When a top client says goodbye

Advisor: This has probably been one of the worst weeks of my career. My very best client has announced that she is transferring her account to another advisor. To say I am shocked would be an understatement. I thought we had more than a client/advisor relationship; I looked upon us as friends. Furthermore, she hasn’t really given me a good explanation, only that “It’s time for a change.”

Her account is doing well, considering the markets. We have worked together on her investment strategy and we communicate frequently. I am not aware of any service problems. So, what happened and how do I deal with it?

Coach says: Every advisor knows he or she will periodically lose clients – due to death, transfer of assets to children or other factors over which we have no control. We generally can deal with this type of client loss; but when a good client leaves us for no apparent reason, it hurts.

The truth is that while you were caught off guard by the departure of this client, you should be aware that clients today are far more open to overtures from competitors or simply willing to “try someone else” than ever before. Call it a hangover from the economic meltdown of 2008-09, or whatever. Numerous studies have indicated that at least four out of 10 clients are thinking of making the move to a new advisor. And although that creates opportunity if you are on the receiving end of that change, it’s bad news if you are the victim of those defections.

Unfortunately, by the time clients have made up their minds to tell you they are leaving, it’s often too late to persuade them to stay. But after the shock has dissipated a bit, reflect on the relationship and ask yourself: “Why didn’t I see this coming?”

I am willing to bet you did reflect on this. And while you may not view this as good news, I am also guessing that as you thought back, you have realized there were red flags that you either ignored or discredited, and which should have alerted you to your client’s dissatisfaction earlier on. Recognizing these early warning signs and taking preventative action has to start well before your client announces the formal end to your relationship. Here are some ideas on how to spot and head off future shocks such as the one you just experienced.

– Follow the money. A client opening even a small account elsewhere, talking about investments you didn’t recommend or withdrawing money from his or her accounts with little explanation is a pretty good clue that you may no longer be the centre of this client’s financial universe.

You don’t have to be consulted on every decision your clients make, but they should be keeping you in the loop, especially if these new activities conflict with any financial planning you’ve done together.

Pay attention, as well, to money you don’t have under management. If that maturing GIC you had discussed transferring to your client’s account with you doesn’t show up soon after the maturity date, ask about it and listen carefully to the client’s explanation of what he or she did with it. If the rationalization for whatever action your client took doesn’t add up, it could be a covert indication that your client isn’t happy.

– Listen to the questions. When a normally docile client suddenly starts asking questions such as “Why did you recommend this stock?” or “Why mutual funds and not ETFs?” it is frequently a signal that the client has been talking to someone else.

Certainly, some clients will always want you to explain your choices for them. In fact, many advisors prefer to work with clients on a collaborative basis. But recognize that a flood of new questions that challenge your expertise probably exposes a weakness in your relationship. You should always be open to client second-guessing. However, when curiosity turns into criticism, you probably are on the slippery slope toward disengagement.

– Talk candidly to the client. Once you are alerted to the possibility of a transfer, or even after you have received notice of a transfer, don’t assume there is nothing you can do about it. A number of advisors with whom I work routinely encounter circumstances in which clients aren’t aware the new accounts they are opening or paperwork they have signed will have an impact on accounts held with their original advisor. Clients simply may have opened an account elsewhere because they weren’t aware it was an account the current advisor could handle. Many clients didn’t realize they also had requested a transfer.

As simple as it sounds, the absolute best practice in this scenario is to make sure to talk with your client to find out why he or she has taken this action.

– If there is an issue, get to the bottom of it. In many cases, clients do not really want to leave their current advisor – and, surprisingly, performance is seldom the catalyst.

Clients generally are aware of the current economic environment and know that jumping to another advisor doesn’t guarantee better returns. Often, their disenchantment comes because they feel neglected, unappreciated or misunderstood by their advisor. In these cases, skilful questioning can get your client to open up and engage in a conversation that can help preserve your relationship.

Here are a few sample questions to bring clients to the table for a discussion:

– “I am getting the sense that something is testing the strength of our relationship. Do you feel it too?”

– “Successful relationships are built on meeting the expectations of those involved. Can you candidly say that we have met all your expectations lately?”

– “I have never known you to do anything financially that you did not feel was in the best interest of your family. Is that what has prompted you to do this?”

– “I hate to disappoint any client, but I especially hate to disappoint one as valuable as you. Would you be willing to share with me what we might do to make you feel more valued?”

– Act professionally. In the event your client does ultimately decide to leave, do everything you can to ensure the actual transition of the account and the client to the new advisor goes as smoothly as possible.

Why? First of all, it is professional to conduct yourself in such a manner. Second, many advisors report that many clients who leave come back when their new experience doesn’t work out as they had anticipated. Leaving the door open for the client to return is a lot easier if you have assisted with the transition.

If we think about the evolution of client/advisor relationships, it’s not hard to see how things can get off track. In the beginning, prospective clients take a chance on you because they like you and because your story appeals to them and their needs. As you demonstrate your expertise, the relationship strengthens, ideally, to the point at which you achieve “trusted advisor” status and your clients won’t make a financial move without consulting you.

Over time, a number of challenges test your relationship – poor returns, competition, presumptive communications, perhaps even boredom. Eventually, client relationships get into trouble when that natural evolution from stranger to trusted advisor starts going backward. This negative process starts with erosion of confidence and ends with defection.

But it doesn’t have to if you are attuned to the warning signs and proactively respond to them. IE

George Hartman is president of Market Logics Inc. in Toronto (www.marketlogics.ca). Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca.

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