Most every financial advisor has lost one or more clients over the course of their years in the business. Sometimes this breakup is mutual in that the advisor and the client decide that things have changed and it's time for the client to move on. Other times the client decides to leave and the advisor doesn’t find out until they receive paperwork from the client’s new advisor.

Just like any relationship the relationship between a client and a financial advisor will change and evolve over time. Sometimes this results in a breakup which is not always a bad thing.

Communication is Vital

The key to a successful relationship between a client and financial advisor is communications both ways. It is incumbent for the advisor to communicate on a regular basis with clients. This might be a combination of market updates, sending them articles of interest about issue that are relevant to their situation, regular updates about their portfolio as well as period meetings and phone calls. (For more, see: Financial Advisor Tips for Talking to Clients.)

Ideally your clients will communicate with you when their situation changes or more importantly if they have an issue with the job you are doing. In my opinion it is important for the advisor to ask questions to elicit responses in both areas as clients may not want to have the frank conversation with an advisor telling them they are dissatisfied with their service.

Studies have shown that clients value communication from their financial advisor even more than the actual investment results. Like anyone else, you clients want to know that you care about their success.

Sometimes Losing a Client is Good

Financial advisors who have been in business over time will likely see their businesses evolve. If they are successful their client base will grow. Perhaps they will work with larger clients over time or perhaps they will find themselves focusing on a particular client niche. (For related reading, see: 5 Vital Questions Advisors Should Ask New Clients.)

It’s sad to say but sometimes as their business grows and evolves some clients may no longer fit the advisor’s service model. As their average client size grows perhaps some of the firm’s smaller clients are offered a modified level of service or perhaps they are now being serviced by a more junior member of the firm. That may not sit well with a long-time client and in this case it may be better to help this client find another advisor who is a better fit for their needs.

There are practice management consultants who will suggest that financial advisors and other professionals review their client roster each year and “fire” those who represent the bottom 10% of their client base. In many cases these might be clients who are being undercharged so one tactic is to raise their fees. If they decide to stay and accept the higher fee that’s fine, if they leave because of this that’s also fine. (For more, see: How to Be a Top Financial Advisor.)

Sometimes a client’s attitude towards the financial advisor and the way they treat the firm’s staff can become problematic. If a client is rude and hard to deal with and speaking with them about this doesn’t help then it might be time to terminate the relationship. (For more, see: Deal Effectively with Difficult Clients and Managing (Seriously) Dysfunctional Clients.)

Make the Transition Easy

If a client terminates your services be sure to cooperate with the client’s new advisor or custodian to make the transition as easy and painless as possible. This is just plain courtesy towards someone who has paid your fees over the years and it makes could sense in terms of the client’s perception of you. The last thing that you want is a former client badmouthing you, especially if they know other clients or professionals with whom you work.

If appropriate, try to suggest another financial advisor who might be more appropriate for this client. This builds goodwill with the client and with the advisor to whom you are making the referral.

Take a Look at Yourself

Losing a client, especially if the client has been with you for a while, can be a sobering experience and one from which you can learn.

Could you have communicated with this client more effectively? Is this a potential issue with other clients? Were your fees an issue? How about your investment approach? (For related reading see: 7 Financial Advisor Red Flags.)

Losing a client should not necessarily be a reason to revamp everything you are doing, but it is always healthy to ask questions of yourself and if this triggers a review of your firm’s client communications that is a good thing.

Set Expectations

I think one of the most important things a financial advisor can do to cement a client relationship is to set expectations. There should be expectations as to frequency of meetings, portfolio updates and other types of communications. (For more, see: Managing Your Clients' Expectations.)

During the process of “courtship” where the client is deciding whether to hire you it is good practice to try to understand and set the client’s expectations. Many clients frankly have no idea what to expect from working with a financial advisor. Others may have very definite ideas of what they expect in terms of communication and other aspects of the relationship.

This is the time to make sure that both you and the client are on the same page in terms of expectations and if possible for you as the financial advisor to shape those expectations. It is far better to make sure that you are both on the same page from the outset rather than to enter a relationship that will be bad for both parties. (For related reading see: Why Clients Fire Financial Advisors.)

The Bottom Line

Losing a client is never pleasant for a financial advisor, but sometimes this is a better outcome than continuing the relationship. In all cases the savvy advisor will reflect on why things didn’t work out, learn from any mistakes and make adjustments in their practice as needed. (For related reading see: Want to Impress Clients? Show Your Due Diligence.)

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