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.
What Your Peers Are Reading
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.