Every advisor loses clients at some point in their career. It happens in all businesses and organizations. When we lived in Brooklyn, we belonged to a private club. I served on the board. The membership was older and our renewal rate was declining. One of my fellow board members addressed this issue by saying: “We are losing members to Florida and the cemetery.” Advisors face the same problem. Why do clients leave?
1. Lack of communication. This has traditionally been the #1 reason. They do not feel anyone is paying attention. They feel ignored. Perhaps their phone calls don’t get returned. In volatile markets, they think their advisor is focusing on other, “more important” clients.
Playing Defense: Use a good CRM system and call clients on a regular basis. On each call, remind them when you had your last call.
Playing Offense: Ask that friend or prospect: “When was the last time you heard from your advisor?”
2. They are moving out of state. This ties into the “losing members to Florida” dilemma our club faced. Unlike a brick-and-mortar club with a bar and restaurant, you can maintain a long-distance relationship. Do they know that? They might prefer a face-to-face relationship.
Playing Defense: Congratulations on your retirement and move to Florida. We have worked together for 15 years, and we can still continue, if you like. I am licensed in Florida and have several clients who made a similar move.
Playing Offense: I hear your advisor is moving to another state. If you would prefer to continue having a face-to-face relationship where you can come into the office, I would be glad to talk with you in greater detail.
3. The firm has gotten bad press. Exxon faced this problem after the Valdez oil spill in 1989. The public was angry at Exxon and some people stopped buying gas at Exxon stations. You have seen plenty of articles when advisors have behaved badly and their firm has been hit with a huge fine.
Playing Defense: The reputation of the firm can be a help or a hinderance in different situations. This is the time you focus on the local connection. The problem occurred in a different division, far away. We are your local office.
Playing Offense: If someone else’s client expresses concern, you explain your firm has not faced that problem. You have safeguards in place. Back up what you say with facts.
4. The client is following their previous advisor. This is the situation where the client was connected to a previous advisor, who went to another firm. The client is following the advisor. You were reassigned the account.
Playing Defense: There is a “Golden Rule” line of thinking here: You want to treat the situation gently in the hope others would do the same if you ever moved. Assuming you want to retain the client, you can respectfully ask if they meet with you in person. You make the case for staying.
Playing Offense: If you are at a (third) firm and your friend just broke this news, you make the case you are a known quantity and would be happy to work with them. They can evaluate the old/advisor/new firm option along with the new advisor/old firm option, but you would like to be considered the third alternative.
5. The client has been reassigned. This client belonged to another advisor. They retired, left the business or joined another firm. You are a new face and you do not have any connection with them.
Playing Defense: You want to keep the account. Meet in person. Get to know them. Establish a connection. Sell the firm.
Playing Offense: Similar to the above situation, you want to present your friend with the “third alternative.” They do not know the new advisor. They know you on a social level.
6. The pricing model has changed. The financial services industry has been pretty competitive on price for years, but asset-based pricing moved the industry away from pay by the trade commissions. The “trade for free” case made by online brokers makes justifying fees tougher.
Playing Defense: If your client is unhappy, have you addressed the benefits the client will be gaining? Is this a “pay as you go” plan compared to upfront charges or surrender fees? Have you talked about transparency.
Playing Offense: If a friend is dissatisfied with these changes, how were they paying previously? Does your firm have a comparable pricing model?
7. The client is being solicited to move upmarket. HNW and UHNW are both overused expressions, but who would not want to be grouped into those categories. A competitor might be soliciting your client to trade up to a more personalized, boutique level of service. In the early 1980s, Sears acquired the brokerage firm Dean Witter. The joke was “stocks and socks.” Do you want to buy your stocks at the same place you buy your socks?
Playing Defense: Your firm might offer tiers of service too. Consider your own client base. Do you have clients larger than the one who is considering moving? Then you work with the HNW and UHNW segment too.
Playing Offense: In this case, you are the person making the case to move from a firm serving the mass market to a specialized firm better able to meet the needs of HNW investors.
8. The client is told your firm doesn’t want smaller accounts anymore. This is the opposite of the previous example. Someone might be telling your client your firm has set a high threshold for minimum account size and they will be redirected to a customer service area. They are trying to scare them.
Playing Defense: If they are your client, remind them you choose with whom you do business. Explain householding. Explain how the firm’s rules work.
Playing Offense: You are the person explaining their account may no longer be welcome, or they will no longer have a local advisor. You explain how your firm focuses on a different market segment.
9. There was a problem, and the ball was dropped. This is a logical complaint. Something was not filed on time. They missed a deadline. Maybe an error was made in their account. Perhaps a phone message was not delivered. The problem cost the client in some way.
Playing Defense: Own the problem. The buck stops here. What steps have you taken to see the problem (hopefully) never happens again? Meet face to face and ask them how you can move forward together.
Playing Offense: Listen to your prospect’s tale of woe. Make the case why this would (probably) not happen at your firm.
10. The client is concerned about succession planning. The client might be loyal to you, but you are approaching retirement. They expect to be working many more years. They do not want to face reassignment, so they have lined up your successor elsewhere. They are prepared to move before you retire.
Playing Defense: Have a succession plan in place. Do you have a team? Have you brought the next generation into the business? Include them in client meetings.
Playing Offense: Establish yourself as the alternative. Explain how you have addressed this at your firm.
11. The client needs more specialized advice. The client feels they have outgrown their advisor. They have developed specialized needs, especially if they own a growing business. They have been solicited by an advisor focusing on their niche or a firm with a depth of specialist resources.
Playing Defense: Make the case you are more than a one-person operation. Do you have specialist resources? Talk about them.
Playing Offense: If you saw the need and are making the approach, explain why your firm is an ideal fit for the prospect’s needs.
12. Clients die. This eventually happens to us all. In this case, the heirs inherit, but they have their own advisory relationship else, invest on their own or need the money.
Playing Defense: You want to meet the heirs and develop a relationship while your client is alive and can act as your champion. There are often accounts bearing their names.
Playing Offense: If your friend is inheriting, you might make the case you know them better than their parent’s advisor.
There are many reasons clients leave advisors. These are a few of the major reasons.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book Captivating the Wealthy Investor is available on Amazon.