4 Reasons Clients Fire Wealth Managers

Poor performance is only one of the reasons clients leave their wealth manager.

As a wealth management firm, you’re one of many.

And in the age of the Internet, it’s easier than ever for a client to research the thousands of firms in this world that are competing for their business.

Clients know they have options when things don't go well for them, and below are some of the reasons they choose to get rid of their wealth manager.

Reasons Clients Leave Their Wealth Manager

1. Poor Communication

According to a Financial Advisor Magazine survey, the main reason clients fire their financial advisor is poor communication, or a failure to communicate on a timely basis.

One in four clients would leave their advisors because of a lack of "personal connection," according to a study from AIG Life & Retirement and MIT AgeLab.

In the age of COVID-19, client communication is as important as ever. Without regular contact, advisors have less understanding of their clients' goals and needs.

While meeting in person isn't so feasible during the pandemic, digital communication will remain an important channel. Whether it's phone calls, video chats, or using social media apps, these are all helpful ways to keep clients engaged.

Michael Kim, the Chief Client Officer at Asset Mark said, "It speaks to which advisors could pivot and connect with client"."

Ones that embraced new and virtual technology "are making a positive impression" with their clients.

There are benefits to more communication with clients. Consider these YCharts stats:

  • Three out of five clients said that more frequent and/or more personalized contact with their advisor would give them more confidence in their financial plan
  • 85% would consider advisors' frequency and style of communication when deciding to retain his/her services
  • 75% of clients want their advisor to send personalized updates to them.

2. Poor Performance

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Delivering low or negative returns for too long, especially when the client feels like time is no longer on their side, will eventually result in a lost client.

It doesn’t matter how down-to-earth and personable you are as an advisor. They hired you and your firm to deliver results.

Why is the performance bad? Are you not devoting your full time and energy to focus on research and investing?

If you're spending too much time on operational and admin work, that is time not spent on investing. If you can automate manual and routine work, that can free up time to focus on research and making better investment decisions.

What tools are you using to manage data and reports? How effective are they? You want systems that improves efficiency and decision-making, like our TAMP1 platform.

3. High Fees

If poor performance is bad enough, then charging high fees is adding insult to injury.

Yes, there is intense downward pressure on fees. It’s hard for small- and medium-sized investment firms to lower their fees to compete at the levels the Vanguards and BlackRocks of this world can afford to charge.

In this industry climate, there will be some give-and-take. Your fees might have to be lowered, but you can look at cost-cutting in other areas to offset the lower fees.

4. Lack of Trust

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Are you selling investment products that benefit you before they benefit the client? Did you overpromise on the returns, but underdelivered?

If you find it easier to make money by bringing in new assets rather than growing the existing base through good investing, then you’re destined to lose the client.

In the short term, you’ll generate revenue, but in the long term, that strategy will fail when the client sees low returns and considers taking their assets elsewhere.

Make sure your interests are aligned with the clients’. You profit when they profit.

Give Clients Reasons to Stay

Good communication will go a long way. Listen to the clients' needs. Be transparent.

Bad communication leads to mistrust and is the main reason why clients leave wealth manager. In that case, they will have less tolerance for poor performance  and high fees.

If performance is poor, take a look at existing practices. What can you do to devote more time to investment-related activities? Free up capacity and consider outsourcing operational activities or leveraging automation technology.

Keep fees in line with clients’ expectations. Be prepared to cut costs in other areas to mitigate lost revenue from lower fees.

Angry clients can make it known to the world why they don’t like you, potentially driving away new business. Likewise, happy clients will tell the world why they love you, and it helps you land new clients more easily.

Do what it takes to keep your clients happy, and you will stand out from other wealth managers.

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