“One of the main reasons we have been your clients for so long and will continue to be is that over the years we have noticed that some of the advice you have given us has cost your firm money. And while you never pointed that out to us, it was clear to us that, when giving us advice, you always placed our interest above yours.”
This assessment was volunteered to us at a recent client meeting when we thanked them for being clients for almost 30 years. One of the more interesting things about this exchange was that I could not recall any of the specifics to which they were alluding. But we do know that a core value of our firm is to “always put the clients’ interests first.” Not only is that our fiduciary obligation—it is embedded in the culture of our firm. And we do not see it as a legal requirement, but a moral responsibility.
That exchange inspired me to reflect on why some advisors keep their clients for years and even decades while others seem to always be striving for prospects to replace clients who fire them. Since we interview many of these ex-clients of other advisors, we have some insight into why people abandon relationships with their advisors that obviously started on a positive note. In spite of the fact that most people strive for long-term relationships with their financial planners, all too often expectations are not met and disappointment results in searches for new advisors. While the following list is certainly not meant to be all-inclusive, it is representative of what many prospects tell us about their former relationships. In our preliminary interview, we always ask what they liked most about their previous advisor and what they did not like. Of course, if there was nothing that troubled them they certainly wouldn’t be sitting in our office. The interesting thing about this list is that it would not take very much to implement strategies that would, most likely, significantly increase client retention.
1. Making claims they can’t keep. Claims such as, “I can consistently give you above-market returns,” or “We have a strategy that provides us with signals of when to buy and sell so that you will probably not be in the market when it loses money.” Promising unrealistic expectations is a sure way of getting fired. We once had a client who interviewed with several firms tell us that the only reason they hired us was because all of the other advisors they interviewed claimed that they could “beat the market,” but we were the only ones honest enough to tell them that it was extremely difficult. They have been clients now for over 20 years.
2. Giving them the impression that new business is more important than serving current clients. Do you treat their concerns as passionately as you did when they were prospects? When they begin to feel that they were treated better before they hired you, you may find them shopping for another advisor.
3. Letting clients do things that may not be in their best interests just because it is expedient. Recently, we told a new client about how we approached the severe market volatility in 2008 and 2009. One of the things we told them was that, for our clients that absolutely needed the recovery when it came, we did everything in our power to avoid them bailing out of the market. While we certainly didn’t know when the recovery would come, we were confident that it would and that it would most likely be significant. He told us that when he called his former advisor to instruct him to sell all equities, rather than being strong and adamant about why this was a poor decision, the advisor simply followed the instructions and sold the equities. As a result, he missed the recovery and told us that one of the primary reasons he was looking for a new planner was that he felt that this advisor “abdicated his responsibility to me.” We always tell prospective clients that, while they may like us more when the markets are doing well, we will be much more valuable when they’re not.
4. Failure to promptly return phone calls. The number of times prospective clients tell us about this, frankly, baffles us. We hear things like, “It’s impossible to get her on the phone”; or, “It takes days to get a returned call.” We have all had experiences with people with whom we do business who are slow to return calls. And it probably bothers us. Obviously, our clients feel the same way when we seem to be ignoring them. Part of our written procedures states, “All calls received before 3:00 p.m. are returned that day. Calls received after 3:00 p.m. are returned by 10:00 a.m. the following day.” If the person called will not be available to return that call, someone in the office must do so within the allotted time frame. For prospective clients who have complained about their advisors’ lack of response, we share this policy with them.
5. Staff members who have the attitude, “That is not my responsibility.” Is there anything more annoying than being transferred from one person to another and not being able to get an appropriate answer? Our procedures also state that a staff member may never say, “That is not my job.” They are trained to transfer the call to someone they know can answer the client’s question.
6. Failure to do comprehensive financial planning. This is one of those areas where communicated expectations are not met with meaningful follow-through. Many of our new clients tell us that their former advisors promised them comprehensive planning, but all that really happened was they completed a risk tolerance questionnaire, and invested their money. No time was spent on estate planning, cash-flow planning, risk management, income tax planning, or any of the other areas that are addressed when comprehensive planning is done. While managing investments is certainly an important part of the planning process, it is not the only one. As a matter of fact, making the proper investment decisions is dependent on knowing all of the other aspects in a client’s life. The fact is that financial life planning with regular updates is one of the most effective client retention tools we have. And, of course, is in the client’s best interest.
7. Not fully understanding clients. A robust discovery process that helps planners understand their clients’ history, values, goals and priorities will help to both cement the client-planner relationship and guide the advice offered. When clients understand that advisors are making recommendations based on a thorough knowledge of the client’s attitudes and desires, the result is a satisfied client. And, I might add, one much less likely to fire his advisor.
8. Placing a priority on the investment portfolio over the client’s life. Of course, this is what financial life planning is all about. Too many of us forget that investing is a means to an end and not the end itself. When clients and planners understand that the investment portfolio is simply a vehicle to help them achieve their life goals, temporary fluctuations in the market are less likely to negatively affect clients if put in their proper perspective. By simply talking about goals and life priorities and not the short-term investment results, clients can be reassured that the process of financial life planning will always place the emphasis where it is most important—on their lives.
While most clients don’t mention the word “fiduciary,” there is not one among them who does not expect their advisors to put their interests first. As previously stated, this list is not meant to be all-inclusive. But putting the clients’ interests first involves not only how one implements investment recommendations, but influences many other areas in the client-planner relationship. Developing a culture that passionately thinks of the client first will most likely avoid the potential problems listed above, and the result is likely to be increased client retention.
Roy Diliberto is the chairman and founder of RTD Financial Advisors Inc. in Philadelphia.