Your clients trust you to offer them reliable advice. But you can lose that trust if you fail to demonstrate that you are looking out for their best interests. These mistakes can raise “red flags” in clients’ minds.
For example, says Nadira Lawrence-Selan, marketing and communications consultant with Hathleigh Consulting in Woodbridge, Ont., suppose you fail to fully disclose the risk associated with an investment, and that investment posts a negative return. That situation would raise a red flag in your client’s mind.
That red flag is Strike 1. Strike 2 could come when you fail to deliver on a promise — for example, neglecting to send information you said you would provide. When you reach Strike 3, for whatever reason, Lawrence-Selan says, “You’re out.” In other words, you lose that client.
Here are four common red flags to avoid:
1. Being less than transparent
Clients want to know what they are paying for and how much. You put your reputation at risk by not being transparent, Lawrence-Selan says.
“The operative behavior is full disclosure” about the fees clients pay, the commissions you receive, product features and any associations you may have that could affect your relationship with your client, she says.
2. Failing to gather information
Clients expect you to ask them questions about their objectives, risk tolerance and other concerns, Lawrence-Selan says. “The [“know your client” questionnaire] s never enough,” she says. “It pigeon-holes clients into boxes.
Clients have unique characteristics and personal situations that are not covered in the KYC document. “Not asking sufficient questions raises red flags with clients,” Holjevac says.
They might question whether you should know more about them — and whether you know what you are doing.
“You have a responsibility to know your clients and to ensure that the risk and features of the investments you recommend are suitable for their needs,” Holjevac says.
3. Creating unrealistic expectations
“It’s easy to make promises to clients,” says Lawrence-Selan, “especially when the markets are performing well.”
But if the markets are up 20% in a particular year, you have a duty to explain to your clients that market performance is not guaranteed and that such performance is not typical.
Be realistic in telling them what to expect and your role in ensuring that they achieve their goals. Says Lawrence-Selan: “Don’t sugar-coat anything.”
4. Poor communication
Clients expect to meet with you periodically and to have the ability to discuss their concerns as they arise.
Being “too busy” to talk to a client is not an excuse, Lawrence-Selan says. It sends the message to clients that they are not important.
Clients make a choice to work with you, Holjevac says. So you have to make a choice to work with them.