Why do investors ‘break up’ with their financial adviser?

By Danielle Labotka, Behavioural Scientist

No one likes to be dumped. And in financial planning, a client breaking up with you isn’t just unpleasant—it’s costly.

When a client leaves, you’ve lost out on their business; you’re out the costs you’ve already put into the client; and you’re losing any business you might have earned from their referrals. And with the megaphone of online reviews, a particularly disgruntled former client can cost your business even more.

But even if an unhappy client chooses to stay, they can still cost you a pretty penny. Research has shown that clients often won’t outright end a relationship with an adviser, decreasing their assets with them instead. That means you could have people taking up space in your practice who would rather not be there.

When a client leaves, it can be tempting to offload the blame on poor returns, but this stance is problematic for two reasons. First, the fact is clients do not tend to leave advisers just because of bad returns—consider research from the global financial crisis that showed clients largely stuck with their advisers even amid a bad market. Second, lackluster returns are going to happen sometimes, so pinning the blame on them puts you in a powerless position when it comes to retaining clients.

In our latest work, we examined why clients left their advisers, to learn what you can do about it.

Top Reasons Clients Fire Their Advisers

We gathered data from 184 investors who have previously fired their financial adviser and asked them, “Why did you choose to stop working with [an] adviser?”

We found six common reasons why clients fired their advisers. The most common reasons were:

  • Quality of financial advice/services (32% of responses)
  • Quality of relationship with an adviser (21%)
  • Cost of services (17%)

Clients also mentioned they fired their advisers because they were unhappy with returns (11%), felt comfortable handling their own finances (10%), and felt they were missing quality communication (9%).

Our results show the decision to fire an adviser is more complicated than being unhappy with returns—that only told 11% of the story. Still, there are a lot of financial issues motivating clients to fire their advisers, which may drive some to despair, but we still think there is a lot an adviser can do to anticipate and remedy these issues.

How to Not Get Fired

Having identified the main issues, let’s talk about how to resolve them before your relationship with a client goes south.

1. Issues regarding the quality of advice and relationship can be addressed by better understanding each client and their specific financial needs and goals.

Clients don’t want an adviser who makes them feel like a number, so take the time to show that you see them as a person. A goal-setting exercise, like a master list, can help you and your clients delve deeper into what they want and need. But this isn’t where the work ends. Clients will struggle to understand the value of your advice if they cannot see how it connects back to the goals they are working toward, so revisit these goals and how they align with their financial plan in your ongoing conversations.

2. Issues regarding the cost of services, comfort handling finances, and communication can be addressed by effectively communicating your value.

Intentionally communicating with your clients about how you are meeting their personal needs can help resolve issues that ultimately stem from clients misunderstanding your role as a financial adviser. Research from our team shows clients and advisers tend to have a mismatch between what they think the value of a financial adviser is. You should be able to communicate to clients not only how you provide the value they are looking for but also provide the value they may not even be aware of.

3. Issues regarding return performance can be addressed by setting expectations for the relationship early on.

Clients rank the ability to “maximise my returns” as the fourth most important value financial advisers bring to the table. Ultimately, this stems from a misunderstanding of investing and financial advisers. When establishing a relationship with a new client, clarify the value of taking the long view when investing. Some clients may benefit from reminders about the value of keeping their expectations on returns in check, but if you are consistently finding a client is only interested in immediate returns, remember it is OK to consider releasing them as a client.


Since its original publication, this piece may have been edited to reflect the regulatory requirements of regions outside of the country it was originally published in. This document is issued by Morningstar Investment Management Australia Limited (ABN 54 071 808 501, AFS Licence No. 228986) (‘Morningstar’). Morningstar is the Responsible Entity and issuer of interests in the Morningstar investment funds referred to in this report. © Copyright of this document is owned by Morningstar and any related bodies corporate that are involved in the document’s creation. As such the document, or any part of it, should not be copied, reproduced, scanned or embodied in any other document or distributed to another party without the prior written consent of Morningstar. The information provided is for general use only. In compiling this document, Morningstar has relied on information and data supplied by third parties including information providers (such as Standard and Poor’s, MSCI, Barclays, FTSE). Whilst all reasonable care has been taken to ensure the accuracy of information provided, neither Morningstar nor its third parties accept responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis or context of the information included. Past performance is not a reliable indicator of future performance. Morningstar does not guarantee the performance of any investment or the return of capital. Morningstar warns that (a) Morningstar has not considered any individual person’s objectives, financial situation or particular needs, and (b) individuals should seek advice and consider whether the advice is appropriate in light of their goals, objectives and current situation. Refer to our Financial Services Guide (FSG) for more information at morningstarinvestments.com.au/fsg.  Before making any decision about whether to invest in a financial product, individuals should obtain and consider the disclosure document. For a copy of the relevant disclosure document, please contact our Adviser Solutions Team on 02 9276 4550.

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