7 Missteps for Financial Advisors to Avoid

Time and time again, research shows that the personal relationship between a client and their advisor is paramount to the success of both parties. Without a strong personal relationship, advisors cannot provide the level of personalized, high-quality advice that clients seek today. For this reason, clients may disengage from their advisor or fire them outright if they see a lack of personal connection and poor advice.

In our latest research, we explored which advisor behaviors contribute to investor disengagement. We also studied how investor disengagement manifests in the advisor-client relationship.

Death by a thousand cuts

We began our research by collecting common advisor behaviors. We then asked counseling clients to rate how often they encountered each behavior. For those they reported experiencing, we asked participants to rate their emotional response to the behavior (on a scale from I really didn’t like it to I really liked it, with a neutral midpoint ). We then asked participants how each behavior affected their relationship with their advisor along four dimensions: their trust in their advisor, their decision to collaborate with their advisor, their decision to allocate assets to management, and their decision to recommend their advisor to others.

What common advisor behaviors do clients hate the most?

We identified seven stocks that customers said they didn’t like (in descending order):

1. Did not provide details of fees.
2. It took over a week for the tasks.
3. Financial jargon used.
4. Recommended investments regardless of values.
5. Suggested investment options without going into detail.
6. Asked me to fill out long forms.
7. Did not provide holistic advice.

For the rest of the actions in the survey, customers reported neutral or positive sentiments (see article for full results). To understand the impact of these disliked behaviors, we created a composite score of the four dimensions and then identified the relationship between the score and each disliked behavior. We found that a client’s degree of dislike for a stock had a moderate negative impact on their relationship with their advisor. In other words, an investor experiencing unpleasant behavior was discouraged from trusting and recommending the advisor, and encouraged to invest less with the advisor and stop working with them.

No more missteps: be aware of hated behaviors

Some of the counselor behaviors we studied in our research may seem harmless at first glance, but can lead to disastrous injuries over time. It is too easy to ignore these results, claiming that You (as a financial advisor) don’t do these things to your clients. Other advisors using financial jargon that leaves clients confused or speeds up explanations of past investments. Not You, Of course. Unfortunately, we find that more than half of clients have experienced each of these behaviors with their own advisors, making these behaviors far more common than any advisor should be comfortable with.

To help advisors ensure they aren’t among the culprits, we’ve created a two-step guide available in the full white paper. The first step is a checklist that counselors can use before and during a conversation with a client, so they can think about and address the five most hated behaviors we found in our research. The second step is a follow-up survey template that advisors can send to clients after a meeting. The survey subtly asks the client if they were confronted with one of the five most hated behaviors during their meeting with their advisor. Compared to a face-to-face survey, the online format of the survey can encourage honest feedback; Instead of being put on the spot, clients are given time to reflect on the meeting and provide comprehensive feedback.

Together, these two steps can help counselors ensure they don’t accidentally destroy the relationships they wanted to develop.