16 Assumptions That Cause Advisors to Lose Clients

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1. I am top of mind with my clients.

This might have been true years ago, when clients traded stocks frequently. It was true when interest rates were high, clients had CDs maturing every six months and municipal bonds had double-digit interest rates.

Reality: Today, the fixed income market may be a lot calmer. Clients ladder shorter-term CDs. With managed money and CD laddering, clients might feel their investments are on automatic pilot. You need to keep in frequent touch to keep your name in front of them.

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2. My client is not looking for freebies.

It is logical to feel you have a business relationship with your client. You provide a professional service. They pay a fee for that service. Airlines provide a service too. Ditto hotels. They both have loyalty programs. Doing business earns points, convertible into free flights or free hotel stays. Clients like freebies.

Reality: Clients like to be taken out to lunch every so often. They like invitations to client recognition events.

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3. My client does not need me to tell them they are important.

You might feel that thanking people is like blowing smoke. You assume people think this is superficial praise. When people are paying, they like appreciation.

Reality: Everyone wants to feel they are an important client. Frequent contact, the more personal the better, delivers this message. Calling them with news about a specific stock they own lets them know you are aware they own it. They want to hear: “You are an important client.”

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4. My client isn’t concerned about pricing.

Today, fees are built into separately managed accounts. The same goes for asset-based pricing. The fees are transparent, but they aren’t “in your face” like they were in the transactional days when trade confirmations arrived by mail. They might have opted for a paperless relationship where almost all correspondence is online.

Reality: If your client doesn’t know the total dollar cost of the relationship, their accountant tells them. If there isn’t an accountant in the picture, a competitor is telling them. A well-meaning friend may say: “I trade for free. Why are you still paying a broker?” This also becomes an issue when the market declines month after month.

Fees should be addressed when you do periodic reviews. If it’s a sore subject, this gives you advance warning.

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5. My client lives in a bubble.

They are your client, and you are their advisor. We believe there is a “moat” around longstanding relationships. Today, clients may have multiple relationships, especially if they do some stock trading online.

Reality: Your best client is someone else’s best prospect. Enough said. They need attention.

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6. I’ve never lost a good client.

All advisors have a range of clients across the revenue spectrum. You know your top clients by name. You can confidently say you have never lost one of them.

Reality: Clients usually don’t just leave. They hollow out the relationship. A good example is when proprietary products that aren’t easily transferred are involved in the relationship. The good client gradually does less and less business. When they eventually stop, sell or transfer the last remaining assets, the advisor categorizes the departure as the loss of a “small client.” They were once a big client. Could the issue have been addressed earlier?

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7. People know what I do for them.

You are a good advisor. You stay on top of your client’s holdings. This isn’t as difficult as it sounds because you have a group of favorite money managers, mutual funds and ETFs held by many clients. You pay just as much attention during down markets as during up markets. Sometimes, the best advice is to sit tight.

Reality: If you do not call clients and say “I am on top of this. We need to sit tight,” they may assume the opposite. They may think you are ignoring their account. Meanwhile, a competitor is asking: “when was the last time you heard from your advisor?”

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8. If they were unhappy, they would tell me.

You know how the corporate world works. If managers get performance reviews, they see the writing on the wall. If people on the sales side underperform, they are put on probation. Clients do not see it that way.

Reality: Clients vote with their feet. Generally speaking, people avoid confrontation. They do not want to call and explain their reasons for leaving. They assume it will be a difficult conversation involving raised voices. Advisors need to look for signs of dissatisfaction, like reluctance to follow advice. Not getting callbacks or answers to emails and texts is another warning sign.

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9. They trust me.

Trust is built slowly over time. You have earned it. It works best when you always explain the rationale behind your recommendations. The expression: “Don’t you trust me” sets off alarm bells.

Reality: Trust takes time to build, yet it can vanish in a short period of time. The client’s trust must be strong enough to defend against outside influences. It is easy for a competitor to second-guess your advice after the fact. The client needs to understand the rationale behind your recommendations. Hopefully they can articulate it when you aren’t present.

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10. They understand what I am talking about.

Advisors often use jargon. It’s how professionals talk. When you hear an analyst speak in an in-house firm presentation, the speaker assumes a level of fluency among the advisor audience. Sometimes advisors use the same terms with clients.

Reality: Most people will not admit they do not understand what you are talking about. This sometimes means they will not follow your advice or only do so reluctantly. A good strategy is to compliment them by saying you assume they understand the concept, but will be putting it into simpler terms, just in case.

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11. They have unrealistic expectations.

From the advisor’s point of view, a person wanting a fixed income interest rate two points above the market level is unrealistic. The client might have heard about something from their barber. They might assume you didn’t tell them because it’s an idea you only share with your best clients.

Reality: Your client does not see this as unrealistic. If the example in question involves fixed income, they need to understand the risk associated with the investment. That rate might be available, but the bonds might be rated as junk bonds, not investment grade. “Oh, I didn’t know that” might be their response.

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12. They know I am thinking about them.

You might pay attention to all your clients’ portfolios. Technology makes this possible. If you do not let your client know, they may conclude they aren’t getting any attention.

An established advisor might tell the story of adding a new client because that person bought a stock at $2, it rose to $20, then declined back to $2 over time. They never heard from the advisor who suggested it.

Reality: Stevie Wonder performed the song “I Just Called to Say I Love You” in 1984. The sentiment still holds today, especially with clients when their money is involved.

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13. They understand I cannot predict the market.

The stock market has had a historical rate of return of around 10%, but it’s been a wild ride decade in and decade out. Volatility is here to stay. TV news makes people panicky. After the fact, some people think (in hindsight) what happened was obvious. Why didn’t their advisor forewarn them?

Reality: Some clients assume market timing is what advisors should be doing. You can show it doesn’t work consistently. You can also show what missing the first couple of days of bottoming out can cost a client. You can make the case for owning good stocks and thinking long term.

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14. There is nothing you can do.

This is the fatalistic approach. That client was going to leave, regardless. The best course of action is to accept it and move forward.

Reality: You can look for the warning signs. Changes in receptivity to client contact is one example. So is not following advice. There are other signs too. Before the client leaves, try scheduling a meal with all parties present. Listen to their concerns. Ask “What can we do to move forward?”

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15. My client wants me to slip away into a well-deserved retirement.

This assumption can come about when clients become close friends. There might be a 20-year age difference. Yes, they might agree you deserve a comfortable retirement, but their accounts will still need attention. Who will be around to advise them?

Reality: If they assume you are close to retirement, they might have lined up your replacement! They might make the move before you retire! They need to know whether you intend to keep working long past your expected retirement date or you have a succession plan in place.

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16. They’ll come back.

Advisors sometimes mistakenly conclude their client left because they thought they could do better with another advisor, but (since you are the best) they will realize the error of their ways. You think of the Surface song “When Your 'Ex' Wants You Back.”

Reality: There is some arrogance here, obviously. Even if it were true, most people are reluctant to admit they made a mistake.

After a decent interval, a New York advisor would call clients who departed and ask them if everything worked out the way they hoped. The advisor would explain they were an important client, but they understood the client had their reasons for leaving. This is a good way to meet them halfway.

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1. I am top of mind with my clients.

2. My client is not looking for freebies.

3. My client does not need me to tell them they are important.

4. My client isn’t concerned about pricing.

5. My client lives in a bubble.

6. I’ve never lost a good client.

7. People know what I do for them.

8. If they were unhappy, they would tell me.

9. They trust me.

10. They understand what I am talking about.

11. They have unrealistic expectations.

12. They know I am thinking about them.

13. They understand I cannot predict the market.

14. There is nothing you can do.

15. My client wants me to slip away into a well-deserved retirement.

16. They’ll come back.

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16 Assumptions That Cause Advisors to Lose Clients

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More on this topic

1. I am top of mind with my clients.

2. My client is not looking for freebies.

3. My client does not need me to tell them they are important.

4. My client isn’t concerned about pricing.

5. My client lives in a bubble.

6. I’ve never lost a good client.

7. People know what I do for them.

8. If they were unhappy, they would tell me.

9. They trust me.

10. They understand what I am talking about.

11. They have unrealistic expectations.

12. They know I am thinking about them.

13. They understand I cannot predict the market.

14. There is nothing you can do.

15. My client wants me to slip away into a well-deserved retirement.

16. They’ll come back.

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