Asset Retention: the Importance of a Good Defense

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GSAM Connect Asset Retention: the Importance of a Good Defense By Vincent Tiseo Many financial advisors are missing a growth opportunity well within their reach: Asset Retention.

1 GSAM Connect Asset Retention: the Importance of a Good Defense By Vincent Tiseo Many financial advisors are missing a growth opportunity well within their reach: Asset Retention. As advisors plan for 2017, we think the topic is worth revisiting. The benefits of an effective client retention strategy are many, including sturdier growth for expanding advisory practices and less pressure for mature practices to find new clients. We think this subject will only rise in importance in the coming years. Baby Boomers will soon pass trillions in wealth to heirs and other beneficiaries. But surveys suggest 70%, perhaps more, will take their inheritance elsewhere. 1 Lopsided statistics such as the above sometimes convince advisors that asset retention efforts are fruitless. We see it differently. An advisor who loses a significant percentage of clientele due to deaths or changing family circumstances would see a large benefit with as little as a five percentage-point improvement in client retention. We think low retention rates are more usefully viewed as a product of less-than-optimal retention efforts than a factor shaping retention strategies. Here, we present five actionable ideas for advisors who aim to retain more of today s business. Lay the right groundwork with heirs. Many advisors believe they are taking the necessary steps for heirs to remain in their care after a client passes away. But a reality check of this perception often reveals otherwise. For instance, we find that many advisors fail to ask clients one simple, direct question: Is it 1 Source: The great wealth transfer is coming, putting advisers at risk, Investment News, July 13, Strategic Advisory Solutions Goldman Sachs Asset Management 1

2 important to you that your assets remain under my care when they are passed to your children? The question is rarely asked. A yes answer is an opportunity to engage clients in a meaningful discussion on how and when to connect with children and/or preferred charities and beneficiaries. The discussion often leads to a clearer focus on the priorities and concerns of both parents and heirs. Meanwhile, a no is useful for different reasons: It would provide clarity and direct an advisor s efforts to other situations where asset retention is a possibility. Knock down perceived geographic barriers. Geography is not the barrier it used to be. Changing communication norms and technology mean that relationships can be developed even with far-flung heirs. Maintain a presence on clients preferred social media platforms so that both clients and their children can observe you regularly in a low-commitment, largely passive manner. Geography has not been a limiting factor for robo-advisors, which have been adept at marketing their services via social media. Advisors arguably enjoy a head start when reaching out to heirs, since they have pre-existing relationships. Consider a comprehensive beneficiary audit. Besides essentials like market and portfolio performance reviews, consider a planning exercise which goes beyond the conventional org chart. A beneficiary audit aims to map out the plan for all heirs and charities. It can help an advisor understand how to change a client s wealth distribution plan in order to serve the client s most closely held priorities. Understanding what a client deems essential will bring clarity to planning between generations. Orchestrating this review allows an advisor build a bridge to heirs as much as it helps meet the client s financial goals. Be prepared for sudden wealth education. Addressing topics which clients heirs face today or may face in the near future can be a fruitful exercise. Sudden wealth education should not be a crash personal-finance course at the very moment of family tragedy. It can be a series of interactions which begin before any immediate need. Spending time on topics of relevance for clients families such as life insurance, financial planning and budgeting, or college savings plans helps build goodwill in advance. Heirs will know the advisor s capabilities and expertise long before wealth decisions are required. Survey clients regularly. Most service models are built in a vacuum, and are oriented towards tasks more than outcomes. Top advisors understand that affinity and stickiness are created from Strategic Advisory Solutions Goldman Sachs Asset Management 2

3 the day service begins and continue by allowing clients to shape their service experience. Do not underestimate the importance of the onboarding process -- it is the chance to induce a wow on first impression. A smooth, informative onboarding experience creates a first impression of excellent service which keeps clients coming back. Advisors can keep clients satisfied by asking the right questions. List out specific items within the service offering and allow clients to rate them on a scale of importance and/or value. The simple, yet powerful gesture of enabling clients to give input about their experience can go a long way toward driving positive outcomes. For financial advisors, the best defense is not always a good offense. Often enough, it is a good client-retention strategy, one which deploys the just-listed efforts in search of a more satisfied clientele across generations. Vincent Tiseo is global head of business practices for the Strategic Advisory Solutions team at Goldman Sachs Asset Management. Views are as of 12/19/2016 and subject to change in the future. General Disclosures This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes. Strategic Advisory Solutions Goldman Sachs Asset Management 3

4 Economic and market forecasts presented herein reflect our judgment as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. United Kingdom and European Economic Area (EEA): In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority. Switzerland: For Qualified Investor use only Not for distribution to general public. This document is provided to you by Goldman Sachs Bank AG, Zürich. Any future contractual relationships will be entered into with affiliates of Goldman Sachs Bank AG, which are domiciled outside of Switzerland. We would like to remind you that foreign (Non-Swiss) legal and regulatory systems may not provide the same level of protection in relation to client confidentiality and data protection as offered to you by Swiss law. Asia Pacific: Please note that neither Goldman Sachs Asset Management International nor any other entities involved in the Goldman Sachs Asset Management (GSAM) business maintain any licenses, authorizations or registrations in Asia (other than Japan), except that it conducts businesses (subject to applicable local regulations) in and from the following jurisdictions: Hong Kong, Singapore, Malaysia, and India. This material has been issued for use in or from Hong Kong by Goldman Sachs (Asia) L.L.C, in or from Singapore by Goldman Sachs (Singapore) Pte. (Company Number: W) and Goldman Sachs Asset Management (Singapore) Pte. Ltd. (Company Number: H), in or from Malaysia by Goldman Sachs (Malaysia) Sdn Berhad (880767W) and in or from India by Goldman Sachs Asset Management (India) Private Limited (GSAM India). Australia: This material is distributed in Australia and New Zealand by Goldman Sachs Asset Management Australia Pty Ltd ABN , AFSL ( GSAMA ) and is intended for viewing only by wholesale clients in Australia for the purposes of section 761G of the Corporations Act 2001 (Cth) and to clients who either fall within any or all of the categories of investors set out in section 3(2) or sub-section 5(2CC) of the Securities Act 1978, fall within the definition of a wholesale client for the purposes of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSPA) and the Financial Advisers Act 2008 (FAA),and fall within the definition of a wholesale investor under one of clause 37, clause 39 or clause 40 of Schedule 1 of the Financial Markets Conduct Act Strategic Advisory Solutions Goldman Sachs Asset Management 4

5 2013 (FMCA) of New Zealand (collectively, a NZ Wholesale Investor ). GSAMA is not a registered financial service provider under the FSPA. GSAMA does not have a place of business in New Zealand. In New Zealand, this document, and any access to it, is intended only for a person who has first satisfied GSAMA that the person is a NZ Wholesale Investor. This document is intended for viewing only by the intended recipient. This document may not be reproduced or distributed to any person in whole or in part without the prior written consent of GSAMA. This information discusses general market activity, industry or sector trends, or other broad based economic, market or political conditions and should not be construed as research or investment advice. The material provided herein is for informational purposes only. This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Canada: This material has been communicated in Canada by Goldman Sachs Asset Management, L.P. (GSAM LP). GSAM LP is registered as a portfolio manager under securities legislation in certain provinces of Canada, as a nonresident commodity trading manager under the commodity futures legislation of Ontario and as a portfolio manager under the derivatives legislation of Quebec. In other provinces, GSAM LP conducts its activities under exemptions from the adviser registration requirements. In certain provinces, GSAM LP is not registered to provide investment advisory or portfolio management services in respect of exchange-traded futures or options contracts and is not offering to provide such investment advisory or portfolio management services in such provinces by delivery of this material. Japan: This material has been issued or approved in Japan for the use of professional investors defined in Article 2 paragraph (31) of the Financial Instruments and Exchange Law by Goldman Sachs Asset Management Co., Ltd. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources. Goldman, Sachs & Co., member FINRA. Strategic Advisory Solutions Goldman Sachs Asset Management 5

6 Views and opinions expressed are for informational purposes only and do not constitute a recommendation by GSAM to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice Goldman Sachs. All rights reserved. Date of first use: December 19, CODE Strategic Advisory Solutions Goldman Sachs Asset Management 6

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