Clients leave financial advisors for countless reasons, but ultimately these reasons can be grouped into a few major categories.
By understanding these categories and evaluating your procedures, you can minimize the chances that you’ll lose clients due to dissatisfaction.
Studies show the following are six of the most common reasons clients leave their financial advisor.
Failure to regularly communicate is the No. 1 reason clients leave their advisor. Keep in mind, not all clients prefer the same types of communication. Some may prefer a traditional face-to-face meeting. While others may be happy with a phone call, an email or a newsletter. Regardless of how your clients prefer to be contacted, you should frequently communicate with them.
Poor investment performance
Consistent poor performance is a legitimate concern. A long-term losing track record likely indicates poorly constructed portfolios or undisciplined investment strategies. Advisors who stick to tried-and-true, long-term investment strategies can generally avoid this problem. For example, creating a diversified portfolio, rebalancing to control risk, minimizing cost, managing taxes and maintaining discipline are all prudent investment strategies.
Failure to understand the client's risk tolerance
When it comes to risk, you need to be on the same page as your clients. The best advisors are listeners who can gauge their client’s tolerance for risk by asking questions that help them understand a client’s personality. Start by asking clients how they would define risk because it may differ from your definition. Investors expect advisors to have answers when the market takes a downturn. If you have properly communicated the investor’s portfolio risk when the investments were made, you can remind the client why certain investment decisions were made.
Failure to provide multiple financial services
Clients don’t want to waste time and money on inexperience. They expect you to be able to speak to a wide range of financial topics, such as financial planning, tax and estate planning, insurance, philanthropy and succession planning. Clients lead complex lives and often need hands-on managing and planning. If you don’t broaden your services beyond money management, clients will look elsewhere.
Failure to promptly return phone calls
Want to keep your clients happy? Promptly return their calls. Most clients make reasonable requests and deserve a timely reply. You should set a standard and strive to stick to it.
The bottom line
There are many reasons why clients leave advisors, but if you follow the rules, get to know your clients and take the time to communicate regularly and clearly, you can minimize the chances of that happening. Sometimes it’s best for a client and advisor to part ways. But many of these breakups can be headed off with preparation and common sense.
For more ways to ensure your clients remain satisfied with you and your practice, contact Iron Point today for a no-obligation coaching call.