Financial Advisor Magazine just posted the five top reasons clients fire their advisor, ostensibly from a survey that they conducted to find out.
In a nutshell, here were the reasons.
- 72% said the advisor failed to communicate with them
- 51% said the advisor failed to understand their goals and objectives
- 44% said the advisor failed to return their phone calls promptly
- 34% said the advisor’s investment performance was poor
- 23% said the advisor made claims they couldn’t deliver on
Here’s the fascinating thing: four out of the five are largely about client expectations, and alignment of the client’s portfolio with their risk tolerance.
#1 and #2 — the failure to communicate and failure to understand objectives — are, at their core, the same thing. The client’s expectations aren’t in alignment with their portfolio, so the gains and losses they see have no context, and they don’t understand how that can happen without the advisor communicating about it.
#4 — the failure to deliver good performance — often happens when an advisor is anchoring portfolio risk to their risk tolerance, which is more conservative than the client. The markets are up, the client feels like their portfolio should be growing faster, and their risk tolerance agrees.
#5 — the advisor making claims they can’t deliver on — is often the case where an advisor uses a long term average to set expectations for portfolio growth, but the market almost never hits its average in a given year. So whether the markets are above average or lower than average, the client feels like the advisor isn’t delivering.
The secret that Riskalyze advisors have discovered is the power of pinpointing client expectations with quantitative risk tolerance, engineering portfolios to fit that risk tolerance, and delivering on client expectations time and time again.
These advisors have effectively killed four out of the five reasons clients fire an advisor, and their business and revenue growth tells the story.
And as for #3, until we release the Riskalyze Artificial Advisor Intelligence Robot that can return client calls for you, you’re on your own. But maybe you can use all of this new free time to return those calls now.
(If you want to join a guided tour and see more about how Riskalyze is helping advisors engineer risk to fit their clients, you can RSVP here.)