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Turnover is a problem in many industries. From the employer side, it has been said loyalty to the company is no longer considered an attribute. Companies lay off employees when they need to reduce expenses. From the client or customer side, shopping online and looking for the cheapest price has weakened the bonds of client loyalty. If you are in the financial services industry, you might wonder why clients leave, often without advance warning.
Accountants might not have this problem. Continuity is a great contributor to a sticky relationship. The fear of getting audited by the IRS for something you claimed two years ago is a great motivator for sticking with the guy who prepared your taxes two years ago.
Financial advisors and other financial professionals are at greater risk of losing clients. What might the reasons be?
1. Investing is easy. After many years of an extended bull market, some investors think “I can do this” and decide to embrace online trading and leave their advisor. They might enjoy day trading. They might forget the government is their silent partner, especially when they have short term capital gains.
Strategy: Explain why investing isn’t easy. How are ways investors can get themselves into trouble? Buying stocks when you need the money to pay a big bill next month is not a good idea. Neither is buying a stock if you do not understand how the company makes money. Does your firm offer self-directed online trading? Even if they leave, try to keep the door open.
2. Lack of communication. This is an enduring complaint. “My broker never calls.” This can sometimes be “My broker only calls when she wants me to buy something.”
Strategy: Clients should feel you are emotionally invested in their success. They should have a schedule of review meetings. They should be made to feel important. Invite them to client events.
3. I am just another number. This can be similar to the above example with a variation. You give great service and follow up on client problems immediately, if the client calls you. The client feels the phone only works in one direction. Yours is incapable of making outgoing calls.
Strategy: If clients wonder “What am I paying for” you need to deliver value. This includes reviews, introducing them to new products and financial education. Make them feel special.
4. They are solicited by another advisor. Like in dating, the years before marriage can be more exciting than the later years after marriage. You and your client get into a comfortable routine. Now someone arrives and shakes things up.
Strategy: Do not let them feel they are taken for granted. Assume another financial professional will ask “When was the last time you heard from your advisor?” Anticipate this by starting each review or conversation with “When we spoke at out last review meeting in January…”
5. They feel changing firms is trading up. It is easy to see a pecking order in terms of firm prestige. Private bankers might be at the top. That speaks to having lots of wealth. Different firm names trigger different levels of respect. Someone might say “Your current firm is for the little guy. You deserve better…”
Strategy: Your firm likely has tiers of service. What is your range? Does the client fit into that bracket? Does your firm manage pension or endowment assets? There may be a quirk in the client confidentiality rules that makes that public information. Find out. If that is the case, “name drop” within the rules.
6. A family relative has entered the business. Their son-in-law is now a financial advisor. As a show of solidarity they need to open an account. They are leaving you.
Action: This is awkward because you make the case family members should do business with you. You might start by mentioning it is OPK to have more than one financial advisor. “How many doctors do you have?” You might mention confidentiality: “How much do you want your son-in-law to know about your personal finances?”
7. They are dissatisfied with their investment performance. They might feel they are losing money or would have done better if they invested in other things. They blame you. Perhaps they lost money because the stock market has been going down.
Action: Your client needs to see the whole picture on a continuous basis. This means periodic portfolio reviews. They might be losing money, but if they have lost less than the overall marked (thanks to asset allocation) that is better news. Their overall portfolio might not have had the positive return of a 100% stock portfolio like an index, but the equity component might have done better that the overall portfolio. You need an apples to apples comparison.
8. They have lost interest in the stock market. This could be for a variety of reasons. They see investing as an online video game. They found a new hobby. The market is going sideways.
Action: They need to be reminded of the high purpose of investing. Do they want to achieve financial independence? Get to a point when work becomes a choice, not a requirement? Provide for a comfortable retirement? Leave a legacy for their children? They need to be reminded of the reasons why they invest.
Advisors need to be perceptive. They need to recognize the signs of dissatisfaction or boredom and step in to address them. Get your client excited again!