What to do when a client leaves

By Todd Humber | October 6, 2023 | Last updated on October 10, 2023
3 min read
Business man looking at big bright opened door concept
© Rancz Andrei / 123rf Stockphoto

“We need to talk” are the four words no financial advisor wants to hear from a client.

But by the time the phone rings, it’s often too late to salvage the relationship — the decision’s been made, the paperwork’s signed and the investments are moving to another advisor.

“The honest truth is that no one advisor is a fit for every client,” said Jason Pereira, a senior partner and financial planner with Woodgate Financial in Toronto. “Sometimes, we can acknowledge that they’ll be better off with someone else. Remember that it’s their money and they can do whatever they please.”

That doesn’t mean advisors shouldn’t ask questions.

John Cucchiella, partner with First North Consulting in Toronto, recommends engaging with a client once an advisor learns they’re leaving. “Consider it an exit interview,” he said. “Learn from yourself and be humble about it.”

A departure can be easy to take personally — Cucchiella said he still remembers the name of the first client who left him. “I was floored and I was hurt. Because you’re so invested, right?”

But, after Cucchiella finished licking his wounds, he and his team talked about what they missed and what could have been done better.

“You start to triage your practice and understand where the gaps are,” he said. “And then you hope to correct it, and you’re better for it once you come out of the other side.”

Pereira agrees that asking the client why they’re leaving can be educational.

The reason for the departure “might be a legitimate complaint [but] beyond the scope of your control,” he said. “If they’re complaining they haven’t made much money in the last 24 months, well, no one controls the market.”

Finding out what they’ve been told or promised by their new advisor can also be helpful.

Often, the client will have been offered better returns and performance — which Pereira said is a bit disingenuous because “anyone can just pick a number out of thin air and say he could have done better.”

“No one can guarantee you what they did previously,” Pereira said. He likes to ask a lot of questions of clients on the way out the door to ensure they haven’t been “sold a bag of goods” or promised something that isn’t possible. If that’s the case, showing your math might help explain why the pastures aren’t greener with another advisor.

In other cases, the client may not be aware they’re moving — a scenario that recently played out for Pereira. Paperwork landed to move a client’s assets and he called the client to find out why. “He was like, ‘What are you talking about?’ He wasn’t moving. He didn’t mean to,” Pereira said.

That client had been at his bank and signed some documents without realizing their nature. “Maybe that was in error or miscommunication, or maybe it was on purpose,” Pereira said. “But the reality is that there are cases where the client doesn’t even know what they’re signing.”

More commonly, Cucchiella said, clients don’t bother telling their advisor they’re leaving.

“Clients, generally, don’t want to have that conversation with you,” he said. “Usually, you just get surprised with a transfer document.” Further, the new advisor will often coach the client not to talk to their old advisor for fear that they may be talked out of moving their assets.

Warning signs

While blindsides can happen, there are usually signs that something is wrong in the relationship. “It feels perhaps a little more cold; there isn’t the engagement that there once was,” Cucchiella said. “Perhaps the client isn’t returning calls anymore.”

A big red flag is when clients stop heeding your advice or begin liquidating their positions without a clear reason.

To avoid getting to that point, advisors should be proactive about communication.

“If your spouse goes silent on you, do you just forget about it? It’s no different here,” Cucchiella said.

He encourages advisors to reach out and find out how everything is going.

An advisor can say, “I’m getting a sense that our relationship is kind of drifting here,” Cucchiella suggested. “Am I misreading this or is there something going on that I need to understand?”

Todd Humber

Todd Humber is an award-winning journalist who has reported on workplace, HR, employment, legal and occupational safety issues for more than 20 years.