Whilst most advisers keep a new business register, few in my experience keep a lost business register. Whilst it may not be a direct compliance requirement or feed into adviser sales budgets, client retention has a big impact on long-term profitability.
We all know the stats around retaining a customer, that it’s more much profitable to keep an existing customer than to acquire a new one. I’d even push this further and argue those stats are understated when applied to financial advice, as our cost of acquisition would be greater than any other retail service given our KYC, reasonable basis, and best interests requirements.
Given this, there’s no good reason for us not to keep a Lost Business Register. This could be as simple as a spreadsheet (or even a new sheet on your new business register), online sheet (Google Sheet or Airtable), or searchable standard note type in your CRM. Whatever it is, it ought to exist.
In this article I’ll be covering
- What should be tracked
- Ideas on how to use it
What should be tracked
Here are some suggested inclusions for your new Lost Business Register:
- Client name
- Adviser name
- Ongoing fees lost
- Ongoing commission lost
- Total revenue lost
- Clawback applicable?
- Insurer churn
If insurance is only a small part of what you do, I wouldn’t worry about this. Tracking those who could count towards your insurance churn figures may help if ever it comes up later.
- Client age
- Client type (Risk only vs. Comprehensive or Fee vs. Commission only)
- Client category/rating
In tracking demographics we’re looking for data mining opportunities. I wouldn’t worry about most of these for a very small firm, but for a larger firm where management is unlikely to recognise the name this will help recognise patterns. For very large firms this may give an opportunity to data mine.
- Last client survey result
- Reason given and notes
Each of these items are critical for any size firm.
I’d be asking if a client loss was preventable. If a client said they were going to another adviser, it was clearly a preventable loss. If a client died, it wouldn’t be. In the middle there is lots of grey here, but I’d be pessimistic and assume most were preventable. Clients are too likely to say something nice to avoid hurting your feelings than to be up front, and it’s emotionally tempting to accept that on face value.
Protip: An exit questionnaire is a simple yet effective option to genuinely learn more about what led to your client’s departure. Whilst I’d still put in the phone call in an attempt to retain business, you may get more honest insights from a survey than you would on the phone. Plus, what do you have to lose? It’s not like they’re going to leave again!
The last survey result (if known) could be worth looking up. A preventable loss of a promoter would be a very bad result and worth investigating. The loss of a detractor may well be a good thing.
How to use it once you have it
There is of course no point doing this if you’re never going to use it.
A common problem in smaller practices, is you tend to have a feeling for what is going on. However, once you suspect a problem, you don’t have data to validate your perception and it’s very difficult to go back.
If it is tracked, you can look back on it at any time and see. If you feel like you’ve had an increase in lost clients recently, you’ll be able to go back and check if it’s roughly normal or if things have really picked up. If things have gone up, but not so much that you would have noticed, the data can tell you.
Furthermore, there’s an opportunity for pattern identification.
- Clients moving interstate and moving to engage a local adviser may be an opportunity to include more digital engagement options.
- If an aging client base is starting to bite financially, it may be time to shift gears and work on filling the gap with a younger demographic.
- You may find you’re losing clients on a given service level (which could even be part of your strategy).
The point is, ignorance isn’t bliss. I would recommend setting a task for management to review at least annually.
Calculate Client Retention Rate
Your Client Retention Rate is easy to calculate. A little Excel ninjutsu can make this pretty easy to automate.
Just check it when you do a periodic review and see if it’s moved.
If you’re looking for a new licensee, lender, or buyer then you may want to include your Client Retention Rate in your documentation. They’re interested in ensuring you are low risk, and a strong client retention rate demonstrates happy clients bringing in consistent income improving your bargaining position.
Incentives and KPIs
Any staff incentives and KPIs shouldn’t just be focused on new business and existing clients but consider the impact of lost clients. That is something every client facing staff member can impact.
To turn this into a positive thought, there are some positive things we can think of while we’re thinking about the value of existing clients. I know at least one firm that offers a loyalty discount. This could be something that decreases a little each year beyond the fifth year for example. Or, just a gift to recognise loyalty at 5-year milestones in the relationship. Plenty of ideas here.
If you’ve been doing this, help others learn from your experience and share what you learned in the comments below.
Prescription for cutting costs by Bain & Company
How to calculate Customer Retention Rate by Adam Toporek