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Why Affluent Prospects Hire Their Advisor

The quality of the advisor is what seals the deal; the firm plays a minor role in the selection process.

For the past two years, we asked questions in our research that were designed to uncover the primary reasons an affluent prospect selected a particular financial advisor. Albeit there were slight variances year-to-year, the overwhelming influencer was some form of word-of-mouth influence: the advisor was recommended by a personal contact.  

Our data shows it’s the quality of the financial advisor that seals the deal. Below you can see that the size and/or reputation of the financial advisor’s firm was a factor, but significantly below that of the advisor.

Primary Reason for Selecting Your Financial Advisor
*Reported by Affluent Investors

  • Recommendation                                      33 percent
  • Great impression during the meeting        19 percent
  • Worked for a large institution                    18 percent
  • Know advisor personally                           15 percent
  • Worked for a small institution                   5.5 percent
  • Lowest fees                                              5.5 percent
  • Other                                                           4 percent

When you combine factors unique to the financial advisor (recommendation, great impression during the meeting, know the advisor personally), 67 percent of the primary reasons center around the quality of the advisor. The advisor’s firm, whether it’s a large or small institution, plays a minor role in the selection process.

Our 2017 Affluent research reported similar findings, but phrased a bit differently: 60 percent of primary impact factors focused on the advisor (recommendation, reputation, first impression) and 16 percent were attributed to the reputation of the advisor’s firm.

Today’s affluent prospects are making it clear that you, the financial advisor, are the product. It’s you they’re hiring to oversee the multidimensional aspects of their family’s financial affairs. And they’re not chasing the lowest fees.

To drill down further into the power of word-of-mouth influence, we asked our affluent respondents: “How many of your friends, family or colleagues also used this person?” Sixty-seven percent had known one or more people who were already working with their advisor.

How Many of Your Friends, Family or Colleagues Also Used This Person?
*Reported by Affluent Investors

  • Zero                                         23 percent
  • One                                          18 percent
  • Two                                          26 percent
  • Three                                       12 percent
  • Four                                           4 percent
  • Five or more                              8 percent
  • Unsure                                      9 percent

While 9 percent say they’re unsure, word-of-mouth may still be at work: a financial advisor is recommended by a client without the prospect knowing how many other people in their spheres-of-influence are working with this advisor. The key takeaway is that slightly over two-thirds knew someone already working with the advisor they’d chosen to hire. Here is where the personal introduction occurs, which is how you put new affluent prospects into your pipeline.

This debunks the myth some advisors use for not penetrating their affluent clients spheres-of-influence; affluent clients are private regarding their finances and don’t want people to know which professionals they’re using. This is a flawed narrative. True, affluent clients don’t want their advisor sharing any financial information. But most affluent clients are quite comfortable recommending their advisor if they hold this person in high regard.

Regarding your pipeline, you’ve probably noticed we’ve touched on both ends—putting new affluent prospects into your pipeline and transforming prospects into clients. What’s important to take note of how word-of-mouth influence, at every stage of pipeline management, is at work.

Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients. www.oechsli.com.

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