Saturday, June 22, 2024

Which is the better path for client growth: Organic or inorganic?

Importance of Client Retention in the Financial Advice Industry: Insights from EY Leader

In the ever-evolving landscape of the financial advice industry, client retention has become a crucial focus for wealth management firms. As market competition intensifies and margins decrease, the need for sustainable organic growth has never been more apparent. In a recent report by EY, titled the 2024 EY Global Wealth Management Industry Report, the importance of outperforming on organic growth strategies was emphasized.

While some advice licensees may prefer growth through mergers and acquisitions (M&A), the reality is that M&A activity can be time-consuming and costly, especially for smaller firms already struggling with IT and compliance expenses. This has shifted the spotlight onto client retention and organic growth as key drivers of success for financial advice practices.

Elliott Shadforth, EY’s Asia-Pacific wealth and asset management leader, highlighted the significance of organic growth in today’s competitive environment. With clients becoming more willing to switch providers, the client onboarding and retention process has become a critical area for improvement. EY’s previous report revealed that a significant percentage of wealth management clients in the Asia-Pacific region are considering switching providers by the end of 2025.

The changing expectations of clients, coupled with the rise of personalized service models, have made client retention a challenging yet essential task for advisers. Shadforth emphasized the importance of understanding and meeting clients’ evolving needs to ensure long-term relationships. By implementing a blend of digital tools and human interaction, advisers can enhance the client experience and foster loyalty.

Looking ahead, Shadforth predicted continued merger activity in the Australian advice market as larger players seek to adapt to the changing landscape post-royal commission. New players with innovative technology and fee structures are entering the market, while smaller practices are seen as more easily integratable and cost-effective targets for acquisition.

In conclusion, the focus on client retention and organic growth is paramount for financial advice firms looking to thrive in a competitive market. By prioritizing the client experience, embracing personalized service models, and leveraging a mix of digital and human interaction, advisers can position themselves for long-term success in the evolving wealth management industry.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. The content is based on general research and may not be accurate, reliable, or up-to-date. Before making any financial decisions, it is recommended to consult with a professional financial advisor or conduct thorough research to verify the accuracy of the information presented. The author and publisher disclaim any liability for any financial losses or damages incurred as a result of relying on the information provided in this article. Readers are encouraged to independently verify the facts and information before making any financial decisions.

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