Financial advisors often make common mistakes that can lead to client dissatisfaction and/or loss of business. These mistakes are due largely to a lack of adequate processes; advisors’ failure to operate their practices like a business; and, in some cases, negligence or oversight.
The bottom line is that advisors need to understand that they are running a business that deals with clients. This requires taking steps to ensure that their clients’ interests always come first.
Here are seven common practice management mistakes advisors make and how to avoid them.
It’s easy to make promises to clients, especially when the markets are performing well. But if the markets are up in a particular year, you have a duty to explain to your clients that market performance is not guaranteed; that markets go up and sown. Be realistic in telling them what to expect and your role in ensuring that they achieve their goals, regardless of market conditions. Don’t sugar-coat anything.
Clients expect to meet with you periodically and to have the ability to discuss their concerns as they arise. Being “too busy” to talk to clients is not an excuse. It sends the message to clients that they are not important. The truth is, clients make a choice to work with you, so you have to make a choice to work with them.
Clients expect you to respond to their questions or concerns within the time frame you promised — which is typically established upfront. Failure to do so can lead them to seek answers elsewhere. It’s a non-starter if you can’t keep your word. However, you don’t always have to be the one who responds to clients as your team can do so whenever it’s appropriate
Advisors often assume that nothing has changed with existing clients, so they do not revisit their expectations. There is a huge opportunity cost that comes with this assumption, as client expectations might change because of various life events. Therefore, you should ask your clients frequently about life changes and how you can be of further assistance. Make proactive rather than reactive calls to clients. You can also revisit clients’ expectations during periodic reviews or through feedback mechanisms such as surveys.
You can put your reputation at risk by not being transparent. Clients want to know what they are paying for and how much. The operative behavior is full disclosure about the fees clients pay, the commissions you receive, product features and any associations you may have that could affect your relationship with clients. It always comes down to full disclosure about anything that may have an impact on your relationship with clients, now or in the future.
Typically advisors focus on product performance and service and often neglect the “little things” that demonstrate client appreciation, such as follow-up phone calls, lunches, birthday cards and modest gifts of appreciation. You can get a sense of what clients would appreciate during the discovery process. You must be aware that even little tokens of appreciation can go a far way into maintaining healthy client relationships.
When building client relationships successful advisors take into account their clients’ best interests. They avoid attempting to persuade clients to accept their views. It is recommended that you take a “big picture” approach when making client decisions — one that embodies a holistic view of each client’s situation. Successful advisors construct the most efficient and effective portfolios for their clients, taking into account their unique needs. They counsel them about what’s best and don’t try to sell them products off the shelf.