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A list of Dan Richards’ previous articles appears at the end of this article.
A video of this article is available here.
Every couple of weeks I take an evening or a weekend morning to talk to investors – discussing their mood and chatting about what they’re thinking and doing.
A couple of weeks ago I talked to an investor who had recently switched advisors – and who provided an example of the stress that investors experience when they‘re not sure whether their advisor is really on top of their financial affairs.
“I’d been working with this advisor for a few years,” he said, “and I liked him well enough. He’s actually a really nice guy.
But late last year I realized that I was losing sleep because I wasn’t sure whether he was really on top of my situation.”
This investor went on to say that as a result, he was approached by a different advisor who a buddy of his suggested contact this investor. After a couple of meetings, he moved his account.
I asked this investor what led to the decision to change advisors.
“Two things really,” he answered.
“First, my advisor had put together a financial plan about three years ago.
In light of everything that’s happened, about a year ago I asked him whether the plan needed to be updated. His answer was that the plan had a long-term focus and that what we’d been through was just a blip and that I didn’t need to worry.
Given that I kept reading about how the financial system was melting down, I didn’t entirely buy that – and got more and more concerned that my advisor wasn’t really taking my account seriously.”
Then he went on.
“The other thing that concerned me was that, aside from getting a call from his assistant to book a meeting once a year, I had to take all the initiative to stay in touch.
Whenever I called him, he always got back to me right away – he was really good at that.
But I only heard from him when I called. I was just concerned that I wasn’t important enough for my advisor to really care about – and that my half million dollars was secondary to his other bigger clients.”
Like many people who switch, this investor didn’t relish the prospect of breaking the news – and the new advisor told him he’d get in touch with his previous advisor’s office and take care of all the paperwork entailed to switch his account over.
Inevitably, the investor got an immediate call from his old advisor.
“I was really surprised to get a request to transfer your account,” the conversation began.
“I know that the markets have been tough but I thought that we had talked about how your account has really bounced back and in fact done well under the circumstances. Based on our last conversation, I thought you were actually reasonably happy.”
This investor explained that it was nothing personal and that his move was not primarily because of the performance of his portfolio.
One of the reasons for his move, he said, was the concern that his plan hadn’t been brought up to date.
“That was actually on my list to talk to you about the next time we met,” the the old advisor responded.
“I didn’t realize that this was that big a concern – if you’d told me I would have been happy to do this for you.”
There are a couple of important lessons from this experience – costly for the advisor who lost the half a million dollar account, but available free of charge to everyone else.
The first is to listen for hidden meaning when talking to clients and to never dismiss any concern or apprehension, no matter how small it might seem. Chances are that if the advisor had acted when his client first questioned whether his plan continued to reflect the market reality at the time, he would still have that account.
The second lesson relates to the stress that many clients experience when they feel they have to initiate all the contact with their advisor.
I’ve written in the past about the difference between a conversation that a client initiates (on a topic such as college savings accounts for grandchildren) and one when the advisor picks up the phone to make the call first.
It can be exactly the same conversation, but if it happens at the client’s initiative, the advisor gets dramatically less credit – people wonder whether that conversation would have happened if they hadn’t picked up the phone and called.
I recently talked to an advisor who last spring began setting aside half an hour a day to pick up the phone and check in with clients who he hadn’t spoken to for a while. He told me he was astonished at the positive response – and the relief those clients felt just knowing that he was on top of their situation.
In fact, this advisor commented that the most productive 30 minutes was when he didn’t actually reach any clients and simply left messages, saying something like: “It’s Joe Smith. I’m just calling to check to be sure everything’s okay and to see if you have any questions you’d like to talk about. If there’s anything you want to discuss, give me a call at the office – otherwise, I look forward to sitting down when we meet in a couple of months for our regular review.”
Along similar lines, a couple of years back, I interviewed an extremely successful business owner who talked about what he looked for from his professional advisors.
“I assume that most people are basically competent and know what they’re doing,” he said.
“What I look for are people who are proactive and are always thinking about my situation so that I don’t have to,” he said. “That’s what I look for in my accountant, that’s what I look for in my lawyer – and that’s what I look for in my financial advisor.”
Not every client articulates this as clearly as this business owner. But those words capture the essence of what many clients seek – the confidence that their advisor is on top of their situation so they don’t have to be.
* Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written and video commentaries and to reach him, go to www.clientinsights.ca.
