“Call Me, Maybe?”: Why Clients Leave Their Financial Advisors

This post was authored by Khalid Usmani and originally appeared here on GuideVine.

Given the high levels of market volatility, most financial advisors are getting more calls from their clients on how their investments are performing. But if you are the one receiving the calls, and not the one making them, then you are already behind. The best advisors follow a well-defined communication strategy with clients and stay ahead of the story.

History Is The Best Teacher

Following the initial surge of client departures in 2008, one out of four high net worth clients pulled their assets from their existing financial advisor and another third did so in the following two years. What was driving this behavior? A major reason why clients left their advisors then, and continue to do so now, is poor communication. While investment performance is always important, it isn’t the only thing clients care about. The Oechsli report, “The New World Adviser,” [note: email registration required] found that clients with $250 thousand to $10 million in investments were often more concerned about clear, timely communication and quick problem resolution than about investment performance.

Get Ahead of The Story

You should always be communicating with your clients – good times or bad. Many financial advisors make the mistake of avoiding clients during the challenging times, but sticking your head in the sand won’t make things better. Aside from sending information on how your firm is handling the market volatility, as an advisor, being responsive to any questions is critical. Nearly two-thirds of high net worth clients surveyed indicated they would leave an advisor who didn’t return their call in a timely manner. That shouldn’t surprise anyone.

Ad-hoc Messaging vs. A Defined Communications Strategy

For financial advisors, effective client communication is as much about using the right communication channels as it is anything else. If you don’t have a well-defined client communications strategy in place you are increasing the risk of client dissatisfaction. Ad-hoc communications can easily fall short or even through the cracks. Communications guided by a deliberate strategy, rather than by circumstances, are much more likely to produce the desired results. Here are five critical elements around which to create your strategy:

1. Communicate through multiple channels with your clients. With communication, more is better – not necessarily in terms of volume, but in terms of effectively connecting with your clients through the best channel at the right time.
2. Ask your clients about their communication preferences. This should be done at the outset, in person. If not, you should conduct a detailed survey asking your clients how and when they would like to receive information – offering a full range of options.
3. Segment your client base by service level. Your CRM system should allow you to add profile markers indicating the type, timing frequency and channel preference for communications. Your CRM system should also be able to automate the workflow of client communications.
4. Focus on education. Clients want to feel smart about their finances and investments. Offering opportunities to gain knowledge through an e-newsletter, social media postings, a blog, or a webcast is a form of communication that clients appreciate. It also creates more opportunity for client interaction. If you’ve segmented your client base, you can target them with more relevant information.
5. Create and communicate service standards in a written agreement. Much of the dissatisfaction with client communications comes from not knowing what to expect. A written agreement will set the expectations for response times and contact frequency.

Finally, there is no substitute for personalized communication. This is a critical part of any advisor-client relationship. Depending on your client’s communication preference (e.g., email, phone, social media), sending them a quick, individual message can build a stronger relationship as well as provide you an easy way to address any concerns. The cumulative effect of consistent, meaningful contact with your clients creates a layer of security making them feel appreciated and that you are looking out for their interests, good times and bad.