Even the most successful financial planners sometimes lose their clients. It is important to analyze common advisors’ mistakes to help prevent you from experiencing those same losses.
Here are a few top missteps and how to avoid them:
Investopedia mentions confusion as one of the top reasons why the clients may fire their financial advisor. Using complex financial industry terms without properly explaining them to clients creates nothing but confusion. Remember, clients are most likely not trained financial professionals. A very good way to avoid this unnecessary confusion is by attempting to use simpler terms in communicating with your clients.
2. Lack of Communication
Not explaining complicated terms is just one side of communication issues that can potentially affect clients and financial planners. As several publications including FA Magazine mention, an open communication channel between the client and the advisor is crucial for their productive relationship. Risk assessments, fees, return on investment, and everything in the scope of the relationship needs to be explained thoroughly.
Online investment management site Covestor.com cites a lack of attention from the advisors as one of the top 3 reasons why the clients walk.
According to Investor’s Business Daily, setting appropriate expectations at the very beginning of a client relationship will help in the long run, especially during tough market conditions. Clients need to know that there is a plan in place, that they are taken care of, no matter what is happening in the market. This sense of security can only be achieved through proper communication.
Often clients cite poor market performance as the main reason they decide to change financial advisors. This situation could potentially stem from not understanding a client’s wants and needs or from initially setting their expectations too high. Educating clients and being there for them during tougher financial times will help build a client’s loyalty to you and your firm.
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