A Critical Metric Wealth Managers Aren’t Tracking

Many wealth managers don’t know how many prospects agree to become clients but then fall through the cracks, along with millions in assets and revenue.

Illustration by Institutional Investor

Illustration by Institutional Investor

Wealth managers spend a tremendous amount of time and money sourcing leads and convincing investors to work with them. Yet nearly half of the largest wealth managers aren’t tracking how many investors agree to become clients but then fail to sign paperwork or fund accounts, both critical business metrics.

“No one seems to be tracking this utterly important ratio,” Doug Fritz, founder and CEO of F2 Strategy, a technology consultant to wealth management firms, told RIA Intel.

Fritz said he knew from speaking with clients of his consultancy and others that some prospects agree to work with advisors and never actually do. But when he asked wealth managers how many would-be clients were falling through the cracks and why, no one seemed to know the answer.

To determine if it was a problem, Fritz turned to F2 Strategy’s network. The consultant periodically surveys more than 70 executives at some of the largest wealth managers (including RIAs managing $2 billion in assets and the largest bank-affiliated wealth managers with billions of dollars in assets) and publishes the findings. In a March 2022 survey of 31 executives, half of them revealed that, despite their size and resources, they aren’t tracking prospective client attrition.

Prospects tend to fall off during two distinct phases of the onboarding process, so F2 Strategy asked executives about each.

Only 42 percent of wealth managers tracked their non-client conversion ratio, or the number of individuals who received account opening paperwork and did not complete it or become clients. The same percentage of wealth managers said that they tracked their client process abandonment ratio, or how many clients open accounts but do not fund them within 12 months.

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Nearly half, or 48 percent, of wealth managers tracked their client transfer viscosity ratio, or the number of clients who open and fund accounts but with lower than 75 percent of the assets they committed to bring with them.

“We verified that it is actually a problem,” Fritz said. “There is real revenue to be had just tracking it.”

Fritz said that, anecdotally, the median wealth manager is losing out on 5 to 10 percent of the households that otherwise should have become clients (F2 Strategy is working on collecting that data specifically). That could translate into a significant number of new clients at a large, growing firm. At smaller firms, the percentage might translate into fewer households, but they could have an outsized impact. For example, missing out on a couple clients managing $5 million or more would be a considerable loss at an RIA managing $100 million or less.

Fast-moving wealth managers can have clients sign documents and then open and begin funding accounts within three to 10 days. But the same process takes weeks at some other firms, Fritz said. Timeline aside, the process itself has an impact on how successful a firm is at converting a prospect into a client.

For example, a wealth manager sending paper documents for a person to sign is then forced to wait for the client to check their mail, sign where they need to, and return the documents. Digital onboarding can shorten those timelines dramatically. E-mails also get lost in inboxes, but follow-up messages are easier to send.

When a client does sign and return documents, they might also, intentionally or not, drag their feet to fund accounts, potentially leaving an opportunity for them to change their mind.

Michael Thrasher (@Mike_Thrasher) is the editor of RIA Intel and based in New York City.

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