“You’re fired” might be entertaining when you hear Donald Trump yell it at a would-be apprentice, but it makes a lousy show if your client says it to you. In the first of this two-part article, I will spell out the reasons that are most likely to get you fired. In the second part, I’ll provide strategies to help you keep your clients and maybe get some referrals too!
Contrary to conventional advisor beliefs, most clients do not fire their advisors impulsively due to the heat of the moment.
Based on several studies, dozens of presentations to financial advisors and investors, I’ve found two major reasons that explain why clients terminate their advisors: communication issues and performance issues. If you find several behaviors in each category apply to you, don’t be surprised if your client shorts you—you deserve it.
Communication Issues
Communication is the cornerstone of your client relationships, so it shouldn’t be surprising that when clients think your communication is flawed, they are likely to give you papers to transfer your accounts. What is flawed communication? Here are four indicators that add risk to maintaining your client relationship:
Infrequent Communication. How many times a week or month do you speak with your clients? Many advisors operate on a “need to talk” basis which usually is defined as discussing a buy or sell order. However, clients who fire advisors cite "infrequent" communication from their advisor as a relationship breaker. For some, infrequency translates into once a week and for others it's once every few months. In either case, though, the client feels neglected, and that their account is being ignored.
Timing. Most clients have the financial savvy to know that their advisor cannot “time the market,” but it irks them strongly when their advisor’s timing stinks in returning a phone call within a reasonable amount of time. “When I call my advisor when the market opens, I expect a call back in an hour. If I call mid-morning, I want to hear back before lunch, and if I call after lunch, I want to hear back before the closing bell.” For sure advisors are busy, but the bottom line is clients tend to fire advisors who don’t promptly return their calls.
Unmet Expectations. All clients have expectations—beliefs about how their advisors will act and perform during the course of your relationship. When expectations are met or surpassed, client trust and confidence are built with the payoff being that the client wants to continue working with the advisor and might even refer some clients. For the most part, clients are forgiving when an expectation here or there isn’t met, but the one exception seems to be when advisors raise the client’s expectation to an unrealistic ROI level. When the unrealistic expectation is not met, the client experiences more than disappointment; he or she often feels betrayed and angry, and trust in the advisor wanes. Together, these feelings often lead clients to dismiss their advisor.
Failure To “Listen.” When psychotherapy clients feel listened to, it means they believe their therapist recognizes and understands the feelings they put forth. When a patient feels their therapist doesn’t, the patient often terminates therapy.
Similarly, clients also leave their financial advisors for not being listened to, the difference being that financial clients are less concerned with their feelings being “heard.” They use the term to mean that their advisor does not recognize and understand their financial values, and goals. “If my advisor cannot understand my financial objectives, he cannot help me meet them and in fact, may make asset allocations that sabotage my finances” is the way one investor put it. When you don’t understand your client’s financial needs and goals, you can blame yourself for dooming the relationship.
For those of you who commit one of these flaws, you put your client relationships in jeopardy. Two or three, you are adding great risk. If you commit all four, then you don’t have to be a top analyst to expect your client relationship to crash.
If you avoid these flaws, you can consider your client relationships to be on safe ground, the caveat being your ROI to your client can still get you axed.