Practice Management

Why Clients Leave Their Financial Advisors and How to Prevent it

Have you ever wondered why clients leave their financial advisors? What if your actions are preventing you from retaining clients? Learn how you may be losing your client's trust and how to fix it.
Louis Retief
6 min to read
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People choose their financial advisor for many different reasons — credentials, experience, or a glowing referral from a friend or relative. While that part is clear, you may be more interested in knowing why clients leave financial advisors. Though clients may initially be attracted to your firm because of your glowing credentials, it's not enough to make them stay. There’s only one thing that will keep clients around for the long term is trust. 

Trust is the foundation of every successful client-advisor relationship. Your clients trust you with their money and livelihood, after all — putting their financial health into your hands. They trust you will ensure they can afford college for their children or that they meet their retirement goals after years of hard work. This level of responsibility should not be taken lightly, which is why it's crucial to build and maintain trust with your clients. 

A productive client relationship requires a lot of effort, especially up front. If you invest in the relationship from the beginning, clients are more likely to trust you and stick around. Retaining clients is essential because the longer a client stays with you, the higher their compound value. 

While you might understand the importance of creating client trust, you may be surprised to find out that some of your actions (or lack thereof) are causing your clients to leave your financial advisory firm. Here are eight ways that you might be losing trust with your clients without even realizing it. 

Happy older female financial planner talking to new client
It's easy to be excited when onboarding a new client and get carried away with your client promises.

You overpromise during the onboarding process

You lose trust with clients by making promises during the onboarding process but failing to deliver on them. This might be because you don’t have a way to properly track your client promises and tasks discussed during meetings, don’t communicate client deliverables within your firm, or are lacking processes that ensure timely follow-ups.

 A lack of proactive follow-up is one of the fastest ways to lose credibility with your clients. Even though your intentions are in the right place, you may find yourself breaking promises because you don’t have notifications to remind you of them down the road or set processes in place for how you’re going to deliver on them.

To avoid overpromising, determine what is causing promises to slip through the cracks. For example, is it because you're not communicating and setting expectations with the rest of your team? Or, perhaps there are limitations with your current workflow processes and you need better practice management software to support your business. 

You underdeliver on your promises

Forgetting a client promise is bad, but what about under-delivering? Overpromising and under-delivering is a sure-fire way to lose trust with your clients. You want to make sure that you are building off of every client meeting and keep things moving forward, not re-starting from square one. If you find yourself having clients following up with you about promises — this spells trouble.

Take a moment and consider if your advising approach is reactive versus proactive, it’s an indication that you aren't providing the best client experience possible. If that’s the case, it might be time to evaluate your current workflows, processes, and software to see how you can provide a more proactive service to your clients. 

Related Blog Post: Three Steps to Fix Your Workflows for Financial Advisors

You focus on new clients instead of existing clients

Another way you’re losing trust is by prioritizing new clients over your existing ones. If you are onboarding more clients than you can handle, it might be at the expense of serving your current clients — especially if you aren't hiring additional staff. If you don’t grow your team as your firm scales, things will begin to slip through the cracks.

When you are focused on onboarding as many new clients as possible, your overall client experience will suffer. For example, you are probably not thinking about identifying ways to engage with current clients. Maybe an existing client has children entering college, nearing retirement, or reaching RMD age — all perfect opportunities to engage with existing clients that you are missing. Your older clients will notice the stark difference between the level of service they received from when they were onboarded to now. This will result in your clients beginning to lose trust and leave for a different financial advisor. 

Did you know that Hubly can notify you of important client dates such as when clients are reaching RMD age or their next check-in meeting is due? In addition to streamlining your onboarding process, your capacity will quickly free up so that you can focus on both new and existing clients.

New Clients or old clients?

You haven't optimized your back-office 

Your back office plays a crucial role in continuing to improve client service and the client experience to deepen relationships with clients. A common problem that advisors make is understaffing and underutilizing their back office team. 

Without a set of procedures or clear instructions for your back office team, it is challenging to fulfill client promises or prevent costly mistakes — leading to confusion and inconsistency in the client experience. Not investing in your back-office will erode trust with clients over time. 

Have you considered what processes are in place to support your back office? What recent technology have you purchased to help make your back office employees happier and more productive? All of this will pay dividends on building trust with your clients. 

Related Blog Post: Behind Every Great Advisor is an Even Greater Operations Team, Find Out Why

Keeping your clients in the dark will deteriorate trust.

You lack transparency 

Setting the stage is an essential part of the client-advisor relationship. Your initial meeting with a client is an opportunity for you to build trust by being open about your advising process, such as introducing them to the team that will be part of their planning and fee structures. 

Putting in a little extra effort at the beginning goes a long way in building trust. Though explaining your process in the initial meeting takes some extra effort, it helps the client feel more comfortable and confident moving forward, making them less likely to leave you.

You’re communication is inconsistent

The most successful financial advisors are highly accessible for their clients. According to a survey from YCharts, 85% of people said they would consider their advisor's frequency and style of communication when choosing whether to retain their services. Not responding to client questions in a timely manner will result in a loss of trust — if not right away, then certainly over time.

Aside from answering client emails and calls promptly, it's also best to proactively stay in touch with clients. One way to do this at scale is by sending out monthly or quarterly newsletters in response to significant market events. Your clients need to know that you are there for them in the good times and bad. 

Staying in touch is also a way to help clients avoid mistakes during market turmoil. For example, they may be tempted to sell during a market downturn, and hearing from you might be the reassurance they need to stay the course. 

You use industry jargon 

It's next to impossible to build trust with clients if they can't understand you. It's crucial to avoid complicated jargon when communicating with clients — straightforward language is key. Many advisors find that using real-life examples is one of the best ways to help clients grasp complex financial ideas. 

Many people get confused by estate planning topics, especially the purpose and benefits of trusts. Instead of abstractly discussing trusts, make them relevant to your client. For example, if your client has a child with a disability, talk about how a trust can help financially support the child after the client passes away – human to human. By bringing this level of accessibility to your conversations with your clients will build transparency and trust, making it less likely for your clients to leave your financial firm.

Is this what you think people want from their financial planner?

You talk more than you listen

Poor listening skills can cause communication breakdowns between advisors and their clients. If you're only hearing what's on the surface, you won't be able to get to the heart of the matter with clients, resulting in them feeling unheard and frustrated. Actively listen to what your clients are saying, which also includes paying attention to what their body language is saying, before preemptively jumping in. Michael Kitces wrote an entire article on why active listening is the one skill that has the biggest impact on being a successful financial advisory firm.

Improving your active listening skills is an essential skill to have as a financial advisor. Becoming an active listener will allow you to build a deeper connection with clients. Talking about money is difficult for many people and brings up a lot of emotions – a key indicator that trust is also a key characteristic in creating meaningful, honest conversation around personal finances. Being an empathetic ear for your clients will build trust and lead to an abundance of loyal clients – and referrals. 

Final thoughts

If one thing’s clear, it’s that building trust with your clients is a worthy investment. Be sure to avoid common pitfalls such as overpromising, underdelivering and inconsistent communication. Invest in your back office team and software to support and enhance the client experience. 

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