To put it bluntly, many consumers trust their advisors with one of the most precious things in their lives’, their retirement. The difference in an advisor that does well for you, and one that doesn’t can be the difference in retiring on time, or being set back 5,10, or even 15 years. In 2013 Financial Advisor magazine surveyed 1400 advisors on why they lost clients. Let’s see if you, the client, fall into any of these situations where an advisor was fired.
The fifth reason, answered by over 23% of advisors, was that the advisor made claims in which they could not deliver. How does this happen? Usually the advisor doesn’t speak in goals, and brings up returns right away, locking themselves into a performance based relationship. An example of this would be “We’re targeting 8% a year for you.” No one should be targeting a specific percent return with your retirement, they should be planning goals and needs, as future performance is not guaranteed. Think about this, the market itself, hits its own average roughly once every quarter century.
The forth reason, that was answered by over 34% of advisors, was poor performance. Clearly, if an advisor is telling you an unachievable return to get your business, and that advisor fails to hit their own benchmark, most likely you will leave that advisor. When advisors don’t educate their client’s on risk vs return, asset allocation, and go based straight to returns, it’s a lose-lose situation. Usually you will ask “Why is my portfolio not beating the market?” or “why are you not hitting the returns we talked about”. Either way, if you were properly educated on what type of portfolio was constructed, this should not come up.
Coming in at number three, with over 44% of advisors saying they lost a client over, was failure to return phone calls promptly. This is just being plain out disrespectful. A client should never have to wait to have their calls returned in an orderly manner. The best advisors, either have multiple ways for client’s to get in touch, have an easy way to have most of their questions answered, or are proactive with their client’s so they don’t have a reason to reach out. Are you being neglected by your current advisor when you reach out to them?
The second reason, which is one of the main reasons why client’s go to a professional, with 51% of all advisor’s saying the lost client’s from, said the advisor failed to understand their goals and objectives. For most advisors, educating your client’s is the top job. With all the different products, accounts, and investment jargon, it’s very easy to get lost in it all. What a good advisor will do, is break it all down for you, in easy to understand language, and from there, will construct a profile of what you want, where you are, and where you need to go to get to your goals. Client’s want their advisors to put their best interests in front of them, and help them get to where they need to. Is your advisor doing this now? Do you know where you want to be in 3 years? 5 years? Maybe these are questions you should ask if they haven’t been answered.
And now, the number one reason advisors said they lost a client, a whopping 72% of them said, they failed to communicate with the client. The best advisors have a clear plan in place and proactively reach out and build lifelong relationships with their clients. Yet nearly 2/3’s of those advisors surveyed said they have lost a client to no communication. If your advisor is not communicating with you, how are they making sure you’re staying on track? How do they know if something has changed? Marriage, children, new jobs? All these things need to be talked about with your advisor. Make sure your advisor knows it’s a two-way street.
So there you have it. The top five reasons advisors lose their clients. Do you think you fall into any of those area’s? Ask yourself, if I am paying for the services of a professional, why am I not getting value for it. At the end of the day, any of these reasons could create a setback in your overall life plan, and set you back years. Make sure you are working with someone that actually tailors their advice to you, doesn’t forget about you, and is proactive in the relationship.