For most investors, leaving their financial advisor is not usually top of mind. But many who choose to take that step do so mostly when they’re confronted with a major life transition.
That’s one of the key findings in London-based Ernst & Young Global Ltd.'s 2019 Global Wealth Management Research Report, which states that “[clients] are switching for value – most often at critical life moments and as the complexity of their financial lives evolve.”
The research finds that among clients who looked to move their assets to another advisor in the past three years, 61 per cent left a job; 48-49 per cent were expecting a child, inherited or received a large sum of money, started a new business or got married; 43 per cent experienced a divorce or separation; and 38-39 per cent were sending their children to college, buying a house or retiring.
Jason Pereira, partner and senior financial consultant at Toronto-based Woodgate Financial Inc., a financial planning firm under the IPC Securities Corp. umbrella, says that clients are especially prone to leave an advisor right before or shortly after retirement because their anxiety levels are significantly higher at this point in their lives.
For these clients, figuring out what to do with their time causes a sense of uncertainty, which leads to feelings of financial insecurity, regardless of their level of wealth.
Advisors who can demonstrate their value at all stages of a client relationship are more likely to gain a leg up on the competition by attracting clients interested in moving their money.
Mr. Pereira, April-Lynn Levitt, a business coach with The Personal Coach in Waterloo, Ont., and Krista Kerr, president and chief operating officer at Toronto-based fee-only wealth-management firm Kerr Financial Group shared their tips on how to appeal to investors who are looking to make a switch to a new advisor.
1. Lead by listening
Advisors often lead the conversation when speaking with prospective clients by focusing on investment returns or proposing what they can offer rather than responding to the person’s needs.
In fact, Mr. Pereira says his firm competes for multi-million-dollar client portfolios that other advisors have lost because of poor communication and service.
“When trying to have a conversation with a prospect, most advisors talk about returns, which they have zero control over” instead of ensuring they’re in a suitable portfolio based on risks, goals and costs, Mr. Pereira says.
“[Prospective] clients will talk to two or three other advisors, and those other advisors will listen to them for five minutes before sliding over a piece of paper and saying, ‘Here’s the portfolio I can put you in, and if you don’t like it, we’ll change it,’” he adds. “They come to the meeting with a solution for the client before even hearing the client speak.”
Instead, advisors would do better to take the time to discover what a prospective client truly wants from the relationship.
2. Communicate proactively
Clients are more likely to start looking around for other advisors if they feel they’re receiving lacklustre communication. They’re more prone to leave an advisor if their calls aren’t returned on a timely basis or if the advisor hasn’t reached out in a long time, Ms. Kerr says.
“It’s important that clients think you’re thinking about them on a regular basis,” she adds. “They don’t want to go somewhere and feel like they’re one of many, getting a very tiny amount of attention.”
To build confidence in clients, advisors should demonstrate that they understand their clients, they’re proactively thinking about their needs and they’re providing tailored advice.
3. Put a team in place
Clients want to ensure they’re being covered at every stage of their lives; so, sometimes, a team offering will put prospective clients more at ease.
Bringing younger advisors into a team can be particularly attractive to clients, she says. For example, having a team in place can make it easier to start and establish a succession plan so that clients don’t start wondering who is going to manage their money in the next 20 or 30 years if their advisor is of a certain age.
Clients facing large intergenerational wealth transfers will also be comforted to know that their children also will be taken care of by younger advisors on the team.
Says Ms. Levitt: “Putting younger advisors on your team can go a long way in retaining assets.”
4. Embrace technology
Many clients are busy and looking for efficiency. The more advisors can adapt to their clients’ preferred technological methods of communication, the more likely they’ll be able to win them over.
Although clients still value face-to-face relationships, they also want the option to communicate through technology, whether that’s text messaging or social media, Ms. Levitt says. Electronic tools, such as the ability to provide e-signatures, are also good selling points for an advisor’s practice.
Advisors can face limitations on their technological efforts due to compliance, but an increasing number of firms and advisors are starting to offer a variety of ways for clients to interact and communicate, which make these firms and advisors appear forward-thinking and not “stuck in the old days,” Ms. Levitt says.
5. Don’t pressure prospective clients
As the client-advisor relationship is often a multi-decade commitment, both parties owe it to themselves to ensure it’s a good fit. Clients, especially, should feel comfortable with their decision.
So, let prospective clients finish doing their homework and meet with a few other advisors before solidifying the relationship, Mr. Pereira says. Otherwise, clients could find themselves in another unhappy advisor relationship or feel put off by the pressure to commit.
“We don’t want to pounce on them,” he adds. “A very simple way to compete is to treat them with respect and the way you would want to be treated.”