Here's Why Clients Fire Financial Advisors (2024)

​It’s happened to the best of us.

You get that phone call, email, or letter basically saying “we’re through”.

And no, I’m not talking about boyfriends and girlfriends (although I wrote an article about howprospecting is like dating)…

I’m talking about when financial advisors get fired by their clients.

According to PriceMetrix, financial advisors lose an average of 5-10% of their clients per year. The chances of leaving are even worse for households with more than $100,000 in assets — these clients have a 13% chance of leaving their financial advisors annually.

For the average financial advisor (who makes about $90,000 - $124,000 per year depending on which source you use), that 13% chance represents more than $11,000 in lost income. But that’s in an average year — in reality, this number could be much higher!

Sure, you could go out and get new clients to replace this lost income. But as it turns out, keeping your clients is a lot cheaper than going out and getting new ones. According to the Harvard Business Review, acquiring a new client is anywhere from five to twenty-five times more expensive than retaining an existing client. This means if you lose a client, your actual loss could be much higher than the 13% figure I just gave you.

Imagine losing more than 13% of your income in one year. No one wants that — so how can you prevent it?

You’ve got to know the reasons why financial advisors get fired. After all, if you were working at a car dealership and you saw your fellow salespeople get fired for burning rubber in the cars, what would you do? The correct answer is to not burn rubber in the cars.

Here are the top five reasons why clients leave their financial advisors, and how to prevent them...

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It sounds simple: just keep in touch with your clients. But the problem is that a lot of financial advisors bite off more than they can chew.

If you’re a brand new advisor with a small book of business, you have absolutely no excuse. Communicating with your clients should be a top priority.

For seasoned financial advisors with tons of clients, you can only allocate so much of your time to each one. This is an extreme example, but if you’ve got a book of business with clients ranging from $10K AUM to $10M AUM, you’ll naturally allocate more of your time to the higher-end clients and hope that they rest just stay with you.

Here’s the good thing about this problem: it's the easiest one to fix.

You’ve got a few options for doing so:

1. Trim your client base.
2. Automate communication.
3. Hire someone.

A combination of the first two — trimming your clients and automating — might be the best option. Say goodbye to unprofitable clients and then automate communication. After all, automation’s not just for setting up appointments. You could set up an email autoresponder loaded with specific touch points for clients and use it to broadcast personalized messages.

Automation might not solve all of your communication problems, but it’ll definitely make them easier.

As for the last option, a lot of advisors get nervous about bringing on an associate. But if they don’t want to lose their lower-end clients altogether, there’s really no other viable option. If you literally cannot keep in touch with everyone you serve, they’re going to leave. What’s worse is that they’re going to spread the word about how you didn’t keep in touch.

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It’s not just how often advisors communicate — it’s also a matter of how quickly they respond.

This insight comes from a study conducted by Financial Advisor magazine. Nearly 1,400 advisors shared the most common explanations clients gave for firing their previous advisor. 44% said that it was because their phone calls weren’t returned fast enough.

That’s not all. Other research shows that:

• 66% of HNW baby boomers would fire an advisor who didn’t return phone calls promptly.
• 58% of Gen Xers said not returning calls fast enough would be their primary reason for firing an advisor.
• 52% of millennials said the same thing.

I know that sometimes the phones ring off the hook. The best solution, aside from fine-tuning your schedule, is to coach your clients on what to do and what to expect. You can also keep them on-course by reminding clients about their financial goals and expected time frame to reaching them.

You don’t want to eliminate the phone calls completely, but you do want to eliminate the ones that stem from a panic attack after binge-watching CNBC.

🔑 That said, here’s one rule of thumb for phone calls: return them on the same day.

But if you feel like you’re sacrificing marketing and prospecting time to return client calls, it’s time to think about hiring someone. Marketing and prospecting are your highest value activities — you should never give them up to return client calls.

A big part of the solution here is being a good listener. Dig deep into what clients want.

Sometimes clients might not even know what they want — so it’s up to you to help draw that out. Don’t be afraid to ask questions.

After your meetings, jot down detailed notes about what clients said in your CRM. For example: if your client talked about wanting to go to Paris in a few months, you should bring that up at your next meeting.

You also need to stay on top of clients’ goals because situations and circ*mstances change — and oftentimes, clients won’t volunteer that info to you. Why? It’s not their first instinct to let you know that they might be changing careers or getting a divorce. Some might, but the majority won’t.

What that means is that you’re often working with old data — yet clients expect you to be up-to-date with their current situation. So listen, take notes, and check in with clients. For example, you can say something like, “Last time we met, you mentioned that this was important to you. Is it still important?”

You might also pick up on patterns over time, like charity work among UHNW clients. Keep an eye out for these trends because they represent what’s important to the client. Then check in on these issues to show that you’re on top of their concerns and know what’s important to them.

​ALSO READ:5 Client Loyalty Strategies to Help You Retain More Clients

There’s a common theme in the reasons clients give for firing their financial advisors: it really all comes down to setting and managing client expectations.

These expectations apply to your fees, how meetings will run, when clients can call you, and so on. Making these clear will set both you and your clients up for a better experience working together.

You also need to set boundaries with your clients regarding the level of service and type of service you provide. This will save you time and prevent “scope creep” — situations where clients keep asking for more and more. Clients don’t call or message you with ill intentions — they do it because they’re unaware.

Make sure you put the information in this article to good use to keep your clients around for longer. If you have any questions, feel free to reach out and I’ll help you if I can.