Financial Advisors Should
Avoid These Common Mistakes

Most financial advisors believe a client leaves them because of how their portfolio is performing. In fact, the majority of financial advisors’ client relationships are severed due to a customer service matter. The Spectrum Group conducted a survey and found the four main reasons investors worth between $1 million and $5 million ended their financial advisor relationship to be the advisor did not:

  • eturn their phone calls,
  • Reach out to them proactively,
  • Provide new ideas, and/or
  • Respond to their email.

Studies have found the two-year mark to be when most clients dissatisfied with their financial advisor will end the relationship.

So what can financial advisors do to avoid disappointing their clients and then losing those clients? Besides practicing good client service by returning calls and emails in a timely manner, and demonstrating initiative and a commitment to a client’s best interest by offering new strategies and ideas, they can avoid making common assumptions that can just as easily derail a client relationship.

Manage Client Expectations

While they may be managing their clients’ investments, financial advisors must never forget to manage their clients’ expectations. This requires a concerted effort to educate clients, communicate with them regularly and not assume that they are financially literate. Even the most educated individuals may not have mastered financial matters. It’s always better to overeducate a client, rather than leave them misinformed or completely confused. Avoid using financial and investment jargon when discussing a client’s portfolio. Instead, keep the discussion in layman’s terms; simple and straightforward.

Don’t assume that your clients’ needs haven’t changed from year-to-year. In addition to the initial, comprehensive discovery to assess a client’s financial goals, risk tolerance, family dynamics, etc., make it an annual policy to review potential changes in the client’s financial goals, life and family situation and adjust their financial and investment plan accordingly. Through regular communications on a quarterly basis, at minimum, financial advisors can stay abreast of likely changes and life events that may trigger a need to adjust their plan.

Robust Reporting and Conscious Listening

Clients value financial advisors that present thorough reports that track the progress of their investments against their goals. Present these reports in person, whenever possible. While automation and technology have their place, there is no substitute for an in-person meeting through which advisors can strengthen their client bond, further build trust and advance the relationship. During these meetings it’s important not just to report, but also to raise questions to make sure the client understands the presentation. Additionally, listen carefully to the client’s questions and be thoughtful on how you respond. Money is a highly charged matter to most people and preserving and building their assets can be a topic wrought with emotion. Make sure you are really hearing what the client is conveying in the questions they ask and the statements they make.

Strive to Gain New Clients

Every satisfied client can be a path to new clients if new relationships are cultivated properly. While client cultivation events are fine, they are not enough. It’s important that your clients know that you are looking to help other people that matter to them (i.e., clients’ family members, friends, business associates, etc.). Consider your ideal clients and look to build your practice with other individuals with similar investible assets, incomes, etc. Often, those individuals are within your ideal clients’ existing networks. Inviting a client to dinner and asking them if they would like to invite their adult children or sibling and his/her wife can be a great way to develop a new client relationship on a more intimate basis.

The Client Retention/Revenue Formula

Increasing client retention by just 2% enables a financial advisor to generate revenue equivalent to decreasing their operational costs by 10% according to Trust Company of America’s Senior Vice President of Key Accounts. Financial advisors striving for much higher client retention rates can expect an even greater impact on their practice’s bottom line. The key is for financial advisors to strive for total client satisfaction by following good practices which demonstrate a real commitment to serving their clients’ best interests.

Mike Welter is the Director of Migam Global, an international provider of premier investment, insurance and family office products and services such as Wealth FriendsWealth InsuringWorld Class Brands Portfolio Strategy, Eljovi Multi-Strategy FundEljovi Indian Arbitrage Fund, and the Family Office Fund. Connect with us on LinkedIn or on Twitter at @GlobalMIGAM.