Client acquisition and client retention are two sides of the same growth coin. For your advisory business to thrive, you need a base of loyal clients as well as a solid strategy for acquiring new ones. When you have limited time and resources to devote to growth, it’s important to understand how to strike the right balance between customer acquisition vs. retention.

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Customer Acquisition vs. Retention: What’s the Difference?

Client acquisition is the process of bringing new clients into your practice. Acquisition is largely driven by your marketing efforts. The strength of your marketing plan and sales funnels can have a significant impact on your ability to acquire new clients.

Retention is what happens after the acquisition phase. It’s a measure of your ability to keep your clients engaged and loyal so that they have no reason to look for another advisor for help.

Your firm’s retention rate can have a direct impact on your overall success. An investor who becomes your client and remains your client can generate a steady stream of revenue, as well as help you grow your book of business through referrals.

Is Client Acquisition or Retention More Important for Advisors?

Customer acquisition and retention serve different purposes in your business. Both are important, but if you have a limited budget to devote to marketing or simply want to generate the best return on investment for your time, you’ll need to be strategic.

Here are some things to consider as you shape your approach:

Cost: From a cost perspective, it’s typically more expensive to acquire a new client than it is to retain a current one. When you’re marketing your financial advisor firm to prospects, you’re essentially starting with a blank slate, and you may need to do some wooing with your marketing to capture and hold their attention. An existing client, on the other hand, is already familiar with what you have to offer, so your marketing costs may be significantly lower.
Results: Acquisition and retention often differ when measuring results and ROI. With acquisition, it may take less time to see a payoff from your acquisition efforts. For example, offering a valuable lead magnet on your website can produce immediate results if prospects sign up for your email newsletter. Retention, meanwhile, can take longer to pay off, but generate a higher ROI overall.
Focus: Acquisition is primarily marketing-driven. You might be using social media, SEO, collaborative partnerships or email to get prospects into your funnel. Retention, on the other hand, is tailored toward customer satisfaction and positive user experience. You already have the client’s attention, and now you have to figure out what you need to do to give that client the best experience possible.

Whether it makes sense to lean more toward acquisition or retention can depend on your time availability, budget and goals. It’s possible to do both, but you’ll need a plan to ensure that you’re not stretching yourself thin.

Client Acquisition Strategies for Financial Advisors

An advisor considers strategies for customer acquisition vs. retention.

How can financial advisors get clients? It’s a frequently asked question, and there are a multitude of answers. Some of the most effective ways to acquire new clients include:

Social media
Search engine optimization
Email marketing
Content creation and marketing
Digital ads and other forms of paid advertising
Direct mail marketing
Lead generation services
Collaborative partnerships
Cold calling
Referrals

Which acquisition strategy yields the best return? That’s difficult to answer, as it can depend on the niche you’re targeting and how responsive they are to different marketing efforts.

Effective client acquisition begins with understanding who you’re trying to attract. It’s helpful to create an ideal client persona that defines who they are demographically and financially.

For instance, say you’re hoping to attract young professionals in their 30s to your firm via social media. Research suggests that YouTube, Facebook and Instagram are where you’re most likely to find them. If you’re trying to break into the 20-something crowd, on the other hand, you’re more likely to find them on TikTok than Facebook.

That’s valuable information to know, especially if you’re considering investing in social media ads. A perfectly crafted ad is most valuable when it’s displayed in digital spaces where your ideal client has the best odds of seeing it.

Client Retention Strategies for Financial Advisors

Retaining clients is easier in some ways since you already have an established relationship in place. The challenge lies in nurturing that relationship and consistently meeting or exceeding client expectations.

Here are some strategies for encouraging loyalty and engagement:

Communicate: One of the most common reasons clients leave their advisors is lack of communication or poor communication. Following up promptly when a client reaches out, communicating via their preferred channels and ensuring that all members of your team are properly trained in communication protocols are essential for retaining clients.
Ask: Unless you’re a mind-reader, it can be difficult to gauge what a client thinks of you and your firm. Having clients complete an anonymous satisfaction survey is an opportunity to learn more about what they like and what they feel is lacking. When you sit down with clients for meetings, you can keep the conversation going by asking open-ended questions.
Use a personalized approach: Clients want to feel that they’re more than just a number, and a personal touch can be invaluable for retention. Something as simple as using a client’s first name when sending out your weekly or monthly newsletter can help build loyalty.
Show your appreciation: Hosting client appreciation events is an opportunity to meet with them in a casual setting and get to know one another better. These events show your clients that they’re important to you and that you value their business. These events can pay for themselves if your happy clients are more inclined to send referrals your way.

Frequently Asked Questions (FAQs)

Is Retention Better Than Acquisition?

Retention can be better than acquisition if you’re measuring the cost involved and the long-term results. It may be less expensive to retain a client that you already have versus spending your marketing budget to attract new ones. Existing clients can contribute to your acquisition strategy through referrals, and they can also act as a bridge to the next generation if they have children who may eventually need your financial advice.

What Is the Average Client Retention for Financial Advisors?

Statistically, financial advisors retain around 95% of the clients they acquire. However, your firm’s retention rate may be higher or lower depending on the level of effort you’re putting in.

Why Do Clients Leave Their Financial Advisors?

Clients may leave their advisors for a variety of reasons. Some of the most commonly cited issues include problems with communication, investment underperformance, high fees and an overall poor experience that leaves them feeling neglected or unappreciated.

Bottom Line

Acquiring clients and retaining them are essential to your firm's success.

Understanding the differences between customer acquisition vs. retention is critical for developing your marketing and engagement strategies. Whether you’re just getting started or you’ve been in business for years, it’s important to remember that both play a part in your success.

Tips for Growing Your Advisory Business

Digital marketing is one of the best ways to acquire new clients, but many advisors struggle with a learning curve. You may find that it makes sense to partner with an advisor marketing platform to help you capture leads for your business. SmartAsset AMP helps you connect with prospects and gives you the tools you need to follow up. Schedule a demo to learn how you can leverage it to grow your business.
Marketing is increasingly digital-focused, but advisors can still benefit from offline marketing tactics. Investing in direct mail marketing campaigns or print and billboard ads, for instance, are both ways to connect with prospects in your local market. Hosting in-person workshops or seminars or volunteering your services can also afford opportunities to connect with would-be clients.

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