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Get a Pulse on Your Advisory Firm with These 7 Client Retention Metrics

It’s tempting to put all your efforts into client acquisition, but investing in a client retention strategy pays long-term dividends. Serving existing clients should be a financial advisor’s top priority. Current clients aren’t just sources of revenue – they also generate referrals.

In fact, 58% of wealthy investors selected their advisor based on a referral. And people are 400% more likely to become clients when a friend refers their advisor.

When provided with a positive experience, your current clients can generate referrals while you have a steady revenue stream. But to leverage this information for cash flow forecasts and setting growth objectives, it’s essential to have the ability to accurately measure retention.

There is no single client retention metric that can tell you everything you need to know to keep your current clients happy. However, there are at least 7 that provide critical insight into client loyalty.

7 client retention metrics for financial advisors and fiduciaries 

The following retention metrics are easy to calculate and can help you glimpse your client experience. However, note two quick caveats:

Retention is a reflection of how happy your clients are – and poor communication is the top reason for client churn. To allow for that, some of these metrics have been adjusted from product-oriented calculations. Substitute “Total number of interactions” for formulas that otherwise use “purchases” as a variable.

In addition, many of these retention KPIs can measure different periods. Here we use monthly or annual periods.

1. Client churn rate

Your churn, or turnover rate, shows how many clients you’ve lost over a certain period. It’s pretty simple to calculate:

Churn rate = (Lost clients / Total clients during a time period) x 100

For example, let’s say you had 150 clients last month, and 8 left your firm. Here is how that would look:

Churn rate = (8 / 150) x 100

Churn rate = 5.3%

Note this is critical for success: Increasing your retention by just 5% can boost your profits by 25%.

2. Retention rate and segment retention rates

A retention rate is the opposite of your churn rate. This calculation shows all your clients who stayed and signed up. The formula for this rate:

Retention rate = (Total clients at the end of a period – New clients) / Total clients at the start of the period x 100

For example, let’s say you had 204 clients at the start of August and 204 clients at the end of August. Over that time period, you gained 10 clients:

Retention rate = (200 10)/204 x 100

Retention rate = 93%

You can take this a step further by splitting your client base by segment and applying the formula. For example, look at your retention rate for investors over 50 years old, women, families, small business owners, or another significant demographic.

3. Client lifetime value

You’ve probably heard it’s more cost-effective to retain current clients than acquire new ones. Client lifetime value (CLV) helps you measure how much a client is worth to your business from the beginning of your relationship to the end. This metric makes it easier to forecast cash flow and develop retention and acquisition strategies.

Client lifetime value = Client value x average client life span

Before we look at an example, we need to calculate client value and the average client life span. This can get a little complicated, so we’ll break it down step by step:

Determine the average revenue

As an advisor, your clients’ value is easier to calculate, as they will likely pay a percentage fee annually.

Average revenue = Revenue over a period / Number of purchases during a period

Let’s say you charge a 1% fee and your client has $5 million AUM. That would equal $50,000. Your client value is:

Average revenue = $50,000 / 1

Average revenue = $50,000

Determine the average frequency rate

The average frequency rate highlights how often a client makes a “purchase.” However, your clients aren’t buying products. There are two ways to monitor frequency. You can use your billing periods, or you can tally how many times the client uses your services via meetings, email communications, and so forth. For our purpose here, we’ll go with the second option.

The formula:

Average frequency rate = Total purchases (billing periods / interactions) over a period / total client number

Let’s say you have communicated with a client 10 times over the past year and you have 80 clients:

Average frequency rate = 10 / 80

Average frequency rate = 0.125

Determine the client value

You can calculate client value by multiplying the average revenue from the client by the frequency rate.

Client value = $50,000 x 0.125

Client value = $6,250

Determine the client life span

We have one last number to calculate before getting to the CLV. Life span is fairly simple:

Client life span = Average years of client retention / Total number of clients

Let’s keep our total of 80 clients and assume the average client stays for 20 years:

Client life span = 20 / 80

Client life span = 0.25

Calculate the CLV

Now we can calculate the CLV.

Client lifetime value = Client value x average client life span

CLV = $6,250 x 0.25

CLV = $1562.5

The CLV may look like a small number, and it is. For most advisory firms, the best way to increase the CLV rate is through improving retention. The longer clients stay, the higher their value.


4. Client satisfaction score

There are a few different ways you can calculate client satisfaction. We’ll go with the simplest one.

The formula:

Client satisfaction score = (Satisfied clients / Total clients surveyed) x 100

Here is an example of how this works:

You send a survey to 129 clients that asks a simple question: “Do you feel your advisor understands your investing concerns and addresses them?” If 109 respond positively, 12 respond negatively, and 8 don’t respond, the equation would be:

Client satisfaction score = (109 / 129) x 100

Client satisfaction score = 84.50%


5. Client retention cost per client

Here we are calculating how much it costs to retain clients. This is different from the client lifetime value, which highlights how much value your clients provide over a certain period.

The calculation:

Average client retention cost = Total cost of retaining clients / Total client number

Let’s say you spent $10,000 on software, tools for client engagement (CRM, chatbots), and similar activities and you have 131 clients:

Average client retention cost = $10,000 / 131

Average client retention cost = $76.34

6. Referral rate

Advisory firms largely rely on word of mouth to acquire new clients. Pinpointing your referral rate can help you determine how successful you are at prompting recommendations.

Referral rate = Number of referred clients / Total number of clients

Asking potential clients during a discovery session how they heard about you is the easiest way to determine this, but that leaves too many variables. A better option including the question on a digital intake form.

Key tools for measuring retention

To manage this data, you need the right tools. Otherwise, it would be impossible to keep track of data points, much less scale the process. Below are the must-have tools that can give you insight into your client retention efforts.


Your client relationship management (CRM) software enables you to keep track of client communications and segment your clients for better analysis. These platforms often integrate with marketing and advisory software, removing data silos and keeping your information consistent.

Check-in surveys

Another essential tool is the check-in survey. This can help you better determine not only your clients’ satisfaction but also gauge their market sentiment. For example, if a client replies with negative sentiments about the current economy or financial markets, you can prioritize meeting with them to review their portfolio.

Marketing tools

Most marketing software offers additional metrics to measure retention or engagement. Email marketing platforms, social media management software, surveys, website analytics, and similar tools have their own set of metrics. You can use these tools to not only determine the success of your acquisition efforts but also look at current client engagement.

For example, an email marketing platform allows you to segment email lists, such as client and non-client lists. You can then see what percentage of your client list opened or interacted with a specific email. Surveys make it easy to see who answered your questions, and with a little tweaking, you can figure out how many current clients visit your website.

All of these metrics can help you determine if your clients are fully engaged and building a relationship with your firm.

Put your clients first

The quickest way to better retention is growing your client’s wealth. Part of inspiring a strong client experience is through boosting engagement. Learn how you can foster client engagement in our latest article.

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