Why do clients say goodbye?

Common reasons why clients leave financial professionals, and how to encourage them to stay

Every financial professional knows the importance of attracting new clients, and there’s seemingly no end to the number of people (and companies) that are ready to offer advice and assistance in finding prospects.

"If the relationship begins with an unrealistic, over-promise, it is likely to lead to a separation down the line."

But what about keeping them once you’ve got them? Is it only about the numbers on the year-end statement? We surveyed numerous sources, conducted 1:1 interviews, and even asked ChatGPT to tell us the most common reasons why clients say goodbye to their financial professionals. We then compiled our findings in the following list. Interestingly, inadequate returns rarely came up. Instead, the most cited reasons largely fell under categories the financial professional can control. Here are the most common reasons why clients say goodbye, along with a few tips on how to avoid them.

Great expectations

Every relationship between a client and financial professional rests on a promise (explicit or implicit) that the financial professional will provide guidance that increases the client’s wealth. If the relationship begins with an unrealistic, over-promise, it is likely to lead to a separation down the line.

According to Gregory Gallo, co-founder of The Opus Group advisory company, overselling at the outset can spell inevitable doom. “Over-promise and under-deliver—that's a big one,” he offered.¹ Misaligned expectations become problematic not only in relation to eventual returns, but also in connection with the relationship itself: Different clients have different expectations when it comes to how hands-on they will be in the decision-making process as well as how, how often, when and why their financial professional will be in touch with them. When a client expects regular communication but doesn’t get it, irreconcilable differences may arise.

Tips:

• Avoid making specific promises about future performance. Instead, make statements regarding the approach you’ll take and your reasoning behind it.
• Be 100% clear about what the client expects regarding frequency and type of communication, then personalize your approach to meet their needs.

Poor communication

This is a big one. Misaligned expectations often arise out of bad communication, and “88% of clients say that they would consider their financial professionals’ frequency and style of communication when deciding whether to retain their services.”² An important point successful financial professionals frequently make: Communication is about listening as much as it is about speaking. Failure to actively listen can lead to surprises and misunderstandings. The flip side of this is failure to proactively communicate. Either way, clarity is key every step of the way. In fact, when it comes to reasons why clients say goodbye, “poor communication” was the cause that came up most frequently.

"Clients don't necessarily fire financial professionals only because of poor performance, but rather because the financial professional never communicates with them,” said Bill Hammer, Jr., a principal founder of the Hammer Wealth Group, a Melville, NY. wealth management firm.¹ Listen first. Then express/confirm what they’re saying, so they know you understand. Finally, keep them informed.

Interestingly, communication does not always have to be personalized. In many instances, blogs, podcasts, newsletters, email blasts are all forms of communication that let your clients know you’re thinking about them — and their money.

Tips:

• Always remember that clients are looking to be understood and informed — in that order.
• Maintain regular communication, both personal and general, demonstrating that you are in the flow of ideas and developments and that you are a thought leader.
• If you’re not willing to customize your communication approach on a client-by-client basis, then make sure you’re 100% clear upfront about how/when/why you will communicate with them, and follow-through as promised.

Lack of personalization

This problem is also linked to the listening component of communication. Every client is an individual, and while groups of clients may share the same goals, and therefore be suited to the same strategies, no one wants to feel like they’re being sold some sort of “cookie cutter” approach — especially when it comes to something as personal as their money. A “one-size-fits-all” approach simply will not fit all, and because cookie cutter won’t cut it for everyone, personalization becomes paramount. If you’re not delivering some reason for the client to say, “I’m getting something special here,” then he or she has less reason not to cut you loose.

But personalization doesn’t stop at the portfolio.

Do you know the spouse? Do you know the children, especially adult children? If the main money manager dies, do you have a relationship with the one who will take over? It’s a big mistake for any financial professional to fail to establish a relationship with the client’s significant others.

According to Jeannie Underwood, SVP and head of Global Atlantic’s Global Atlantic Consulting group, “Research shows that women report feeling the most disconnected from the financial services industry, and the financial profession has been slow to adapt.” This is an area where financial professionals literally can’t afford to fall short, unless they’re comfortable missing out on their share of a near-trillion-dollar market. "The industry is missing out on an estimated $700 billion in revenue annually by not meeting the needs and expectations of women."³ And all of this is directly related to our next entry.

Tips:

• Many people are seeking personalization in their portfolios. Make sure that you’re clearly communicating how the strategies you suggest are specifically suited to each client.
• Personalization may extend past the portfolio to include getting to know personally the spouse or other people who are important in your client’s life.

New association

Clients can and will have any number of life changes during your relationship. Marriage, divorce, births, deaths, geographic relocations, even new friendships can all lead to situations in which someone new is introduced to potentially take your place. These are all completely out of your control, obviously. But what you do to position yourself against such shifts is very much up to you.

The industry is missing out on an estimated $700 billion in revenue annually by not meeting the needs and expectations of women."

According to Bryan Kuderna, head of the Kuderna Financial Team and author of multiple books, including most recently, What Should I Do with My Money?: Economic Insights to Build Wealth Amid Chaos, published by McGraw Hill and available on Amazon, “Family referrals are probably the most difficult to preempt. When someone comes to you and says, ‘Oh, my new brother-in-law is a financial professional.’ That sort of thing is hard to anticipate or avoid.” But, he says, you should still be ready to answer with truths such as, “It’s always good to have unbiased, independent professional advice. And there can be discomfort in dealing with family and friends.” As Bryan says, “The goal is at least to get them to give pause and consider the potential traps of working with someone just because they’re related or the friend of a friend.” Once again, the previous entry on the list leads directly to this one: the more personal the connection, the more protection you will have against possible abandonment when new names are suggested to your clients.

As far as geographic relocation is concerned, given today’s technology, there is no reason why a lack of physical proximity should feel alienating in any way. If you’re not already communicating via phone, email and Zoom/video chat, then something is definitely wrong. In short, a move doesn’t have to feel like a seismic upheaval.

Tips:

• Know what’s going on in your clients’ lives to get out in front of life changes.
• Deliver personalized service that encourages your clients to suggest you to their new acquaintances, rather than vice-versa.
• Establish communications in a variety of ways so that physical distance won’t feel so disruptive.

Fee escalation

Fees are an unavoidable fact of financial life. And sometimes fees go up. And even if fees don’t go up, clients may still feel like they do if performance goes down. When a client sees losses and fees, the obvious question becomes: “What am I paying for?” This entry seems to stand alone, but not really. Everything that came before on the list all comes together here — setting realistic expectations, maintaining excellent communications and establishing authentic personalization can combine to provide a protective (though not impenetrable) shield against this complaint. Whether you weather the storm may depend a lot on whether you built a barricade out of those raw materials.

One thing to consider as well: The words you use matter, and some words work better than others. According to a study commissioned by Global Atlantic, clients find talking about “costs” to be more palatable than “fees.” Everyone understands that products and services cost something, but being charged a “fee” can feel negative or even punitive.

Tips:

• Increase communication in order to reset realistic expectations and deliver heightened personalization during challenging times.
• Try to use the term “costs” rather than fees wherever possible.

Overall, this is definitely a “good news/bad news” type of situation. The bad news is that clients sometimes say goodbye. The good news is that most of the reasons for separation are under your control. In addition, a recent study by Morningstar found that, overall, only 6% of investors break up with their financial professionals.⁴ That’s definitely good news! So, with the odds already stacked in your favor, taking the steps suggested here should help keep your client base growing, with even fewer au revoir along the way.