For many financial advisors, maintaining open communication with their clients is a key component of building trust, understanding their values, and developing meaningful plans to help them reach their financial goals. However, despite our efforts to ensure that all clients understand the “big picture” of their comprehensive plans, some of our clients are experiencing an attractive return on investment and better portfolio performance. You may be tempted by other financial professionals who promise And if a client decides to pursue a relationship with a new financial professional in search of better returns, the advisor knows what went wrong and how to prevent other clients from being tempted. You may wonder.
In the 114th episode of Kitces & Carl, Michael Kitces and client communications expert Carl Richards discuss how financial advisors interact with clients who are tempted by promises of higher returns from other financial professionals, Discuss ways to keep all your customers focused on their goals. Financial plans are created to help you achieve and explain why it’s so important to remind your clients of their real value.
As a starting point, understanding the underlying motivation behind a client’s decision to terminate a relationship in the pursuit of better performance results can be insightful for an advisor. While it’s possible that clients have always been really more interested in investment performance than identifying and planning financial goals (and they weren’t well suited to be advisors in the first place), they often go beyond that and go deeper. There is a reason. Dissatisfaction with portfolio performance (e.g., family pressure, attractive “deals” offered by investment management firms, etc.) diverts client focus from initial funding plans, forcing them to pursue more funding guarantees you will not get
By holding meetings to discuss these reasons, advisors help clients refocus on their goals and priorities, minimizing unnecessary risks that could jeopardize clients in the long run. while remaining a reminder that the portfolio was designed with those goals in mind. Advisors can use these conversations to learn how investment strategies are designed and selected, how portfolios are monitored and managed on an ongoing basis, or how client allocations are designed to suit client assets. You can also identify if there are gaps in how you communicate with your customers. values and goals.
For clients who are confident about ending the relationship, the conversation need not focus on persuading them to continue. However, it can also be helpful for clients to reassess their motivations and priorities (because their advisors are on track to meet their financial goals, they realize they are already well on their way and change their minds). It may even end up being). However, if, at the end of the conversation, the client is still convinced that he or she could do better with another advisor, it may be time to leave that advisor.
Ultimately, the point is that the advisor stays focused on what matters most to the client, even when the client may be tempted to pursue better interests elsewhere that are too good to be true. provide tremendous value to Also, while it may be rare for a client to decide to leave due to investment performance results, having the right communication strategy in place upfront can help advisers provide their clients with a “real” financial planning experience. helps remind and discuss the value of To escape making emotionally driven (and potentially irrational) decisions that you may later regret!