Clients Are Leaving Their Advisers— Are You Ready to Welcome Them?

Journal of Financial Planning: June 2021


Over the past year, we’ve heard a lot about the importance of client communication. In blog posts I wrote for FPA in 2020, I stressed how vital it was for advisers to reach out to clients regularly so you could still connect personally, even if you couldn’t meet in person. Clients needed to know you were still invested in looking after them.

And then, in June 2020, J.D. Power made a shocking reveal: almost 33 percent of clients had not heard from their adviser in the first three months of COVID-19. During a period that included a pandemic, schools transitioning to remote learning, businesses reimagined or shuttered, social unrest, and the largest one-day, one-week, and first-quarter market drops in history, clients would have benefited enormously from guidance.

Let’s Talk About It

Communication is a key driver to creating client loyalty, and those advisers who were silent during 2020 may be facing the consequences. According to a recent Fidelity Investor Insights study, 20 percent of clients changed financial advisers in 2020. During that year of upheaval, when people really needed to talk to someone knowledgeable, a large percentage decided a different adviser would be better. So, who is making these moves?

Frustrated clients. So that was 2020. Surely, that was a one-time blip, and most people are perfectly happy with their adviser now, right? Not so. People are deciding to vote with their pocketbooks and take their business elsewhere when their needs aren’t met. Dissatisfied clients will continue to ask the friends they work with to see if they can do better. Where will your name come up in that conversation—as the adviser someone is looking to replace, or as the referral for that replacement?

High-net-worth clients. This client migration is good news for many advisers—it’s highly likely you will gain new clients. Even better, it seems that high-net-worth clients are especially ready to make a move. Additional Fidelity research indicates that 28 percent of current millionaire clients are considering changing advisers. These are someone’s best clients, getting every courtesy and attention, and they still are not loyal to their adviser.

Decamillionaire clients. It’s probably different with the really wealthy clients, though; they’re no doubt happy with the service and performance they’re receiving, right? Again, not so. According to a December 2020 Fidelity Investments report, Client and Prospect Engagement During These Challenging Times, “91 percent of decamillionaire clients believe their adviser has room for improvement.” Think about that for a moment. The most sought-after clients are not necessarily thrilled with their advisers, either.

Communication Is the Key

What is going on that so many clients are dissatisfied with their advisers? For many, a lack of communication during the pandemic might have been the last straw. In the case of the decamillionaires, the areas these clients identified as needing improvement include investment performance, proactive and frequent communication, and demonstration of the connection between investment performance and goals. Since the markets not only recovered but have continued to set new highs since 2020, it would be hard to blame this deep client dissatisfaction on investment performance. It’s much more likely that communication—or the lack thereof—is at the root of many issues. If clients don’t understand how their investments are helping them meet their goals, that’s fundamentally a communication failure.

The Real Opportunity

What does this mean for financial advisers as they look to build the practice of the future? First, there’s a real opportunity to position your practice and services as meeting the needs of high-net-worth clients, even very wealthy people you might have considered out of reach. What’s crucial is knowing the value you bring to clients and demonstrating that value and competence, so prospects understand why working with you would be better than with their current adviser.

Second, pay careful attention to how you communicate, how often you communicate, and what messages you deliver. A one-size-fits-all strategy probably isn’t going to work here; your older clients might prefer a Zoom client review versus coming into your office, or maybe your tech executives would like to get a text update instead of an email. If you aren’t sure, ask them.

And finally, think of your communication strategy as the underpinnings of the whole client relationship. Yes, investment performance is important, but it’s seldom the reason people leave their adviser. The real reason comes down to a pretty straightforward premise—clients just want to hear from you

Kristine McManus is chief business development officer, practice management, at Commonwealth Financial Network®, member FINRA/SIPC, the nation’s largest privately held registered investment adviser—independent broker/dealer. Since joining the firm in April 2014, she has been working with affiliated advisers to grow their top line through the introduction of various programs, tools and coaching. McManus holds the Chartered Retirement Planning CounselorSM designation, a master’s degree from Pennsylvania State University, and a BFA from Adelphi University.

Practice Management