Nearly three-fourths of clients who fire their advisors leave the professional advice arena entirely, new research from Morningstar found.
Among 185 investors surveyed who had fired an advisor, 73% left the financial planning system and 27% hired a new advisor, according to the report, released Thursday.
Clients with greater investable assets were more likely to hire a new advisor and were more inclined to fire their advisor because they were dissatisfied with the quality of communication. Those who left altogether were more likely to fire their advisor because of their comfort in handling finances, although this was rarely the sole reason, Morningstar reported.
The other reasons cited for firing advisors are quality of advice, cost of services, relationship quality and returns, with advice quality the top reason for both groups, Morningstar said.
"Advisors should remember that retaining clients hinges on their ability to meet client expectations: receiving advice that is worth the cost because it comes from a trusted source and reflects their needs," the report said.
Overall, "the two groups often had similar reasons for firing their advisors," it noted. The only different reasons were communications quality for those who switched and comfort handling finances for clients who dropped advisory services.
And while those who didn't hire a new advisor may feel confident in managing their finances, only 13% fired their advisor for that reason alone, Morningstar said. This indicates that most left over poor experiences, according to the research firm.
Communication and relationships dynamics are key, the firm suggests.
"Dissatisfaction with communication and relationship quality, alongside advice, consistently ranks among the top reasons clients leave, underscoring the importance of trust and engagement in retention," Morningstar said in a release.
So-called switchers can be attractive prospective clients, Morningstar noted. While their firing decisions are helpful for understanding retention, switchers tend to hire for different reasons than they fired.
"Therefore, advisors cannot assume that fixating on their past frustrations will win them over," although they're looking to improve on past experiences, Morningstar said.
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