7 faux pas for financial advisers to avoid

Nov 06, 2023
This article has been written by  behavioural researcher Samantha Lamas.

Time and again, research shows the personal relationship between a client and their adviser is paramount to both parties’ success. Without a strong personal relationship, advisers cannot provide the customized, high-quality level of advice that clients are looking for nowadays. Because of this, clients may disengage with their adviser or outright fire them if they experience a lack of personal relationship along with lackluster advice.

In our latest research, we investigated which adviser behaviours contribute to investor disengagement. Moreover, we dove into how investor disengagement presents itself in the adviser-client relationship.

We started our research by collecting common adviser behaviours. We then asked adviser clients to rate how frequently they experienced each behaviour. For those they reported experiencing, we asked participants to rate their emotional response to the behaviour (on a scale from “I really disliked it” to “I really liked it,” with a neutral midpoint). We then asked participants how each behaviour affected their relationship with their adviser across four dimensions: their trust in their adviser, their decision to collaborate with their adviser, their decision to allocate assets for management, and their decision to recommend their adviser to others.

We found 7 actions that clients reported disliking (in order from most to least disliked):

  1. Did not provide a breakdown of fees.
  2. Took more than a week for tasks.
  3. Used financial jargon.
  4. Recommended investments without considering values.
  5. Suggested investment options without going into details.
  6. Asked me to complete long forms.
  7. Did not provide holistic advice.

For the rest of the actions in the survey, clients reported either neutral or positive feelings (see paper for full results). To understand the impact of these disliked behaviours, we created a composite score of the four dimensions and then identified the relationship between the score and each disliked behaviour. We found that how much a client disliked an action had a moderate, negative impact on their relationship with their adviser. In other words, an investor experiencing a disliked behaviour was discouraged from trusting and recommending the adviser, as well as encouraged to invest less with and to stop working with the adviser.

Be conscious of disliked behaviours.

Some of the adviser behaviours we investigated in our research may seem harmless on the surface but can lead to disastrous wounds over time. It’s all too easy to wave off these results, with the claim that you (as a financial adviser) don’t do these things to your clients. Other advisers use financial jargon that leave clients confused or speed past investment explanations. Not you, of course. Unfortunately, we find more than half of the clients experienced each of these behaviours with their own advisers—making these behaviours a lot more common than any adviser should be comfortable with.

To help advisers make sure they aren’t one of the culprits, we created a two-step takeaway that’s accessible in the full white paper. The first step is a checklist that advisers can use before and during a conversation with a client, so they can reflect and address the top five disliked behaviours we found in our research. Step two is a follow-up survey template that advisers can send to clients after a meeting. The survey subtlety asks the client if they experienced any of the top five disliked behaviours during their meeting with their adviser. Compared with being face-to-face, the online format of the survey may encourage honest feedback; instead of being put on the spot, clients have time to reflect on the meeting and provide comprehensive feedback.

Together, this 2-step takeaway can help advisers ensure they are not accidentally tearing down the relationships they meant to develop.

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