When a client’s portfolio underperformsunexpectedly, the client may feel let down that the advisor didn’t prepare them for this outcome. The client may also want to know why the portfolio was configured in such a way as to deliver this type of result.
Portfolio diversification can sometimes lead to short-term underperformance. Helping clients understand the asset allocation strategy that is in place can help them avoid a sense of betrayal when they encounter a temporary loss.
6.Lack of personalization.
An advisor has systems and processes in place to help run the practice. This makes sense. Even so, clients must feel like they are more than a number in a system. In the YCharts study,75% of respondents who fired an advisor cited a lack of personalization as a reason.
Overreliance on a system in dealing with clients can make them feel that the provided advice is not tailored to their individual needs. Failure to stress the personalized nature of the advice can cause a client to look elsewhere for more curated financial help.
The Cost of Losing a Client
While these and other reasons can cause clients to lose confidence and ultimately move on, sometimes an advisor may be glad to lose certainclients. Perhaps they were not a good fit with the practice anymore, and both sides feel they would be better off ending the relationship.
Losing clients means lost revenue, of course, and now ex-clients likely will not be referring others to the practice. In some cases, clients will notmake a total break, but rather reduce their assets with a firm.
This can be costly in that advisors still need to monitor them while they take up unprofitable practice space.
Retention and Relationship-Building Strategies
There are a number of steps to take to help cement client relationships and reduce client attrition.
- Show clients you care in every way and every setting. Relate to them and their financial situation in the same way as with a family member or a lifelong friend.
- Do the best job possible for each client at all times. Make sure the client understands a new recommendation or any other changes. No recommendation is too small; always ask if clients have any questions, whether by email, over the phone or in person.
- Communicate often and clearly. Don’t assume that a client always understands what is being discussed, even if this is a topic that has been brought up before.
- Anticipate fear when the markets drop, especially if that drop is pronounced. It’s important to understand which clients need their hands held in these situations.
Clients may question a recommended strategy, especially when the markets are down. This is actually good: It provides an opportunity to show them why these recommendations have been made for them. It’s also a good opportunity to get their feedback. If a change is warranted, so be it.
Even with this type of effort, clients may still leave. Reasons might include:
- A change in their situation. Perhaps their income has grown significantly through a major promotion at work and they may feel they need an advisor and firm with different expertise.
- Relocating to another city. Even with Zoom and similar tools, clients may want to work with someone local.
In situations like this and others, the best bet may be to part ways amicably while thanking them for being a client. Assure them that you will cooperate in making the switch and providing any information needed to the new advisor.
Besides being the right thing to do, this helps ensure that if asked they will say good things about their experience.
FAQs
As a financial advisor, it takes hard work to attract clients and even more work to keep them. Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.
Why do clients fire their advisor? ›
As a financial advisor, it takes hard work to attract clients and even more work to keep them. Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.
How many clients should an advisor have? ›
It depends on who you ask but a typical answer is anywhere from 50 to 150 clients per advisor. Having 50 clients could be enough if you're focusing on high-net-worth individuals. Meanwhile, 150 clients are usually considered to be the upper limit of what an advisor can realistically manage.
How often do clients change financial advisors? ›
Clients always have a choice when it comes to whom they work with. This is particularly true in the early stages of the client/advisor relationship: One study indicated that, on average, of those clients who leave to find a new advisor, 20% do so within the first year and 25% leave within the second year.
Why do financial advisors fail? ›
Failure To Be A Value Add
Another reason why many financial advisors fail is that they don't provide value to their clients. Clients want to know that they are investing in something worthwhile, and if they feel like they are wasting their money, they won't bother returning.
How do you terminate an advisor? ›
These contracts generally include a clause about how to formally terminate the advisor-investor relationship. In most cases, you simply have to send a signed letter to your advisor to terminate the contract. In some instances, you may have to pay a termination fee.
What is conflict of interest for advisors? ›
Conflicts of interest generally arise when the financial goals or interests between advisors and clients don't align. In many advisory relationships, financial professionals sit down with clients to identify investment objectives, risk tolerances and time horizons.
What are the 3 key skills required for being advisor for your client? ›
Top Skills Mentioned in Resumes
Communication Skills, Collaboration, and Social Media represent a very decent share of skills found on resumes for Client Advisor with 26.48% of the total.
What do clients want from their advisors? ›
What characteristics do people want from an advisor? These results show that clients value education and certifications, as well as trustworthiness and advisors' ability to engage with and understand clients' goals.
How can I be a better client advisor? ›
Listen to clients
Admittedly, this is obvious, but as an advisor, it's vitally important to truly listen to what your clients are saying. Early meetings with clients should, yes, focus on their long-term goals and answering any questions they may have, but also make it a point to get to know them on a deeper level.
There are Advisors who meet with clients on an Annual basis. There are Advisors who meet with clients on a Weekly basis! There is not a 'Right' answer. There is a clear bell curve with Quarterly Meetings a clear mid-point.
How long does the average client stay with their financial advisor? ›
For instance – did you know that according to a study1 from Etrade Advisor Sales in 2019 – the average percentage of clients that leave during a given year is 20% within a year. And 25% within one-two years. Or - put another way - roughly one-fourth of new clients may leave within the first two years.
How often do clients want to hear from their financial advisor? ›
Every relationship is different, and because financial planning is such a personal issue, there's no one-size-fits-all answer for how often you should talk to your adviser. But financial planner Don Grant says there should be a review at least semi-annually.
What do financial advisors struggle with most? ›
Financial advisors are most concerned about business development. Nearly 80% cite the challenge of finding “ideal” clients (Exhibit 1). While an “ideal” client will vary among financial advisors, sourcing them instead of less preferred clients is a big deal.
What financial advisors don t tell you? ›
10 Things Your Financial Advisor Should Not Tell You
- "I offer a guaranteed rate of return."
- "Performance is the only thing that matters."
- "This investment product is risk-free. ...
- "Don't worry about how you're invested. ...
- "I know my pay structure is confusing; just trust me that it's fair."
According to the U.S. Bureau of Labor Statistics, the median annual wage for personal financial advisors was $94,170 in May 2021. It means half of the financial advisors earned more than that, and half earned less. One in ten earned less than $47,570, while one in ten made more than $208,000.
How do you handle a client firing you? ›
Listen to Their Concerns In a Live Conversation
If your client has decided to fire you, it's important to understand why. Schedule a meeting to discuss their concerns and really listen to what they have to say. Take notes and ask questions to ensure you fully understand their perspective.
When to fire a financial advisor? ›
We've outlined some legitimate concerns that may justify a breakup and some that you may want to re-think:
- Poor Communication. ...
- Lack of Availability. ...
- Bad Financial Advice. ...
- Failure To Listen. ...
- Too Focused on Investments. ...
- Less-Than-Satisfactory Results. ...
- Not Worth the Money.
Research shows that the top reasons people fire their financial advisor are the quality of the advice and services provided, the quality of the relationship and the value of working with that advisor relative to the cost. Many people hire a financial advisor because they want an expert in their corner.
How do you deal with a toxic advisor? ›
If an advisor is treating you badly, don't just tow the line and stick to the chain of command. Instead, go above them. This is what I had to do. I set up meetings with the head of my Department and several different Deans until I was able to get my problem solved.
