Kitces & Carl Ep: Retaining The Client Who Transfers Out Without Notice

Kitces & Carl Ep: Retaining The Client Who Transfers Out Without Notice

By default, financial advisors generally thing that they should hold on to their clients as long as they can… ideally for the remainder of their careers. That is not, however, always the case, and as a result, news that a client has decided to terminate the relationship out of the blue can cause a certain amount of anxiety… especially when said client has a portfolio that accounts for a significant portion of the advisor’s revenue. Oftentimes, the advisor may not understand what went wrong, why the client left, and whether (or how) they should try to win the client back.

In our 69th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can approach clients who terminate their relationship with a firm without notice, the importance of understanding the reasons for the client’s behavior in the first place, and the potential opportunities that arise when clients decide to leave.

As a first step, it’s important to recognize that not all clients will benefit from lifelong relationships with a single financial advisor, because the reality is that, while a client’s original needs and circumstances may have initially set them up as an ‘ideal’ client, their needs and circumstances will almost certainly change over time, and the same advisor (or firm) may no longer offer what is best suited for the client. Accordingly, the fact that a client has chosen to leave without notice does not necessarily reflect negatively on the advisor. Instead, some clients may simply be uncomfortable about telling their advisor they’d prefer a change, uncertain about whether the conversation may become confrontational.

Yet, with the honest intent of truly understanding what is happening with the client, an advisor can benefit from learning how to better serve the client (even if that means helping the client find a more suitable advisor) and, in the process, potentially find ways to improve their practice (which can involve increasing the frequency of client touchpoints, re-evaluating how services are provided, and determining if the right services are being offered to clients in the first place). With that perspective in mind, advisors can approach the (soon-to-be-ex) client to understand why they made the decision they did, and then identify the best course of action for the client… and for the firm. Generally, advisors following this path will be faced with one of three outcomes: 1) winning the client back by addressing whatever issue was grieving the client, often resulting from a lack of communication; 2) agreeing that the client’s needs have changed beyond the scope of services provided by the firm, and helping the client find a new advisor who is better suited to meet the client’s new needs, or 3) graciously accepting that the client simply wants to leave, with no interest in sharing the reasons why, other than perhaps expressing a desire to seek out new services on their own.

By framing the conversation with the question, “Would you extend me the professional courtesy of walking me through what happened?” and not around how to keep the client’s business, the advisor can provide an emotionally neutral space for the client to express any grievances and concerns, reassuring the client that the conversation is not meant to be a confrontational plea to reconsider leaving, but instead, an opportunity for the advisor to either fix the situation, or to help the client find a new, more suitable advisor.

Ultimately, the key point is that an unexpected client departure can be be an opportunity for growth and learning, as the advisor has a chance to identify mismatches between client expectations and the services they offer, which (at the end of the day) can give advisors insight into how they can improve their practices. And having the confidence to let go of clients who aren’t a good fit for the advisor, despite the fact that it can be daunting to lose clients, can actually end out being an blessing in disguide, freeing up space for the next, more suitable client!

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