From survey to survey, the percentages vary, but at the high end, it’s estimated that 41% of American use traditional financial advisors.

As financial advisors and planners know, how prospects become new clients varies. If the 41% currently advised figure is accurate, that implies nearly six in 10 Americans aren’t advised. That doesn’t mean they don’t want to be nor does that data point imply those in the unadvised camp have never worked with an advisor. Some, if not many, have.

On a related note, it’s worth noting that more ink is devoted to why prospects hire in advisors, not why they leave one firm for another. Fortunately, there’s some momentum for exploring why clients change shops and it’s instructive for advisors.

Put differently, advisors that recently “pilfered” business from a competitor should realize that’s only part of the battle. Understanding why that client left a rival for your firm is important, too.

Returns Rarely Get Advisors Fired

It was released three years ago, but a 2023 Morningstar study remains instructive today regarding why clients part ways with advisors. Big hint: It’s rarely about portfolio performance.

“Contrary to conventional wisdom, clients rarely fire their advisor because of investment performance,” notes Sheryl Rowling of Morningstar. “Instead, the most common reasons were the quality of financial advice and services (32% of responses) and the quality of the advisor relationship (21%). Cost ranked third, while investment returns accounted for just 11% of responses.”

Think about that. Barely more than one in 10 clients that ditched one fiduciary for another did so because of slack returns. There’s a fair amount to unpack in that statistic. Namely, many clients are looking for much more than just investment management and, regardless of the products or services they’re in need of, they want real relationships with real humans that are rooted in communication and trust. In fact, underestimating the importance of communication invites dissatisfaction among clients, if not lost business.

“Many clients assume that if they haven’t heard from their advisor, nothing is being done on their behalf,” adds Rowling. “Advisors may be working diligently behind the scenes—but if clients don’t see that work, they often don’t perceive the value.”

Check the Easy Boxes

In a bygone era of advisor/client relationships, investment returns were primary selling points and often the deciding factor for prospects. However, investment management is now commoditized. Obviously, it helps to offer that service, but it’s not a deciding factor for clients and prospects.

The implication there is that advisors need to offer more than just strong portfolio returns to keep clients satisfied. Fortunately, the “more” isn’t difficult to deliver. As Morningstar notes, a lot of it boils down to easily accomplished action items, including returning client phone calls, clear, concise explanations, having clear pictures of clients’ entire financial pictures and heading off problems before they worsen.

“Investment performance still matters, but it isn’t usually what determines whether clients stay. Relationships do,” concludes Rowling.