U.S. Wealth Management Firms Need to Build Client Advocacy

More than half (57%) of wealth management clients are not advocates of their advisory firms, and over 40% do not consider their firm a "trusted adviser" to help them meet their financial goals.

According to an IBM Institute for Business Value study of more than 1,300 U.S. wealth management clients, only 43% of wealth management clients indicated they are advocates of their wealth management firm. The scores fall below Property and Casualty insurance (P&C) scores, but are above retail banking scores (51% and 24% advocates, respectively).

One out of every five wealth management clients (19%) is an antagonist – meaning they have negative attitudes toward their firms – and 38% are apathetics.

The client’s opinion of his wealth management firm leads to distinct actions, the survey found:

  • Advocates are over twice as likely as antagonists to consolidate 80% of their assets with one firm.
  • Advocates are 60% less likely to be sensitive to fees – making them more likely to place value on other capabilities instead of focusing only on transaction costs.
  • Advocates are also four times as likely to view their wealth management firm as a “trusted adviser,” with 90% expressing this viewpoint versus only 23% of antagonists.
  • Clients of universal banks and wirehouses view relationship managers and financial advisers more favorably than other contact points.

Crucial areas in which apathetic clients scored key wealth management staff capabilities poorly included:

  • Understanding client needs: Only 39% agreed that employees listen to them and understand their needs.
  • Offering the best advice: Just 36% felt that their wealth management firm has knowledgeable staff that offers good advice.
  • Effective teaming: Less than 32% felt that their wealth management firm’s employees work effectively as a team to meet their needs.

As part of the study, IBM deployed a new measure of customer loyalty, the Customer Focused Insight Quotient (CFiq), to determine if a client considered themselves an advocate, antagonist, or apathetic. The CFiq combines wealth management clients’ ratings of three statements:

  • I would recommend my primary wealth management firm to my friends and family members.
  • If I needed a new financial service or product, I would go to my primary wealth management firm first.
  • If another wealth management firm offered a set of competitive products or services, I would not switch firms.

Advocates are clients who strongly agree with the CFiq statements, Apathetics are clients who agree with the CFiq statements, and Antagonists are clients who disagree with the CFiq statements.

Primary data was collected from 1,311 U.S. wealth management clients with investable assets of over $500,000.