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Maggie Evans

When musing over the customer retention issues facing IFAs, the message is

clear – it is not why but how. We all know and accept the (varying)

statistic that it costs eight times more to recruit a new customer than it

does to retain one. Although the argument is compelling, few firms have

addressed the issue.

A study carried out by Bain & Co shows that a 5 per cent increase in

customer retention will give, for a brokerage, a 50 per cent increase in

lifetime profits from a typical customer. For auto or home insurance, the

average increase is 84 per cent and for life insurance, it is 90 per cent.

Financial services firms with the highest profits are those with the best

customer retention rates.

This is a result of two factors – customer volume and the lifecycle of

individual customer profitability. Against a backdrop of increasing

competitive pressure, decreasing margins and market mergers, nurturing the

individual customer is pivotal.

So, who is this elusive customer? The one who takes out a 25-year

endowment policy? Or who usually pays an IFA for advice but sometimes buys

investments direct according to the latest league tables? For the IFA, this

fundamental question is difficult to answer.

Keeping tuned in to the customer lifecycle and landmark events is half the

battle. Those getting a redundancy package or a windfall, the

midlife-crisis brigade, recent fathers, the separated or newly widowed. You

will only learn of these by talking.

It is easy to send a newsletter periodically to every customer hoping for

the best but this is an impersonal approach and falls victim to decaying

database validity syndrome. Annual statements from a provider show the

policy status but do little to enhance the customer experience or engender

loyalty to either the provider or intermediary.

The answer is to promote active two-way communication. Simple concept,

daunting logistics but in our experience the best investment possible. How?

Open up. Make yourself available through multiple channels. Several IFA

groups have adopted such a concept. Willis National, admitting that, on the

whole, the IFA population has “not been good” at customer dialogue, is

implementing a multi-channel approach that helps communication face to

face, via phone or via the web. In Willis National&#39s case its recent

acquisition by Bristol & West, it feels, will help this process by

increasing resource.

The next logical step is to engage in dialogue. If you cannot achieve this

internally, seek partners who can help. Mine your data, too. Are you able

to monitor and measure customer churn or “share of wallet”? It is

measurable. In the same way that banks encourage customers to have multiple

accounts (which also helps to retain customers by making it harder to

defect), multiple products taken through an IFA should increase customer


One organisation has analysed its data creatively to find those with high

potential CLV (customer lifetime value) and is approaching them to engage

in consultation with its advisers. There is no pressure, naturally, merely

a quest to understand and to help.

The return on investment is tremendous. Customer satisfaction programmes

are also incredibly powerful and unveil true nuggets. A byproduct is the

verification and enhancement of the database, making other communications

more effective. Strength in numbers suggests that groups and associations

of IFAs should be able to collaborate to achieve this dialogue using

partners where necessary.

Against a backdrop of declining margins and competition, seek smarter ways

to understand, add value to and retain your client base. It is no longer a

question of shall we but how shall we?

Maggie Evans is head of marketing at iSky


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