What Clients Do After Firing Their Advisor: Why Many Leave and How to Respond

When a client relationship ends, it can leave many advisors wondering what happened. Answers to questions like “Why did they leave?” and “Did they decide to hire a new advisor?” not only provide insight into an advisor’s perceived shortcomings, but can also help advisors understand how to retain clients and win new ones.

Morningstar’s latest behavioral report explores the motivations of investors who have fired an advisor and either hired a new advisor or left the financial planning system altogether. It also examines how the hiring needs of investors who have fired an advisor differ from those of investors who have never done so.

Advisors who understand these findings—and what they might mean for their practice—can find opportunities to both retain existing clients and acquire new ones.

To read the full research report, download a copy.

Getting fired by a client is a drain on an advisor’s practice. The loss isn’t limited to future revenue—significant time and energy were invested in onboarding that client in the first place. Naturally, advisors want to understand why they’ve been fired, with the hope of preventing it in the future.

Our past research finds that the motivations behind clients’ firing decisions are more complex than lackluster returns or high costs. Instead, former clients tend to cite discontent with the quality of financial advice and the relationship they had with their advisor. Moreover, not all clients who fire an advisor choose to go it alone—some seek a new advisor while others leave the financial planning system altogether.

Making sense of this distinction can provide advisors with more context on how to both avoid being fired and attract those who’ve already worked with an advisor. The latter of the two present a challenge for advisors given these clients’ negative experience with an advisor, but they can also represent valuable opportunities, as much of the upfront work may already be done.

Not all former clients behave the same way. Our research identifies three groups:

• Switchers: Clients who have an advisor but also have fired an advisor in the past.
• Leavers: Clients who have fired an advisor and have not hired a new advisor.
• Keepers: Clients who have never fired an advisor.

So how do Switchers and Leavers differ? Clients with higher amounts of investable assets are more likely to be Switchers, highlighting their potential value to advisors. This group is also more likely to fire their advisor because they were dissatisfied with the quality of communication, while Leavers were more likely to point to comfort in handling finances.

Yet the two groups often share similar reasons for leaving. In many cases, clients aren’t leaving because they feel they no longer need advice—only 13% of Leavers felt comfortable managing their finances alone—but because their expectations around advice and relationships weren’t met.

This provides an important reminder for advisors: Retention is less about competing with do-it-yourself alternatives and more about delivering on the core elements of the advisory relationship.

Advisors may be tempted to attract Switchers by addressing the reasons that led them to fire their previous advisor. However, this approach can be misguided.

In general, clients’ reasons for hiring a new advisor differed from the reasons they fired their previous one. In fact, only one of the top five reasons for firing overlaps with the top reasons for hiring. This suggests that Switchers aren’t directly selecting advisors based on what dissatisfied them with their previous advisor. Rather, Switchers may overemphasize certain frustrations when explaining past decisions but prioritize different attributes when making future ones.

For advisors, the implication is critical. When speaking with prospective Switchers, past complaints shouldn’t be treated as a road map for winning their business.

Switchers differ from Keepers in how they evaluate advisors. They’re more likely to hire for the quality of financial advice and less likely to be driven by a specific financial need compared to keepers.

That is, Switchers aren’t selecting someone to meet a discrete need, but are assessing whether the advisor’s thinking, guidance, and approach improve upon what they already had.

Advisors may build confidence in the value and quality of their advice by connecting their process to broader needs—particularly the clients’ discomfort handling finances on their own and need for behavioral coaching.

For example, advisors can walk clients through the typical decision-making process for their advice. In doing so, prospective clients may better understand the high quality of service being offered.

Advisors cannot assume that fixating on Switchers’ past frustrations will lead to new relationships. These clients are more likely to be attuned to the overall quality of advice and less on addressing a specific financial need. Three shifts in approach for advisors include:

• Don’t treat past complaints as a blueprint: Acknowledge previous concerns but move toward understanding what the client is seeking in a new relationship.
• Recognize Switchers are experienced clients: Demonstrate how your approach improves upon their existing framework rather than leading with solutions to specific financial problems.
• Emphasize the value of the relationship: Show how you serve as a sounding board, provide clarity in moments of uncertainty, and help clients stay aligned with their long-term goals.

Across all three groups, one theme remains consistent: The key to retaining and winning clients is to deliver on the core elements of the advisory relationship— providing comfort, engaging in behavioral coaching, and building client connection.

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