Applying behavioural insights for stronger client relationships

• How can I prompt clients to refer me to others?
• How can I prevent lost returns or market volatility from impacting my client relationships?
• How can I convince my client to follow my advice?

Although these questions are complex in their own right, at their core they have one thing in common: they pertain to building a strong relationship with clients.

Once an adviser has a strong relationship with their clients, many of these problems seem to resolve themselves. Even for those that require a bit more coaxing, having the solid foundation of a strong client relationship will make ongoing interventions that much more successful. 

The problem in modern day financial advising is that many advisers wait until some sort of financial crisis to dedicate time to their client relationships; only then do many advisers play the role of financial counsellor or coach by helping clients manage their emotions.

For example, many advisers find a renewed interest in behavioural science and techniques during times of market volatility. Unfortunately for these advisers, many of the techniques we suggest must be implemented before volatility strikes.

Nonetheless, many advisers only pay attention to the importance of client behaviours when those behaviours are interfering with the advice process. At this point, it might be too late.

Research shows that lost returns are among the top reasons advisers get fired. Also, research has found that satisfaction with advisers followed market fluctuations. In other words, unless you have done your prep work, once markets go awry, your client relationships may already be suffering.

Looking to behavioural finance insights for answers

One way to understand how to build stronger client relationships is to look at what breaks relationships.

In our research, we asked investors (who had cut ties with an adviser in the past) why they fired their financial adviser. The illustration below shows the top six reasons why investors fired their financial adviser and the percentage of responses that pertained to each category.

As our results suggest, the common misconception that the main reason clients leave their advisers because of cost and performance did not quite play out in our data.

Although reasons related to cost and performance are in the top six categories, they are far from the only, or even dominant, topics. Instead, the top categories allude to the importance of the personal side of the client-adviser relationship. 

Once we dug into each of these categories, we uncovered two key areas advisers can focus on to prevent these issues from popping up in their practice and mend or build strong relationships in the process.