Sex and money are probably the two most difficult discussion topics for most people-whether they are just getting to know each other or they've had a relationship for some time. Both are personal subjects that, even in the best of times, elicit behavior ranging from extreme discretion to outrageous exaggeration. In reality, despite the humor many people can bring to these important subjects, the chances for dissatisfaction are high when honesty and communication are lacking.

So when a professional relationship is based on the oversight and care of someone's assets, the sensitive and emotional nature of the service must be acknowledged and managed through a variety of market cycles and conditions. When investments aren't performing as the client expected or was led to believe they would, regardless of the root cause, the possibilities for disenchantment are numerous.

Earlier this year, the senior editors of Private Wealth, Hannah Shaw Grove and Russ Alan Prince, reported that clients are likely to blame their advisors when financial markets are unsteady and their portfolios suffer. In March, a whopping 71% of affluent clients they surveyed cited plans to move money away from their primary advisors. In a related study conducted in July, 68% expressed similar plans (see the sidebar for more information on the Grove and Prince studies).

Walk First, Talk Later
You might think that when an investor is dissatisfied or concerned with you or your service they would speak up immediately. Actually, they don't. Investors are like customers of any other service-though some get furious, the overwhelming majority will simply not complain when things aren't right in their estimation.

And like other customers, investors who actually follow through on their threats and leave their advisors will rarely give honest feedback about why they are no longer willing to be clients. Many, if not most, will simply leave. They'll give weak excuses about why they are taking their money someplace else. They'll lie, claiming different priorities, a relocation or a change in their personal status rather than having an awkward confrontation with their advisors that sheds light on the real issue.

This doesn't mean they won't talk. In fact, they'll remember everything bad about the relationship with their advisor and tell all their friends and family to not use this firm. And many will, in fact, exaggerate. They might say, "He never returns telephone calls," which is undoubtedly not true.

The Two Sides Of Misperception
Who's to blame for this sad state of affairs? The answer is complex, and certainly the way much of the financial services industry operates contributes to the reason customers simply leave rather than giving businesses a chance to keep them.

For someone to trust you enough to take care of their money, you need to convince them that their money is safe with you. And that means convincing them that, even if the economy is tanking, their money will be safe in your hands-that, in fact, it will grow. After all, we know that money can be made in both an up or a down market-or at least this is what TV, radio and magazines would have you believe. In reality, however, a lot of investors lose money in a difficult economy. But it looks like the advisors and their companies continue to make their commissions and fees.
And that feels inherently unfair to the investor.

Sometimes the problem is compounded because the person who starts the relationship isn't the person who eventually handles the investment. And customers nurse a feeling of resentment that lots of attention is paid to them in the beginning of the courtship, and then their advisors don't return their calls in a timely manner once their money has been transferred. At least, it often feels that way to the customer.

There's an equally complex point of view from the advisor's side. No one likes to take responsibility for something going wrong. Advisors want to feel like heroes, and a hero doesn't make someone poorer or impede their long-term financial plans. So, understandably, advisors are emotionally torn. They don't really want to talk with their clients when news is bad. The clients are generally fraught with anxiety when they know, say, their once-substantial nest egg is shrinking or their estate plans have been derailed, so they aren't real fun to talk to under these circumstances either. So advisors probably like it when their clients don't call to complain. It's simply easier for everyone.

Unfortunately, the price that is paid for this uneasy dynamic is that the customers are lost and reputations are tarnished. It's important to remember that in spite of how difficult it may be to listen to someone attack you for the diminishing size of their portfolio, it's better that they tell you how they feel. Telling you will always be preferred to having them run about the marketplace telling everybody else when you can't defend yourself against what is happening.

Affluent Investors Suffer A Crisis Of Confidence
Tough markets affect everyone in different ways. Soaring gas prices have prompted more people to abandon their SUVs in favor of more fuel-efficient vehicles. The weak dollar means European vacations are now painfully expensive, especially for families. And shrinking retirement accounts hint at the unpleasant trade-off of either working longer or scaling back your lifestyle.

Earlier this year, Russ Prince and I conducted a series of telephone surveys with affluent investors to get a feel for how the current economic climate is changing their financial plans and goals, if at all. What we learned was eye opening and presents a natural opportunity for advisors to engage with their wealthy clients, whatever mood they're in.

In March we spoke with 406 affluent individuals with investable assets ranging from $500,000 to $7 million. Besides learning that more than 90% have a dismal view of the economy and are skeptical of the short-term prospects for a market correction, we also found that nearly all had lost money since the beginning of the year. Their plans for the future were just as sobering: A large majority plan to take some or all of their assets away from their advisors, find new advisors and warn their family and friends to avoid specific financial professionals and firms (Exhibit 1).

In mid-July we went back to the phones, this time speaking with 498 individuals with $1 million or more in discretionary investable assets. While an equally high percentage of respondents plan to decrease the assets they have with their advisors, many have tempered their emotions. Far fewer plan to switch advisors or go out of their way to criticize the financial professionals with whom they work (Exhibit 2).

-Hannah Shaw Grove

Bad News First, Please
So, what can be done? What advice should financial advisors consider? Let's start from the proposition that you want to retain your clients for many years, and that every few years there will be financial cycles that will put your client relationships in jeopardy. The most successful advisors and financial organizations will believe that more client communication during difficult times is healthy-even if it is uncomfortable.

Let's divert the conversation a bit here. Disappointments, deceptions and doubt are all present from time to time in the best of personal relationships. Couples who work through these problems can end up with stronger connections. Those that don't frequently break up. That's not so different from business relationships. It's not the problems that are the problem. It's how those problems are discussed and handled that determine whether the relationship gets stronger or fractures. Any two individuals who avoid a forthright discussion of the issues between them may eventually find it easier to disband the partnership than move it forward.

We need a different mind-set about complaints and encouraging difficult conversations about money. Seeing a complaint as a gift is a good beginning. After all, expressed complaints mean that the customer is still talking with us. They may actually have some good advice we can use to improve our approach to other investors. And if we handle our clients' concerns well, we have a chance to prove our worth. If advisors get better at how they respond to complaining customers, and if they see complaints as gifts, clearer lines of communication with customers will be opened.

If advisors shift their mind-sets to view complaints as opportunities, they can also more readily learn from difficult situations. Customer complaints continue to be one of the most available-and yet underutilized-sources of consumer and market information. As such, they can become the foundation for an organization's quality and service recovery programs.

A position of openness and calmness will help a great deal when a customer complains. Under the circumstances, it's a good idea to immediately thank the client for speaking up. Generally a polite "thank you" disarms an upset customer, and you're more likely able to have a normal conversation with them. I've consulted with dozens of organizations and thousands of individuals about the "complaint as a gift" concept, and I know for a fact that immediately thanking customers works.

After you have thanked your complaining customers, tell them that you're glad they called because it gives you a chance to go over their account and to evaluate their investments in the context of current market conditions. If you think the ride is going to be turbulent for the next 18 months, it's a good idea to be honest with your client. Find out what you need to do to retain their business. After all, it's their money, and when they are nervous, simply talking them into your point of view may backfire. You may be offering the best advice, but you could end up losing them if you push them into making a move they are hesitant about. That serves no one.

This is a good time to indicate anything else you can do for them. This may mean checking back with them more frequently than you usually do. Keep calling them back until they feel assured you are doing everything you can to help them. The airline industry has something to teach us about handling complaints. Cathay Pacific, the Hong Kong-based air carrier, found that it wasn't the fact that luggage was lost or delayed that determined whether passengers would fly with them again. It was how the incident was handled. When your luggage doesn't arrive with you, it's nice when the person behind the counter is sympathetic and understands the difficulties that delayed or lost luggage can create. It doesn't get your luggage back to you any faster, but it's comforting to have that moment of sympathy. Financial investors also want acknowledgement of their concerns.

Researchers of Swedish banks found that branch managers who used complaint handling as their primary tool for creating long-term customer satisfaction ran the most successful branches. These managers didn't run away from complaints; they listened to their customers and considered feedback as having value.

It's important to remember that if your customers leave you because the market is bad and they put their money in the hands of a competitor, that customer is going to face the same bad market. So, they might as well stay with you. But there's no way your clients will do that if you are avoiding them or are unwilling to engage them-especially in difficult economic times. The market may be bad, but that doesn't mean we have to make the situation worse by also alienating our clients.   

Janelle Barlow, Ph.D. is an authority on business complaints and resolution. Twice awarded the prestigious "International Trainer of the Year" award, she has worked with more than 250,000 people and hundreds of organizations on all continents. She is the author of the best-selling business book, A Complaint Is a Gift: Recovering Customer Loyalty When Things Go Wrong, which has been in print for 12 years and translated into 21 languages. A revised edition was released in October 2008 by Berrett-Koehler Publishers. More information is available at www.tmius.com.