Why your clients leave you

An article in last month’s newsletter about when it’s time to fire a client drew a lot of attention! It proved to be a situation that many financial advisers have experienced. However, now it’s time to take a look at the flip side of the coin – when clients leave you.

We’ve set out below some of the reasons that clients might leave you, and what you can do to prevent it happening.

 

They lose the feeling of love

You are busy, lots of new clients coming through the front door and business is great! However at the same time, you need to guard against existing, valuable clients quietly slipping out the back door. Have a really clear activity plan for all of your valuable clients, making sure that all of them continue to feel the love every year.

Make sure your ongoing support packages are really clear in the eyes of your clients. Manage their expectations on what they can and should expect, and then deliver a quality service time after time.

 

They lose sight of the plan

The development of a financial plan is a big deal for clients. They get a strong sense of direction and can see a pathway to future financial success. If required, this often entails you putting products in place.

It’s so important to recognise that you’ve simply started the client on their financial journey. Your role then becomes one of an ongoing guide; keeping the client on track for future success and ensuring the plan is continually pointing them in the right direction. If you don’t keep the client focused on the plan (and not just the products), they can fall off the path. And this is where you risk losing them.

 

They don’t believe in the plan

This is a trickier one as you may be sailing along blindly, thinking the client is 100% committed to the plan. It is worth getting positive affirmation from the client that they are happy with the plan, that it comprehensively covers all of their aspirations and concerns and that they are fully satisfied with the proposed strategies and solutions to achieve the plan.

Of course this becomes a lot easier with cashflow planning as the client can see before them the progress they are making, the further progress needed and whether they are on track or not. This clarity builds their financial confidence.

 

They don’t understand the plan / and or solutions

People don’t like to feel stupid. Some clients may appear to understand everything you tell them, but in fact may be bamboozled by the language and terminology that you use. Be careful that you talk to them as clients, keeping your language simple. Don’t talk to them with language you use with fellow professionals as your client may not understand you. This will undermine their trust in you and rather than appear stupid, they may prefer to deal with someone who they understand and connect better with.

 

They think the grass is greener elsewhere

Some clients leave because they believe another adviser will get better results for them. If another adviser is developing a better, more comprehensive plan for your client, you’ve got a problem. However if another adviser is promising “better returns”, you need to confront this. Clients can get greedy and blinded when confronted with unrealistic opportunities. You need to constantly remind your clients that you (and other advisers) have no control over markets or timing and that your role is identify a portfolio that reflects their specific needs, and not simply to suggest a portfolio with the highest potential returns (and risk). You need to remind them of the valid expectations they should have and how this relates back to the financial plan.

Some clients will leave anyway. Keep the door open to them – they may return when they recognise the grass was greener elsewhere.

 

These are just some of the reasons clients leave you. Ongoing, open communication with your valued clients is the key to preventing them slipping out the back door. Getting new clients into your business is hard work, keeping them there requires the same level of energy and attention.

Take action when it’s time to fire a client

It’s hard enough to get clients in the first place, I hear you say… But sometimes relationships just don’t work out and it’s time to part ways. This arises relatively infrequently in personal relationships, and it also arises fairly rarely in adviser / client relationships. But just as it doesn’t make sense to stay in a bad marriage, it also doesn’t make sense to stay in a toxic or doomed adviser / client relationship…

 

Relationships can turn sour with clients

We’re not talking here about the odd grumble that a client may have. When markets take a bit of a dive, the natural reaction of a client is to get nervous. Some will have an open conversation with you about their concerns, others will stew silently, some might lash out a bit at you. There’s nothing wrong with any of these reactions – your skills as an adviser need to stretch to noticing client reactions, dealing with them accordingly and bringing your client’s attention back to what matters – their financial plan.

Instead we’re talking here about the client who is simply never happy – your service is too slow when it’s not, your charges are too high when they are in fact fair, their fund performance is not good enough when it’s not your fault and the client also doesn’t want to take any risk. If the client can find an opportunity to moan, they immediately take it. When your phone rings and your heart sinks when their number comes up – everyone knows the feeling.

Let the client go – fire him or her. A client who doesn’t recognise your value is no good for you or your business.

 

The time comes to break free

I was chatting today to an adviser that I really respect about a specific client of his. It’s about the tenth conversation we’ve had about the client, who is simply never happy. My adviser friend has jumped through hoops for him over the last few years – regular draining meetings and phone conversations, numerous excellent and time consuming reports, meetings arranged with providers, exceptional service at every turn. All the time having developed an innovative financial plan for the client, that is on course for delivery via a solid investment strategy. And all of this has been delivered for a very reasonable fee.  There has never been a word of thanks or even grudging positivity from the client.

The adviser has ploughed on as the annual fee, even though extremely reasonable is not insignificant. The adviser didn’t want to lose the fee… until recently, when the client started arguing over the fee level (again). The adviser told me today that, about 4 weeks ago he fired the client. He told the client he would not deal with him any more and would facilitate fully his move to another adviser or organisation of his choice.

The client took it badly, told the adviser he was going anyway and went off to talk to other advisers. The faraway hills were not greener – the client soon arrived back a bit sheepishly saying that he(!) had reconsidered and would stay on the existing fee. The adviser said he was no longer a client and wouldn’t be taken back.

 

Don’t look back

Yes the adviser misses the fee a bit. But the cost of that is far outweighed by the liberating impact that getting rid of the client has had, both for him personally and for his business. He knows his proposition is excellent, his fees are fair, his communication is excellent and his results for clients are as good as can be achieved. However this experience caused him to re-evaluate what he does and question that maybe the fault lay with him as the adviser and not the client.  Having done this exercise though, it re-confirmed to himself that his offering is excellent. He has more time for other clients, renewed confidence in what he offers and a certain pride that he stood up for his own principles. He doesn’t dread phone calls, and the slog associated with that particular client is gone. All of this is worth a lot more than a fee.

I’m not suggesting that the decision to fire a client is easy and should never be taken lightly. But do you have a client who is dragging you down, takes up too much time, keeps you awake at night, moans about you to others and makes you question yourself and what you do? Because if you do, you should consider whether they deserve a seat on your bus.

 

Every day you help your clients to live the life they want. Do yourself a favour and live the life you want – don’t suffer clients who don’t deserve you.

Help your clients retire properly

One of the primary reasons why clients reach out to financial planners is to plan for financial security in retirement. Of course, financial planners today deliver far more than helping clients to simply save money for the future. You help clients to visualise what their retirement will look like, you put a cost on this life and then develop a plan to help your clients to achieve the life that they want.

This is very valuable, but clients need more help than this.

Retirement has a huge impact on clients, who overnight go from being very busy people to well, maybe not having a lot to do… Not working any more creates a huge void in their life. Of course for some, this is a very welcome space, for others it brings a range of issues with it. When they’ve hung up their boots, it is often only then that people recognise how important their colleagues were as part of their social fabric. When this daily interaction is no longer there, loneliness can ensue. Of course on top of this is the loss of a sense of purpose every day. Before retirement, your client got out of bed every morning to go to work, to earn money and to achieve their work objectives. Now these are no longer there, what drives them every day?

As their financial planner, you can help your client prepare fully for retirement by expanding your conversations far beyond the financial aspects of their later lives. Here are some areas that you might help them consider,

 

Being with their partner every day

This is not a punishment! But it will definitely take adjustment for both your client and their partner. Routines will now change for each. Your client needs to develop a new routine and the immediate thought might be to hang out with their spouse every day. However their spouse may be happy with their own existing routine (that doesn’t include your client) and might not want to change it.

Of course the answer is in finding a balanced approach. It is about awareness of each other’s space, routines and hopes for the future together. The key to this is talking about it and working through it together. As their financial planner, you can gently guide this conversation.

 

There is time to fill

The thinking around this needs to begin long before retirement. The working day, including commuting time often punched in 11 or 12 hours every day. That’s a lot of time to fill now, so how is your client going to do it? Are they going to play lots of golf? Are they going to study or do voluntary work? Are they going to travel to all those places they had long promised themselves to see?

Your clients need an activity plan, as well as a financial plan. You have worked with many clients as they transition into retirement. Tell the stories of these other clients, how they transitioned, the activities they carried out, how they made retirement work for them. Hearing other people’s experiences is always a useful guide.

 

Encourage clients to mind their health

You have seen the cost of clients getting ill. Bring good health practices into both your client’s financial plan for retirement and also their activity plan. Will they join a golf club or a leisure club with a pool and gym? Will they go for a walk every day?

Also encourage your clients to stay sharp mentally too. Their plan should include cashflow for meeting friends, getting out and about and maybe even going back to college to study? All of these will help your clients stay fit and strong.

 

Remind your clients of their value

Your client has so much to offer in terms of experience, expertise and time. Some people can retire with a perceived loss of value. Previously a company and colleagues relied upon them, and now that is gone. All that actually needs to change here though is that while previously your client was paid for their time and expertise, they can still use their skills, but maybe without payment or for lower payment. Your client will now work on their terms, for someone / a charity that they want to work for, at times that suit them and in ways that make them feel good about themselves. Your client will add enormous value, whether that’s to a voluntary organisation, coaching a sports team or mentoring less experienced business owners. Many retired people build up nice little income streams for themselves in retirement, by putting their skills and expertise to work, all on their own terms.

 

Helping your clients to get their finances in order is very important for them to enjoy a happy and satisfying retirement. But it’s the other factors that will make them feel good about themselves and will help them to live their life to the full for many years to come. As their financial planner, you can guide your clients to think about these areas and help them achieve a full life after retirement.

“So, can you tell me please how you charge”?

There’s a lot of work being done at the moment by financial planning firms in the Irish market in the broad area of charging for services delivered. Firms are reviewing the services delivered to clients and are working out how best to be paid for those services. This opens up a number of areas; fees v commission, how much to charge, how to charge, justifying charges etc etc.

We end up having lots of interesting and thoughtful conversations with financial planners that can be quite illuminating. When working with these firms on their Client Value Propositions, we spend quite a bit of time looking at the services delivered and how these are paid for. We are looking to develop the remuneration model of the future for the business. However as part of this, we want to understand the starting point – how the business is operating today in this area. To get clarity on this, we ask how the following question is replied to, when posed by a potential client,

“Can you tell me please how you charge?”

We get a quite a variety of responses!

 

We don’t charge

Yes, we have heard this one! This of course simply makes no sense. Nobody works for nothing, and clients have no expectation that you should work for nothing. Potential clients at best are simply confused by this answer and at worst are hugely suspicious of this answer. Where’s the catch? What am I missing? How can there be any value in what you are providing to me, if you are providing it for nothing?

Of all the potential responses, this one certainly takes the biscuit in terms of being the one to avoid…

 

You don’t pay us, we get paid commission

When advisers are being very candid, it’s apparent that this one is still trotted out quite frequently. For many of the reasons mentioned above, I have a real problem with this response. I also have a problem with it as it is simply not true. The customer always pays – fact. Without further explanation, this also positions the adviser as a price taker, and whose remuneration is solely dependent on the sale of a product. More suspicion for the customer – do I need this product? Why am I being sold this product etc.?

I am not for one minute decrying commission as a method of payment. It makes sense in so many situations. However that is the way it should be positioned – simply as a method of payment and not where the product is seen as the driver for you to be paid.

 

We charge 50bps on all monies invested

We’re moving into more positive territory now – at least with this response you have your own developed pricing approach. A thesis could be written on the differences and comparative benefits of AUM pricing v flat fees v retainers etc., but that is for another day.

The challenge I have with this approach is that it doesn’t make sense to me that all clients are charged the same amount. Because all clients are different and need and deserve different things and services.  Some clients need to meet you quarterly, some once a year. Many embrace cashflow, some don’t. Why are they all charged the same, when they place completely different levels of demand on your time and expertise?

I’m not proposing a unique charging structure for every client, but the approach below seems much more appropriate to me.

 

We charge based on value delivered

Can there really be any other approach? Clients seek the services of financial advisers today to help them address a very broad range of financial challenges. For some, they have a single, specific challenge. For others, they want to make better use of their financial resources or improve their relationship with their money. For others again, they want a very broad service around establishing life goals and then understanding what is needed to bring those goals within reach through careful planning.

All very different requirements and delivering different levels of value. How can you not charge differently for each of these?

 

How do you answer the questions “Can you tell me how you charge?”, and how will you answer it in future?

Different people want (and deserve) different things

How many clients have you? 200, 500 or 2,000? Often as your client base grows, it results in your number of staff growing. But the chances are that even with your increased staff numbers, you are unable (and unwilling) to provide a top-drawer service to every one of these clients…

Really the question is – why should you? After all, you derive hugely varying levels of income from each of those clients so surely the clients that are driving very high levels of income to your business deserve a higher level of service?

Of course this is not at all a novel concept! Every time you step on a long haul flight, it’s immediately obvious. Turn right for the cheap seats in Economy or turn left to be pampered in Business Class or 1st Class. And then when you book a hotel, you can pay less for a standard room or pay more for a suite with all of the bells and whistles that come with that.

Now let’s take this concept into the financial advice space where for many of you, your remuneration model is built around trail commission. If I’m fortunate enough as an investor to come to you with €1 million to invest, your trail commission might be €5,000 p.a. (assuming you charge 0.5% of assets). That’s fine if your proposition stacks up.

But what happens if I decide to place just €200,000 of my money with you? Now your trail commission falls to €1,000 p.a. Still very attractive, but obviously not as nice. However the question that’s in my head is, “What extra am I getting from you by placing the full amount with you, that’s giving you the benefit of an additional €4,000 p.a. of my money?”

If there is no difference between the services offered in each of these situations, I suggest you’ve got a challenge on your hands… Simply adding trail commission to policies without thinking through your client proposition is fraught with danger.

Not completing a robust segmentation of your clients is also very dangerous. Even without doing a segmentation exercise, I’ve no doubt that a small number of your high value clients get your best service at all times. But inevitably what happens is that there are other high value clients that slip off your radar. Either you don’t realise that they are high value or they just aren’t demanding. This is aside from some low value clients who are constantly on the phone end up getting a huge amount of attention. That’s hardly fair, is it?

So what do you do?

 

Segment your clients

For starters, do a proper segmentation exercise. Know who is valuable to your business and who is not. Don’t be put off from doing this work with the excuse of “it doesn’t capture the full picture”. Yes, there will always be exceptions within your segmentation – for example a client with very little business with you, but who constantly refers other clients to you is actually a high value client to you and should be treated as such. But don’t start with the exceptions; work out how to deal with them later on a case-by-case basis.

I’m definitely not suggesting that client segmentation be based on asset values alone – that is only one factor to be considered and used. However it is usually one of the more heavily weighted factors used by advisers in segmenting their clients.

 

Develop your service packages

Develop service packages for your business that reward clients depending on their value to your business. Make your high value clients feel really special, reward them for trusting you with their money by giving them a truly rewarding client experience. Build a moat around them and pull up the drawbridge from your competitors by providing a second to none service.

Let your mid-tier clients feel valued by your business, while making them aware that there is lots more you can do for them (if they are willing to pay for it).

And of course your no/low value clients will begin to realise that it’s a business you are running and that they don’t have 24/7 access to you. If they want access to superior service (ongoing advice from you), they pay more for it. The same as when they book a flight or a hotel room.

 

Don’t be afraid to say no

Yes, your lower value clients may want a better service possibly than you are offering and might try to demand it from you, without paying for it. Don’t be afraid to say no. You’ll only be doing this with your no/low value clients… And they are of little or no value to your business. Put your time into those clients that are of value to you – this is what your clients deserve and what your capacity allows.

The days of a “one size fits all” approach are over. Give your clients a service that they want and deserve.

What exactly is Lifestyle Financial Planning?

We have seen quite a significant movement over the last few years of Financial Brokers extending the services they offer to their clients, through the delivery of lifestyle financial planning. While this service may not be suited to every client, or indeed you cannot justify delivering it to every client, the shift is happening. This is because of the value that lifestyle financial planning brings to people’s lives and because of the deeper and more engaged relationships that develop between the Financial Broker and the clients that it suits. So what is it all about?

 

What is lifestyle financial planning?

Lifestyle financial planning consists of four main phases, and each of them in turn are required. The four phases are

 

1. Discovery

This is the phase that gets skipped over the most, which is a shame as this is the most important of all of the stages. This is the phase where the planner finds out the lifetime goals and ambitions of their client, where the client can visualise the outcomes in their own terms – the type of life that they will lead, the possessions that they will own, the impact they will be able to have on the lives of others, what they will do and achieve in their lives.

Until you know the answer to these questions, what are you planning for? Just building a pot of money with no idea of what it will allow your client to do?

This phase is carried out by careful and well thought out questioning by you. And then listening intently. It is not “airy fairy”, instead it is the most important conversation that you will have with your client as you get to understand their hopes and dreams

 

2. Planning

This is where the planner then uses his/her expertise to develop the roadmap for the client to get from where they are today, to achieving the life they visualised in the discovery phase. This is generally a comfortable area for Financial Brokers, where you can utilise all of your experience and technical skills to develop a plan for your clients. As a result though of the comfort at this stage, some brokers rush to it without properly completing the discovery phase – when that happens, you are no longer carrying out lifestyle financial planning.

Important also to this phase is the use of future cashflow planning. Without it, it’s not really lifestyle financial planning. When using this process you can demonstrate to clients if they are on track to lead the life they visualised, and if not what they need to do to get on track. You can show them the impact of unforeseen events and how to plan for them, the impact of changing goals and of course the actions they need to carry out, or products they need to put in place to achieve the plan.

 

3. Implementation

The most straightforward of all of the phases and an area that Financial Brokers excel in. This is where you assist the clients in carrying out the required activities (e.g. budgeting, wills, power of attorney) and where you put the required financial products in place that will play a role in achieving the goals of the plan.

 

4. The ongoing journey

This is again a really important stage that sometimes doesn’t get enough attention. Regular contact and scheduled meetings sit at the heart of lifestyle financial planning. The ongoing interactions turn the plan into a real journey towards the client achieving their lifetime ambitions. They are the opportunity to review and restate / change goals, review the progress and performance of the actions and products that were implemented and keep the client on track in terms of their behaviours with their money and their investments.

Without these meetings happening as scheduled, it is akin to pushing a boat away from the harbour wall to sail the stormy seas alone… You need to be beside your client at every turn, helping them to navigate their way towards their dreams. These review meetings also give you the opportunity to stay close to your client, and to gently remind them of the incredible value that you are bringing to their life.

Equally importantly, having a robust and valuable ongoing service also enables you to justify your ongoing charges to the client.

This shift towards lifestyle financial planning is to be welcomed. It increases the value of Financial Brokers in the eyes of their clients, provides a richer client experience and builds value in your business through easier justified ongoing charges.