How to Stay on the Right Side of an ACAT Form
While it’s less than ideal, losing clients can happen. Not even the best advisors can keep everyone happy for the long haul. One of the best ways to ensure that you’re doing what you can to keep your clients, however, is to study the mistakes that others have made.
So, why do clients fire their advisors? A few years ago, Financial Advisor Magazine surveyed nearly 1,400 advisors asking them this very same question. Here’s what the survey showed.
23% of clients reported that the advisor made claims that they didn’t deliver on.
Attempting to prove your value by touting returns is dangerous to do as it locks in expectations. More likely than not, your clients don’t fully understand looking at the big picture, so when you say, “we’re targeting an 8% return with this portfolio,” they only hear 8% – they’re not considering your long-term perspective. Considering that the market itself only hits its own average once in about 25 years, it’s a smarter move to prove your value in more dependable ways.
34% of clients reported that the advisor’s investment performance was unsatisfactory.
If you set up a target for your clients that’s impossible to hit, you can’t be surprised when you don’t hit it – or when clients voice their disappointment. Making concrete performance promises with something as volatile as the market is a lose-lose for everyone involved. If the performance ends up being lower than what you promised, clients will wonder why they aren’t getting the returns they were guaranteed, yet, when the market is up and higher than you promised, clients will wonder why the market is beating their portfolio.
Instead, focus on the client’s overall portfolio and financial plan and talk with them about how each investment may fit into their long-term financial goals. Focus on the big picture and the goals that you’re setting with your clients rather than relying on the appeal of attractive returns.
44% of clients reported firing their advisor because they failed to maintain prompt communication.
An influx of communication can be overwhelming for anyone. If you have multiple clients trying to contact you at all times, it’s understandable that you may be slow to respond when it comes to returning their calls. However, for your clients, this is their hard-earned money and financial future on the line – they have a right to want to stay in touch with you or come to you with their concerns and questions. The best way to curtail the volume of calls that you’re receiving is to effectively coach your clients on what it means to be an investor. This way, when they see an alarming headline on CNN, they’ll know how to handle it without immediately calling you in a panic.
If you can, work toward a proactive communication plan, too. Send out emails to all clients sharing pertinent and timely information so they know they can count on you to share what they need to know.
51% of clients said the advisor failed to honor their goals and objectives.
It can be easy to get swept up in the mechanics of managing a client’s portfolio and navigating the markets, but it can’t be at the expense of what matters to your clients. Be sure that you take the time at the beginning of your relationship to really listen to and learn from your clients what their long-term goals are, what their vision for retirement is, and what they value most. Make it a point to center on those conversations whenever you’re helping them make big investment decisions.
72% of clients reported firing their advisors because they failed to communicate clearly.
Luckily, the number one reason advisors get fired is the easiest problem to avoid. Communication with your client must be understood as a two-way street from the beginning, and it should stay that way throughout your entire relationship. Advisors who are interested in being proactive will have a plan in place to check in with their clients at regular intervals so that they can gauge how they’re feeling about their current and future financial situation.
Being the best advisor for your clients isn’t rocket science.
When looking at the results of this survey, it becomes clear that what people are really looking for from their advisors is clear communication, realistic expectations, and transparency. Taking the time to learn your clients’ goals and values and to coach them properly on being an investor can make all the difference when it comes to maintaining your clients long-term. Although investors should be focused on the long-term, they often react to short-term changes and risks, provoking them to make emotional knee-jerk decisions that can negatively impact their long-term goals. As an advisor, it’s your job to be available for them during these times and to coach them behaviorally if you’re looking to maintain their business.
If you’re ready for an opportunity to grow as an advisor while maintaining your independence, consider joining TriCapital Wealth Management today. At TriCapital, you can fully focus on your clients’ needs and grow your book of business while leaving all of the practice management to us. Contact us today if you’re interested in learning more about TriCapital Wealth Management.