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Client Engagement

Why Do Investors Fire Their Advisors?

Key Takeaways

  • Clients fired their advisors for several reasons other than cost and return performance—indicating that assumptions exclusively focused on money may miss the mark.
  • Our findings reveal that investors are most motivated by reasons pertaining to the quality of relationship and financial advice.
  • To understand how to resolve these issues, advisors should focus on the top underlying drivers, which we identified in this research: 1) a lack of personal attention; 2) an inability to communicate value; and 3) a mismatch of expectations early in the relationship.

Read Time: 4 Minutes

Losing investors can happen to even the best of advisors. Still, being fired may result in costly setbacks such as ungiven referrals, negative reviews, and missed opportunities.

As an advisor, how can you deliver quality service and help prevent your investors from parting ways?

While every situation is unique, it’s important to understand common factors that push investors to make termination decisions. By identifying the drivers, you can strengthen your client relationships and gain deeper insight into future issues. We evaluate the underlying motivations that lead investors to fire advisors—and how you can overcome these obstacles.

To read the full research report, download a copy here.

Understand the Motivations Behind Firing a Financial Advisor

While variables related to money may be easy to blame, new Morningstar research suggests a more complex story—revealing that there are a multitude of reasons that go beyond high costs and lackluster returns.

The good news? Investors rarely fire their advisors. But for clients who choose a clear break, they’re more likely to have certain traits such as a higher income, a higher amount of investable assets, and a higher level of financial literacy.

Here’s a breakdown of the top drivers for why investors stop working with their advisors.

Lack of personal attention

Successful advisors know it’s crucial to build meaningful relationships with investors. That means not only identifying clients’ financial goals and risk tolerance, but understanding who they are as individuals.

When advisors fail to establish a personal connection or recognize investors’ needs for a particular service, clients may choose to terminate the relationship. Effective tactics like leveraging discussion guides and checklists can help solve this issue.

Not communicating value

The ability to clearly communicate your value as a financial advisor may be key to retaining investors. If advisors don’t intentionally share how they’re meeting client needs, investors may overlook the quality of an advisor’s help. Another common challenge advisors face is explaining complex investment strategies to clients in an accessible way.

These communication problems might cause more issues: A client who misunderstands the benefits of your financial advice may not be able to justify the cost of your services.

Being available through different channels, like email and video chat, and keeping clients updated on market movements can make a difference.

Mismatch of expectations early on

Unfortunately, some investors have a misconception of the role financial advisors play in investing. These clients may expect immediate returns and become unsatisfied with advisors when those expectations aren’t met. And that frustration will only increase if there’s inadequate clarification of service levels and fees during the onboarding process.

Failure to answer client questions in a timely or efficient manner may also negatively impact an investor’s experience. By encouraging clients to understand long-term investing and the importance of perspective, advisors can set expectations for the relationship early on while efficiently addressing investors’ concerns.


Delivering Value as an Advisor

Investors have different goals and personal circumstances. When you’re able to both identify their needs and demonstrate the value of financial advice, you can help your clients become more financially empowered and reduce the chances of them terminating your services.

Morningstar’s Advisor Workstation has the tools and resources you need to confidently provide expert advice to investors. The all-in-one platform allows you to strengthen client communications through customized reports and support your recommendations with trusted research.

Request a demo today.