Client Advisory Board Drives 15% AUM Growth for New Horizons

Client Advisory Board Drives 15% AUM Growth for New Horizons

Executive Summary

New Horizons Financial, a growing wealth management firm, faced the challenge of staying intimately connected with evolving client needs amidst rapid growth. To combat this, CEO Rebecca Hayes established a Client Advisory Board (CAB) to foster open communication and gather direct feedback. This proactive approach, coupled with strategic implementation of the Board's insights, resulted in a 15% increase in Assets Under Management (AUM) from existing clients within one year, demonstrating a significant boost in client loyalty and satisfaction.

The Challenge

New Horizons Financial experienced rapid growth, onboarding an average of 20 new clients per quarter over the past two years. While this growth was positive, it presented a unique challenge: maintaining close relationships with existing clients and ensuring their needs were continuously met. Rebecca Hayes, CEO of New Horizons, recognized that relying solely on annual reviews was insufficient to capture the nuanced shifts in client expectations and preferences.

Specifically, New Horizons faced the following challenges:

• Diminishing Engagement Scores: Client satisfaction surveys revealed a slight dip in engagement scores, from 92% to 88% satisfaction, indicating a potential disconnect. While still high, Rebecca saw this as a warning sign that needed immediate attention.
• Suboptimal Service Utilization: Analysis of client portfolios showed that a significant portion (approximately 35%) were not fully utilizing all available services, such as estate planning integration or tax optimization strategies. This indicated a lack of awareness or perceived value of these services among some clients.
• Increased Competition: The wealth management landscape in New Horizon's region was becoming increasingly competitive, with new firms entering the market offering similar services and aggressive fee structures. This heightened the need for New Horizons to differentiate itself through exceptional client service and personalized solutions.
• Difficulty Gathering Granular Feedback: Traditional methods of gathering feedback, such as annual surveys and individual client meetings, proved to be time-consuming and often yielded generic insights. The firm needed a more efficient and targeted approach to understand client pain points and unmet needs. For example, one client with $750,000 AUM moved their business to another firm after expressing a lack of communication regarding alternative investment opportunities in the clean energy sector - a risk New Horizons wanted to mitigate.

The cost of client attrition, estimated at approximately $5 million in lost AUM annually, motivated Rebecca to seek a proactive solution. She needed a mechanism to tap into the collective intelligence of her client base and ensure that New Horizons remained aligned with their evolving financial goals.

The Approach

Rebecca Hayes spearheaded the implementation of a Client Advisory Board as a strategic initiative to address the challenges outlined above. The approach was structured around the following key principles:

• Diversity and Representation: The CAB was designed to represent a diverse cross-section of New Horizons' client base, encompassing different age groups, income levels, investment objectives, and life stages. The initial board consisted of 12 clients, carefully selected to reflect this diversity.
• Structured Meeting Schedule: Quarterly meetings were established to provide a regular forum for discussion and feedback. These meetings were strategically scheduled to coincide with key market events and firm initiatives, ensuring relevance and timeliness of the discussions.
• Facilitated Discussions: Rebecca acted as the facilitator for the CAB meetings, guiding the discussions and ensuring that all members had the opportunity to contribute. Agendas were prepared in advance, focusing on specific topics such as service improvements, investment strategies, and market trends.
• Actionable Feedback Loop: A critical component of the approach was the establishment of a clear feedback loop. All feedback received from the CAB was documented, analyzed, and prioritized. The firm committed to implementing tangible changes based on the Board's recommendations, demonstrating a genuine commitment to client input.
• Transparency and Communication: New Horizons maintained open communication with the CAB members, providing regular updates on the progress of implemented changes and the impact of their feedback. This fostered a sense of ownership and collaboration, further strengthening client loyalty.

Rebecca also implemented a decision-making framework. Any initiative that emerged from the Board would be ranked based on: 1) client impact, 2) strategic alignment, and 3) resource requirements. The initiative must score above a pre-determined threshold to be implemented, ensuring efficient use of resources. For example, the Board suggested enhanced digital financial planning tools at a cost of $50,000 to implement. However, the client impact score was significantly higher than other suggestions such as adding quarterly networking events. As a result, the digital planning tools were prioritized.

Technical Implementation

The successful implementation of the Client Advisory Board relied on the strategic use of technology to facilitate communication, gather feedback, and track progress.

• Virtual Meeting Platform: Zoom was selected as the primary platform for conducting the quarterly CAB meetings. This allowed for easy participation from clients regardless of their location, maximizing attendance and engagement. Features such as screen sharing and breakout rooms were utilized to enhance the collaborative experience.
• Survey Software: Qualtrics survey software was implemented to gather structured feedback from the CAB members. Post-meeting surveys were distributed to capture key insights and identify areas for improvement. The survey data was analyzed to identify recurring themes and prioritize action items.
• CRM Integration: Client feedback and action items were integrated into the firm's Customer Relationship Management (CRM) system, ensuring that all relevant information was readily accessible to client-facing employees. This allowed for personalized communication and proactive service delivery.
• Data Analysis and Reporting: Using financial modeling techniques, New Horizons was able to track the impact of changes implemented based on the CAB's feedback. For example, they were able to measure the increase in AUM from clients who specifically mentioned benefiting from a new service offering recommended by the Board.
• Security and Compliance: All data collected and stored was managed in compliance with industry regulations, ensuring the privacy and security of client information. HIPAA and GDPR compliance were paramount during the implementation process.

To calculate the 15% AUM growth, New Horizons analyzed the change in AUM from the existing client base over a 12-month period following the implementation of the Board's recommendations. They used the following formula:

AUM Growth % = ((Ending AUM - Starting AUM) / Starting AUM) * 100

Where:

• Starting AUM = Total AUM from existing clients at the beginning of the 12-month period.
• Ending AUM = Total AUM from existing clients at the end of the 12-month period.

Results & ROI

The implementation of the Client Advisory Board yielded significant positive results for New Horizons Financial:

• 15% Increase in AUM from Existing Clients: Within the first year of implementing the CAB's recommendations, New Horizons saw a 15% increase in AUM from existing clients. This translated to an additional $12 million in AUM, based on a starting AUM of $80 million.
• Improved Client Satisfaction Scores: Client satisfaction scores, measured through annual surveys, increased from 88% to 95%. This indicated a significant improvement in client perception of the firm's service quality and responsiveness.
• Increased Service Utilization: The percentage of clients fully utilizing all available services increased from 65% to 80%. This demonstrated that the CAB's recommendations led to greater client awareness and adoption of the firm's comprehensive offerings.
• Reduced Client Attrition: Client attrition rates decreased by 40%, indicating enhanced client loyalty and retention. The estimated savings from reduced attrition amounted to $2 million annually.
• Enhanced Brand Reputation: The Client Advisory Board served as a powerful marketing tool, enhancing the firm's brand reputation and attracting new clients. New Horizons saw a 10% increase in new client referrals.

The success of the CAB can be attributed to its ability to foster open communication, gather actionable feedback, and drive meaningful improvements in the firm's service offerings. The ROI of the initiative far exceeded the initial investment in time and resources.

Key Takeaways

For other advisors considering implementing a Client Advisory Board, the following key takeaways are crucial:

1. Prioritize Diversity and Representation: Ensure that the CAB represents a diverse cross-section of your client base to capture a wide range of perspectives and needs.
2. Establish a Clear Feedback Loop: Implement a structured process for collecting, analyzing, and acting on the Board's feedback. Demonstrate a genuine commitment to client input by implementing tangible changes.
3. Maintain Transparency and Communication: Keep the CAB members informed of the progress of implemented changes and the impact of their feedback. This fosters a sense of ownership and collaboration.
4. Leverage Technology Effectively: Utilize technology to facilitate communication, gather feedback, and track progress. Implement tools such as virtual meeting platforms, survey software, and CRM integration.
5. Quantify the Impact: Track key metrics such as AUM growth, client satisfaction scores, and client attrition rates to measure the ROI of the CAB and demonstrate its value to the firm.

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