Why clients leaveArticle added by Mark Satterfield on September 15, 2009
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Mark Satterfield

alpharetta, GA

Joined: August 21, 2010

As every advisor knows, there are two crucial elements to building a client base --attracting the right types of clients and, even more importantly, keeping those who you would hate to see leave.

Todd Martin is, by any criteria, a member of the affluent class and the type of client most advisors would love to have. As the VP of sales for a $200 million manufacturing business, his income consistently exceeds $750,000. With more than $2 million to invest, he is on the "most desired" list for many financial advisors.

Last month, Todd decided to make a change after four years with his current advisor. What prompted the decision? Was there anything his advisor could have done to retain Todd as a client?

"I really didn't blame my original advisor when the market tanked," says Martin. "However, what got me thinking about making a change was that I started to hear less and less frequently from him."

Martin continues, "For a long time there was just deafening silence. And then, when he did start to communicate, it was all very defensive. It was obvious that he wanted to convince me that it wasn't his fault."

Communication is a tricky issue. Certainly no one likes to be the bearer of bad news. However it's during tough times that the need for communication goes up, rather than down. Ironically, this is when many advisors decide to go into "silent running" mode. It's a decision with terrible consequences.

A survey of 105 affluent investors who had changed advisors in the past six months finds that, in 88 percent of the cases, "lack of communication" was the primary factor in the decision to make a change. Obviously, communicating for the sake of communicating isn't the answer, but, of even more importance, is what is being communicated.

Nancy Bradley, CEO of a chain of pet supply retail outlets, says that her decision to change advisors was primarily based on a lack of substance in her advisor's communication.

"My advisor did an OK job of communicating with me frequently, that wasn't the problem. However, what made me start to think about changing advisors was that she didn't seem to have an opinion about what was taking place. She never discussed the pros and cons of various options I might consider. It really caused me to think about whether she was a true advisor or just an order taker. I felt that I was being talked down to. Look, I may not be as knowledgeable about investments as she is, but I didn't achieve what I've achieved by being a dummy."

This comment underscores what I've discussed before about how important it is to have a perspective and a philosophy. That is one of the key ingredients that separates an advisor from the masses, or as Bradley says, "One who is actually an `advisor' vs. a well-dressed clerk.'"

Martin comments, "If an advisor is going to target the affluent and ultra-affluent niche, they have to assume that we're relatively smart people. Advisors get themselves in trouble because they aren't able to facilitate substantive discussions."

So what's the lesson? First, err on the side of more, rather than less communication. Resist the natural tendency to go into the "silent running" mode when you know you have a difficult conversation ahead. Secondly, be prepared to discuss a variety of options, not just your one solution. That demonstrates intellectual breadth, for which your affluent clients will respect you.
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