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As a financial advisor, acquiring new clients is a key business priority.

But it's crucial to recognize that client retention – keeping your book of clients - is equally vital.

High client turnover can harm your bottom line, deter potential clients, and may create stress.

But it’s important to remember that clients will come and go. It’s a fact of life in this industry. But your approach toward client satisfaction can significantly impact the natural turnover rate.

What I mean is, minimizing attrition should be a primary goal, and to achieve this, you need to understand why clients leave advisory firms and what strategies typically improve retention rates.

Once you understand that you can incorporate key financial advisor-client retention strategies that may help the development of a loyal, long-term client base.

So, let’s take a closer look at some of the big reasons clients leave and the tips on keeping them happy instead.

How Often Do Clients Switch Financial Advisors – And Why?

Clients leaving have remained a thorn in the side of financial advisors – especially in the first few years.  

For instance – did you know that according to a study1 from Etrade Advisor Sales in 2019 – the average percentage of clients that leave during a given year is 20% within a year. And 25% within one-two years.

Or - put another way - roughly one-fourth of new clients may leave within the first two years.

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The good news is that as time goes on, retention rates also rise (meaning the average client generally sticks around longer).

Thus, the first two years are pivotal for a financial advisor.

In fact, further evidence2 has shown that 80-90% of financial advisors seem to fail and close their firm within the first three years of business – implying that roughly 10% of financial advisors even succeed overtime.

So why do clients leave?

Some common reasons may be –

·         Experience neglect or insufficient attention from their advisor.

·         Face communication gaps and delayed responses to inquiries.

·         Receive advice that doesn't align with their objectives.

·         Believe their portfolio is underperforming due to the advice received.

·         Encounter high fees affecting their investment returns.

And while there are many more possible reasons – the good news here is that these kinds of reasons can be mitigated by a better understanding of your client.

So here are some key tips how to potentially keep clients happy and prevent their departure. . .

1. Have Clear, Personal, and Prompt Communication (This is Key)

It's essential for clients to reach out to you with their questions or concerns, but that should not be the only form of communication. While being responsive is crucial, proactive outreach is equally important.

For instance – according to a 2019 Y-Charts Report3 – three-out-of-five clients (80%) believe that more frequent, more personalized contact with their advisors would give them more confidence in their financial plans.

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Figure 1: Y-Charts

Further, 75% of clients want their advisor to send them personalized updates.

·    In fact, in the same report, respondents ranked a “deep understanding of their goals” (60%) and “client communication” (59%) far above actual portfolio performance (47%).

Thus, the key takeaway here is that to communicate early, communicate often, and communicate in a way that resonates with your clients is important.

Personalization matters also – so make an effort to ensure your clients feel like you are speaking directly to them and not just everyone on your email list.

2. Ignoring Other Financial Service Needs (This is a Big One)

While portfolio performance and allocation matters, many clients want a financial advisor that offers more value.

This is why holistic (interconnected) financial planning is important – it hits more ways to improve client goals.

And there’s a big demand here that isn’t being met.

For instance, the Spectrem Group published a report4 in 2021 that broke down the services investors received, valued, and desired (aka what they wanted vs. what they could get).

Some highlights were:

·   91% desired trust services, but only 12% received it.

·   92% desired estate settlement advice (for after a death), but only 11% received it.

·   87% desired charitable/philanthropic planning, but only 6% got it.

·   82% desired educational financial advice, but only 6% received it.

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Figure 2: eMoney (sourcing Spectrem Group)

There’s clearly a lot of clients looking for a wide variety of financial services and help.

And this is where holistic financial advisors can play a key role in filling these essential gaps.

Keep in mind as a financial advisor if you can’t provide such services, then the client may look elsewhere.

Now, don't get us wrong, returns still matter – they're crucial for keeping client’s content and their wealth growing.

But demonstrating the overall value you bring to the table throughout your client relationship can help them ride out the inevitable ups and downs on their journey to achieving their goals – wherever they may lie.

Oh, and before I forget, we at Dunham provide more than just investment management services. But also trust related services. We support financial advisors in their ability to help clients achieve their holistic planning goals. If interested in these key areas, please feel free to reach out to us.

3. Poor Handling of Portfolio Performance

While investment performance is important, it's crucial to manage client expectations.

Most clients may understand that macro forces often influence returns. But a sudden black swan event – aka a random, unforeseen, large event (like COVID) – can be tricky to deal with.

The problem arises when clients are blindsided by their portfolio's performance – especially in times of volatility.

Thus, it's essential to establish a clear strategy and keep your clients informed about market volatility trends. If things start to go awry, reassure your clients, and remind them of their goals and your preparation for market downturns.

This is key - because during periods when volatility spikes and returns sink, having answers to important client questions is crucial (it is their investments after all).


Client retention is essential for the long-term success of financial advisors. And you keep them by enhancing value, communicating well, and providing clarity during uncertain times (the best you can).

Thus, by understanding why clients leave and implementing strategies to enhance retention, you can build stronger, more enduring relationships with your clients.

Which hopefully can become a win-win - the clients benefit from your help, and so does your bottom line.

What more can you ask for?







This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax, or investment advice or an investment recommendation, or as a substitute for legal counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy, or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.

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