The number of people unhappy with their financial advisors may be higher than you think, and it’s not because of poor investment performance.
A recent YCharts survey found that 75% of advisory clients will change or are considering changing their advisor in 2023. 56% cited “deeper understanding of me and my goals” as the primary driver of satisfaction, even surpassing portfolio performance, and over 75% said increased frequency and personalized communication boosted their confidence and influenced their decision to stay.
As the founder of a service that matches people with fee-only advisors, I’ve heard from both sides: The most successful advisor-client relationships take a holistic approach focused on meaningful conversations that encompass the client’s entire financial life.
These comprehensive conversations are essential from the moment a potential client meets an advisor and throughout the entire relationship.
How to find the right advisor for you. A successful relationship with an advisor requires a collaborative relationship based on mutual understanding. An advisor must understand two important things about you and your finances: what keeps you up at night and your lifestyle aspirations.
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The vetting process requires multiple substantive getting-to-know-you calls and meetings where advisors must demonstrate deep, active listening skills.
Clients likely appreciate that their financial advisor is willing to share their knowledge and provide valuable insights, whether it’s discussing a Roth conversion strategy or concerns about their father-in-law’s dementia and potential financial assistance needs.
Traditionally, advisor-client conversations tend to take place in formal, quarterly, formulaic meetings that primarily focus on reviewing financial statements and business performance, then the meeting is over and questions, if any, are figured out later.
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The typical old-fashioned conversation starts with a client asking, “I have $200,000 to invest, what should I do with it?” This can be a risky question because the advisor isn’t taking into account important circumstances in the client’s life, such as taxes, debt, real estate, lifestyle, family needs, expenses, etc. Brokers love this type of question because it makes it easy to make an investment recommendation without having to spend time advising.
In contrast, holistic conversations are dynamic and reactive. The exchange can be emotional, especially when someone’s life has just changed. Clients meet with their advisors at least four times a year, but lives change in between, and unexpected changes are often the real reason to reach out to discuss their deepest concerns.
For example, if a client is thinking about selling their home and downsizing, they shouldn’t wait to contact an advisor. This is a big decision, and clients would benefit from discussing the pros and cons with their advisor now rather than next quarter. Effective advisors will not only stress-test the financial impact, but will also explore how the move will affect their client’s lifestyle.
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The power of good questions. For both client and advisor, the quality of the answers received depends entirely on asking good questions. Questions must address the client’s concerns and vision for their lifestyle.
Author and life planning pioneer George Kinder teaches financial advisors to put the life their clients want at the center of their financial plans.
He suggests advisors ask their clients: “Imagine you are financially secure. You have all the money you need now and in the future. How would you live your life? What, if anything, would you change? Picture a life that is fulfilling, authentic and prosperous.”
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Clients should also feel empowered to ask their advisors what they need, such as, “What do you want to know about me so you can develop a plan and give me the best advice?”
In a meeting where an advisor truly understands their client, the first 30 minutes are spent discussing strategy, assessing cash flow, and making adjustments, and the next hour and a half is spent working through how all of this relates to the client’s current life. A good conversation can help a potential client find out whether hiring an advisor is truly worth it. Additional examples of the types of questions advisors and clients can ask include:
Client to Advisor:
Tell us about your typical client, what problems do you help them solve, and how? How often do you communicate with them? What can they expect from your meetings, and what if they need something in between scheduled meetings? How do your clients pay you? What fee structures can you offer? (asset management fee, retainer, hourly)
Advisor to Customer:
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What are the specific problems you want to solve now and in the future? What do you and your family want to accomplish with your financial assets? What areas of your life currently worry you the most or make you (or your spouse) anxious?
Know your role in the conversation
Collaboration requires two-way communication, and financial planning requires context. Each partner in a couple should feel free to ask their own questions.
Life is unpredictable, and when change brings uncertainty or opportunity, it’s a catalyst for clients to reach out to their advisors to make sense of it and move forward with confidence.
Pam Krueger is the founder and CEO of Wealthramp, a platform that matches consumers with fee-only financial advisors, and the creator and co-host of PBS’ MoneyTrack and Friends Talk Money podcasts.
