Investment advisers may work hard and possess technical know-how, yet they still lose clients. The solution is to identify problems early and address them quickly. Otherwise, dissatisfied customers may quietly (or not so quietly) leave.
Rita McGrath for example grew increasingly unhappy with her adviser’s indifference and lack of engagement over seven years. Her portfolio underperformed and her adviser didn’t seem to care. “They rarely checked in with me,” said McGrath, a professor of management at Columbia Business School. “I felt like an afterthought to them.”
When the adviser did contact her, the conversation was loaded with industry jargon. There was little interest in McGrath’s needs or concerns.
“It was all bar graphs and pie charts and lingo,” McGrath said. “They never proactively suggested anything. They knew my age and that I had kids not yet in college. But they never talked about retirement planning” or offered ideas to fund her children’s tuition.
After McGrath completed the paperwork to leave the firm, the adviser called and said, “We had no idea you were unhappy. You should’ve let us know.”
“The fact that it took them by surprise tells you something,” McGrath said. “Advisers need an early warning system” to mend a fraying relationship.
Ideally, advisers will take frequent “pulse checks” of their clients. Periodic phone calls or emails help keep tabs on the people they serve and reinforces their role as a supportive ally for a client’s financial plan and goals.
At a minimum, clients expect their adviser to return calls promptly. But Peter Laipson found that his otherwise knowledgeable and likable adviser became increasingly inaccessible.
“Her availability decreased sharply,” said Laipson, an educational administrator in Arlington, Mass. “We found it difficult to get in contact with her.” The adviser also ran a solo practice and Laipson paid her an hourly rate ($250) on an as-needed basis. It reached a point where “too much time would elapse between our contacting her and getting a reply,” so Laipson found a more responsive adviser.
Succession planning also is important in order to retain clients. Advisers need to hire talented professionals who possess the skills to keep clients from bolting. When Barry Rotman’s adviser prepared to retire, he assigned his heir apparent to work with Rotman. It didn’t go well.
“His assistant made math errors and just wasn’t competent,” recalled Rotman, a physician in Walnut Creek, Calif. “The one thing you want from your adviser’s team is people who are good at math.” For Rotman, the final straw was his discovery of a billing mistake. He left soon after. “I wrote a letter to my adviser letting him know why we were leaving,” Rotman said. “He responded that he was so sorry, that he’d make it better. But by then, it was too late.”
Occasionally, advisers act as their own worst enemy. Rather than respect a client’s life choices, they may pick a fight and let outraged clients walk out the door. Ellen McDonald and her husband, David Buck, thought they had found a keeper after about 10 years with an adviser whom they liked. Parents of two children, they asked the adviser about strategies to save for tuition at a prestigious liberal arts college.
That’s when things unraveled. “Our adviser was aghast,” recalled McDonald, a Kansas City, Mo.-based marketing and public relations consultant for the performing arts. “She was dismissive and unwilling to help,” volunteering her opinion that state schools were fine and it was foolish to pay more for a private college. “It suddenly became clear her value system was different from ours,” McDonald said. “I thought, ‘Oh my God, I’m working with a total stranger.’ I saw a side of her I hadn’t seen.”
The couple soon realized they could no longer work with their adviser. And they sensed the feeling was mutual. “I don’t think she cared if she lost us as a client,” McDonald said. “We found a new adviser who lit up when we told him about our goals for our kids.”