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Financial Planning > Behavioral Finance

Thinking About Starting a Client Advisory Council? Don’t.

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I recently received an email asking for advice about setting up client “advisory” councils to help owner/advisors better understand the needs of their clients. Here’s the short answer: client councils don’t work. Sure, they seem like a good idea; key clients sitting around talking, bonding with the senior advisors, and sharing their experience with the firm, and insights into what the firm does well and what it could do better. What could go wrong? Plenty. In my experience, client advisory councils are way more trouble than they are worth. Here’s why.

First, lets’ start with the honesty issue. Most clients aren’t, by nature, dishonest, of course, but it’s human nature to avoid being critical. When you get them into a group, for instance, and other folks are talking about how much they “love” what the firm is doing, many people are reluctant to bring up things they don’t like. In fact, we’ve had clients on advisory boards continually say great things and then just slam the firm in our client surveys. Unfortunately, this is far from an unusual occurrence.

Then there’s the problem of getting helpful suggestions. Most clients don’t know what they need; that’s why they hire an advisor to tell them. As most advisors know, clients are constantly bombarded with bad ideas in the media and from friends and family—ideas that their advisors often have to spend considerable time convincing them to forget. A client council just creates one more forum for those ideas to get an audience. 

What’s more, typically, clients don’t have a realistic perspective of what tools, products and services are out there to help them with their needs. One of the primary jobs of an advisor is to sort through all the financial services noise and recommend solutions and strategies that make sense. At best, a council could be a sounding board for adding some new services or strategies to the firm, but as they are almost always client-specific, it’s almost always better to do this on a client-by-client basis, which can include a complete explanation of why a new idea is a good idea for each particular client.

Finally, there’s the unavoidable issue of leaving some clients off the advisory council. While creating such a group can strengthen ties to key clients, it also can send a negative message to those who are not selected: who wants to hear that he or she isn’t a “key” client? As far as I can tell, there’s no good way to word it so as to avoid this underlying implication. Even rotating who’s on the council really doesn’t solve the problem. 

On balance, advisory councils usually create more problems than they solve. If you’re determined to create one, I’d recommend including as many clients who own their own businesses as possible: because they face many of the same challenges that you do, they have a better perspective, ask more questions about the realities of available resources, and understand employee issues. 

However, most of them still don’t won’t financial services backgrounds, and I’d predict that sooner or later, you’ll regret starting the council. 


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