significant loss of revenue and AUM. With an average client portfolio size of $850,000, losing even a small percentage of clients had a substantial financial impact. Conservatively, the churn equated to an annual loss of approximately $8.5 million in AUM for every 1% of churn. The client onboarding costs, estimated at $5,000 per client, further compounded the financial burden of client attrition. In addition, the lack of communication was also causing reputational damage, as departing clients were sharing their negative experiences with peers, potentially impacting new client acquisition. The firm recognized that a proactive and consistent communication strategy was critical to retaining clients and maintaining its competitive edge.

The Approach

Golden Door Asset partnered with the wealth management firm to develop and implement a structured communication cadence designed to foster stronger client relationships and enhance trust. This approach was built on three core principles:

1. Personalization: Tailoring communication to individual client needs, preferences, and financial goals.
2. Frequency: Establishing a consistent and predictable communication schedule to keep clients informed and engaged.
3. Value: Providing relevant and insightful information that demonstrates the advisor's expertise and commitment to their clients' financial well-being.

The following steps were taken:

• Client Segmentation: We segmented clients based on factors such as portfolio size, investment objectives, risk tolerance, and communication preferences. This allowed for the creation of tailored communication plans for different client groups.
• Communication Cadence Development: A detailed communication schedule was created, outlining the frequency, channel, and content of client interactions. This included:
  • Monthly Email Newsletter: Providing market updates, investment insights, and relevant financial planning tips.
  • Quarterly Portfolio Review Meetings (Virtual or In-Person): Reviewing portfolio performance, discussing progress toward financial goals, and addressing any client concerns.
  • Annual Financial Planning Review: Conducting a comprehensive review of the client's overall financial plan, including retirement planning, estate planning, and tax planning strategies.
  • Proactive Phone Calls: Contacting clients during periods of market volatility or significant life events to provide support and guidance.
• Content Creation: High-quality, informative content was developed for each communication channel, including email newsletters, portfolio review reports, and financial planning presentations. We emphasized clear and concise language, avoiding jargon and focusing on the practical implications of market events and investment decisions.
• Advisor Training: Advisors received training on effective communication techniques, including active listening, empathy, and the ability to explain complex financial concepts in a simple and understandable manner.
• Feedback Mechanism: A system was established to gather client feedback on the communication program, allowing for continuous improvement and refinement of the cadence. This involved regular client surveys and informal check-ins.
• Technology Integration: The new communication cadence was integrated with the firm’s existing CRM and email marketing tools to automate tasks and ensure consistent execution.

A key strategic decision was to move away from a reactive communication model to a proactive one. Instead of only contacting clients when prompted or when new investment opportunities arose, advisors were encouraged to initiate contact on a regular basis, providing valuable insights and demonstrating their commitment to the client's financial success. The decision-making framework included weighing the costs of implementing the new cadence (e.g., advisor time, technology investments) against the potential benefits of reduced churn and increased client satisfaction. The projected ROI clearly justified the investment.

Technical Implementation

The technical implementation involved leveraging the firm's existing technology infrastructure and integrating new tools to streamline the communication process.

• CRM Integration (Salesforce): The communication cadence was mapped within the Salesforce CRM, creating tasks and reminders for advisors to initiate client contact. Custom fields were added to client profiles to track communication preferences, allowing for personalized messaging. Automation rules were implemented to trigger email sequences based on specific client events, such as a birthday or a change in employment status.

• Email Marketing Platform (Mailchimp): Mailchimp was used to automate the distribution of monthly newsletters and other email communications. Custom email templates were designed to reflect the firm's brand and ensure consistent messaging. Segmentation features were used to target specific client groups with relevant content. A/B testing was conducted to optimize email subject lines and content for maximum engagement.

• Portfolio Management System (Black Diamond): Portfolio data from Black Diamond was integrated into client reports and presentations, providing a comprehensive view of portfolio performance. Automated reporting features were used to generate customized reports for each client, highlighting key performance metrics and progress toward financial goals.

• Calculation of Client Churn: Client churn was tracked and calculated on a quarterly and annual basis. The formula used was:

  Churn Rate = (Number of Clients Lost During the Period / Number of Clients at the Beginning of the Period) * 100
  

  The before-and-after churn rates were compared to determine the impact of the communication cadence. The AUM saved by reducing churn was calculated as:

  AUM Saved = (Reduction in Churn Rate / 100) * Total AUM at Beginning of Period
  

  The financial impact of the AUM saved was calculated based on the firm's average advisory fee of 1.0%.

• Training: Recorded tutorial videos using screen share and voice-over were created for the staff to learn how to use all of the features.

Results & ROI

The implementation of the structured communication cadence yielded significant improvements in client retention and overall business performance.

• Client Churn Reduction: The client churn rate decreased from 10% to 2%, representing an 8% reduction.
• AUM Retention: This reduction in churn resulted in the retention of approximately $40.8 million in AUM. The calculation is as follows: 8% of $510M AUM = $40.8M AUM
• Increased Client Satisfaction: Client satisfaction scores, as measured by Net Promoter Score (NPS), increased from 35 to 65, indicating a significant improvement in client sentiment.
• Revenue Growth: The retention of AUM contributed to increased revenue, as the firm earned advisory fees on the retained assets. Based on an average advisory fee of 1.0%, the firm generated an additional $408,000 in annual revenue from the retained AUM.
• Improved Advisor Productivity: While initially requiring an investment of time, the structured communication cadence ultimately improved advisor productivity by streamlining client interactions and reducing the need for reactive problem-solving. Advisors reported spending less time addressing client concerns and more time focusing on proactive financial planning and business development.
• Increase in Client Referrals: Client referrals also increased, contributing to new business growth and reducing client acquisition costs.

Key Takeaways

1. Proactive Communication is Key: Regularly engaging with clients, even during stable market conditions, builds trust and reinforces the value of your advisory services.
2. Personalization Matters: Tailoring communication to individual client needs and preferences demonstrates that you understand their unique circumstances and are committed to their financial success.
3. Technology Can Enhance Communication: Leveraging CRM and email marketing tools can automate tasks, streamline communication, and ensure consistent execution.
4. Gather Client Feedback: Regularly solicit feedback from clients to identify areas for improvement and ensure that your communication program is meeting their needs.
5. Consistency is Crucial: A consistent communication cadence helps to establish expectations and provides clients with a sense of predictability, which can be especially important during periods of market volatility.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors anticipate client needs and build stronger relationships. Visit our tools to see how we can help your practice.