How AI Is transforming advisor retention strategies in the WealthTech sector
Advisor attrition is a critical challenge in the wealth management industry, and yet most firms are not doing enough to prevent it, according to a new report from Fligoo.
The movement of advisors can cause significant financial losses and disruption to client relationships. For instance, the advisor attrition rate surged 7.5% in 2023, resulting in over $100bn in assets under management (AUM) being transferred in just 90 days.
The US’ Federal Trade Commission’s ban on non-compete agreements is expected to increase the attrition trend. With client expectations changing and the current competitive hiring market, Fligoo underlines the importance for wealth management firms to adopt an innovative retention strategy.
Fligoo, a provider of enterprise AI solutions, has launched a new whitepaper exploring the trends driving advisor movement, the failings of traditional retention strategies, how AI can help address the problem, and guidance on how to improve retention.
Advisor attrition is a major challenge in wealth management as existing retention strategies fail to identify the root causes or anticipate when an advisor is at risk of leaving. To resolve this, firms need to adopt a proactive approach that assesses risk factors and early indicators.
Fligoo highlighted a number of indicators of attrition. One of these can be the trading activity, with an active advisor consistently maintaining higher levels of trading activity, while those at risk of leaving are more likely to show a noticeable decline.
Other indicators of attrition can be tenure, with advisors more likely to leave within the first 10 months for some firms, and the reduction in the number of managed accounts, as advisors tend to manage fewer accounts as they look to leave.
One of the best ways for a firm to become more proactive with retention is to leverage an AI tool to help identify those at risk of leaving, Fligoo stated.
The report claims that AI-powered solutions, like those offered by Fligoo, have demonstrated a 90% accuracy in predicting advisor attrition, up to three months in advance. Through the AI, firms can see evidence of advisors that are becoming disengaged and changes to their work habits that could be warning signs of imminent departure.
This Fligoo whitepaper explored the underlying causes of advisor attrition, the emerging trends in the industry, and how AI-driven solutions can mitigate the problem by predicting advisor behavior and risk. By understanding these factors and leveraging data-driven insights, wealth management firms can not only reduce attrition but also improve overall advisor satisfaction and performance.
For more insights into how AI can tackle the challenge of advisor attrition, read the whitepaper here.
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