Vacation request

Advisors lose clients all the time.  It’s an unpleasant truth. McKinsey produced a report, “Stay or Stray,” examining retention in the financial services industry. Figures from 2013 show about 10% of households leave.  Yet when a client leaves, it often comes as a great surprise.

It makes sense that the logic behind attracting clients often uses the same rationale that motivates the client to leave their current advisor. When a client leaves, we often make excuses.

1. I’ve never lost a good client. Some clients say: “See ya” and suddenly pull out. You get the transfer notification. Others gradually move their business. They aren’t following your advice and making new investments. The good client became inactive. Their revenue declined. When they finally left completely, the advisor looked at the lost revenue, realized it was a small piece of the total picture and rationalized “They weren’t a good client anyway.”

Lesson:  They were a good client before they became an inactive client.

2. My clients know what I do for them. The market rises. You pay lots of attention to your client’s account. You are doing a great job in their eyes. The market falls. You are paying lots of attention. You know you own good investments. Sitting tight is the right strategy. Your client thinks you are doing a terrible job. You worked equally as hard in each scenario.

Lesson:  If your client doesn’t know your thought processes concerning their investments, they assume you are doing nothing. You need to have these conversations.

3. They would tell me if they were unhappy.  Most people avoid confrontation. They silently build up pressure. They are also influenced by outside factors. Their spouse might say: “What does (your name) do for us, anyway?” Meanwhile, some advisors think “No news is good news.”  They are surprised when the account transfers out. The last words in the conversation are: “Why didn’t you tell me?”

Lesson: Like marriage, client-advisor relationships require communication. Sometimes you need to draw them out: “There’s something on your mind…”  Let them know if something upsets them, you want to know about it.

4. They trust me. This implies they will go along with something they don’t understand. You are leaning on the goodwill you’ve built up over time. When doing interviews for my book “Captivating the Wealthy Investor,” a retired executive explained “Trust is earned incrementally.  Trust can vanish instantly.”

Lesson: Clients need to understand the logic behind your thinking. If someone attempts to lure them away, they know the reasons for your recommendations.

5. They understand what I’m saying. We all use jargon. Professionals in the industry understand concepts. Sometimes we assume we are talking with another professional, yet our client hasn’t a clue what we are talking about. In the fixed income (bond) world, “average life” is one of those confusing expressions. They feel they are in over their head. Money is on the line.  They leave.

Lesson: Start by apologizing because they probably already understand these terms, then explain them as simply as possible. They will probably be grateful you did.

6. They had unrealistic expectations! Doesn’t everyone? We want to live happily ever after.  We want all the lights on the street to turn green at the same time. We want to make money without taking any risks. Life isn’t like that.

Lesson: Those expectations weren’t unrealistic from the client’s point of view.  Most clients will buy into logic, but you need to do some level setting early on and along the way.  When the market rises for a few months, they might assume this is the new normal.  It moves in cycles.  Equities might be a top performing asset over long periods, but they don’t go in a straight line.

7. They know I’m thinking about them. It’s a favorite excuse for why you don’t call them. Ever send a birthday gift to a niece or nephew? Do you get annoyed when they don’t write/text/call/email a thank you? Would you accept “You know I’m grateful, so why do I need to tell you?” Of course not.

Lesson: You need to keep in touch, even when there isn’t any news. Here’s an unexpected upside: “I’m glad you called. I was just thinking about you… I just came into some money…”

8. They know I can’t predict what the stock market will do. Many people think “It was so obvious in hindsight…” Someone competing for their account might explain how they saw the move coming and told their clients. This implied you either didn’t see it or told only other clients. Unfortunately, “The market took us all by surprise” sounds so lame.

Lesson: You might make the case that earnings drive the stock market, yet world events can move it suddenly. You want to be a voice of reason, explaining the fundamentals for your recommendations are still intact. This should be done dynamically, not after the fact.

9. There’s nothing you can do. When the client leaves, you assume their mind is made up.  Rock solid. They aren’t changing their mind. Yet, when you bring a new client on board and they transfer in assets, you warn them their current advisor will be on the phone immediately.  Seems like there’s a double standard.

Lesson: You don’t want to get into a fight with your client. Ideally you can see them face to face.  You must respect their reasons for leaving, although you make an effort to address the issues.  It’s important to keep the door open, because the grass may not be greener across the street.  

10. They’ll come back. “Your ex wants you back.” It’s another fantasy. Even if they realized they made a mistake, pride gets in the way.

Lesson: Keep the door open. Call after a few months. “Has everything worked out as you hoped? You were an important client to me. I want to be sure you are all right. Meet them halfway.”

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Bryce Sanders

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,” can be found on Amazon.