What Is the Real Return on Client Engagement?

Every now and then I find myself having a conversation and wonder, much later, if we were actually talking about the same thing.  

Client engagement is a case in point.  

Most, if not all, advisors I speak with tell me client engagement is a goal. At the same time, I have yet to find two people who define it in exactly the same way.

The reality is that it’s easy to set goals that ‘sound right’. But it’s very hard to achieve those goals without a clear and shared definition of exactly what you're aiming for and what drives you toward that outcome. And yet it happens all the time.

The use of the term ‘client engagement’ is further complicated by the fact that it’s both an outcome (an adjective) and a process (a verb).  

  • As an adjective, a client is engaged, or not. But how do you actually know, without a clear and measurable definition?
  • As a verb, we want to engage a client. But how do you know what to do without data on the drivers of the outcome you are trying to achieve?

To put it more bluntly: Don’t set client engagement as a goal if you can’t define it, measure it and understand what drives it. Otherwise, it’s little more than a platitude.

Defining Client Engagement

We naturally associate client engagement with the depth of the client relationship – something very intangible. Accepting that would be to say “you’ll know it when you feel it” which is light, at best, as a business strategy.

And while it’s easy to believe it’s not something that can be measured, we beg to differ.

Years of gathering and analyzing data have allowed us to create a measurable standard for engagement and, importantly, to understand the drivers.

For the purposes of our on-going investor research and for our work with individual advisory firms, we identify Engaged clients based on a combined rating of their satisfaction with the advisory relationship and their actual referral behavior.

On that basis, only 26% of high-net-worth clients are Engaged and yet 93% are somewhat or very satisfied. That is, of course, because satisfied clients, while wonderful, can be very passive.

A satisfied client may be happy but passive. An Engaged client is happy and is telling the world about the work you do.

Because the definition incorporates the quality of the relationship and referral activity, it’s aspirational. And that’s ok, because the real goal is to understand what causes a client to be Engaged and to use those findings to drive the overall experience.

Your Return on Engagement

But all of this begs another question. Why should you care?

The ROE For Your Business

Engaged clients are more loyal.

  • Among Engaged clients zero percent are at risk, increasing to 13% among clients who are not engaged. For our industry research, a client is at risk if, when asked if they are likely to continue working with their advisor in the next 12 months, the response is a 3 out of 5, where a one is ‘not at all likely’ and a five is ‘extremely likely’.

Share of wallet is higher among Engaged clients

  • Fifty-three percent of Engaged clients say they have 75% or more of their investable assets with their advisor, dropping to 40% among those who are not engaged.

Engaged clients are less likely to be concerned with short-term market volatility, focusing on the long-term.

  • In April 2022, 72% of Engaged clients said they were satisfied with their long-term investment performance/returns, dropping to 48% among those who are not engaged.

The ROE for Your Clients

Engaged clients perceive higher value relative to fees paid.

  • Seventy-one percent of Engaged clients say they strongly agree that they receive good value for the fees they pay their advisor, dropping to 47% among those who are not engaged.

Engaged clients are more confident about their financial futures.

  • Eighty-seven percent of Engaged clients are in the ‘high self-confidence segment’ dropping to 66% among those who are not engaged. Absolute Engagement's Client Self-Confidence Index measures the extent to which clients feel confident, clear and in control of reaching their goals and feel financially secure.

So yes, client engagement is not only measurable, but a goal worth pursuing. There is a tangible return for the business and for the client.

Client engagement is not only measurable, but a goal worth pursuing. There is a tangible return for your business and for your clients.

Driving Engagement

But we’ve known this for some time. At Absolute Engagement, we started talking about client engagement as a meaningful and tangible goal in 2008, before it was cool.

At that time, everyone believed that satisfaction was enough, but the data told us a different story. As we looked at the data that book-ended the period between 2008 and 2010 it became clear that satisfaction was being impacted by market conditions whereas engagement was something deeper.

It also became clear that while achieving client engagement was a goal worth pursuing, we needed to understand the path from here to there. And the data tells us something about that as well.

Next week, I’ll share some of the highlights on the drivers of engagement from our industry research. That comes with the obvious caveat that the only thing that really matters is what matters to your clients, not to the average client. But it’s a start.