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Over half of advisory clients left their financial advisors last year, survey finds

On Behalf of | Apr 1, 2024 | Financial News

A new survey underscores the challenges financial advisors face when it comes to maintaining relationships with their clients, according to WealthManagement.

The research was conducted by YCharts, a leading investment research and client communications platform.  It found that 75% of respondents either switched advisors or contemplated doing so in 2023, a significant increase from the 48% recorded in the same survey the previous year.

54% of clients actually left their advisor, 9% thought about switching to a robo-advisor or a new firm, and 12% moved from a robo-advisor to an actual advisor.

It was such a dramatic difference that YCharts performed the survey again just to verify the findings.

“Upon reviewing the initial survey results, we were taken aback by the notable increase—compared to our previous year’s findings—of clients who indicated they were considering switching advisors, compelling us to conduct the survey twice to validate. With similar results, a resounding theme was clear: clients want more and better communication from their advisor,” said Sean Brown, CEO of YCharts. “It is clear that advised clients now have a high go-forward propensity to leave advisors who are not communicating with them when, and how they desire.”

775 clients of financial advisors provided answers in the survey, which tried to determine what clients want from their advisors when it comes to communication.

About 80% of the clients want to hear from their advisor four times per year but only 63% of the advisors are fulfilling that desire.

More than a third of advisors’ clients say they are contacted infrequently, rarely, or never, while only 1 in 5 clients feel their advisor contacts them very frequently

When it came to communication style, 73% of surveyed clients prefer email communications from their advisor, while 45% indicated a preference for phone calls and 35% like text messages.

The survey authors had this suggestion for advisors: “If you currently communicate with clients via just one of these channels, consider expanding your strategy to include a variety of contact mediums—every client is different, and this approach offers more options for engagement. Per our survey’s findings, ongoing contact outside of scheduled meetings can increase a client’s comprehension in those meetings.”

They also cautioned that the aftermath of the COVID-19 pandemic is proving to be a critical time for financial advisors because the pandemic’s impact on the market caused many clients to seek alternatives.

Of surveyed clients, more than 1 in 5 switched advisors since 2020, and more than 1 in 4 considered
switching. Clients are now watching their portfolios more closely, making client attrition too big a threat to ignore, according to YCharts.  “Acquiring new clients is the ultimate way to combat the headwinds advisors face post-COVID-19, and an improved communication strategy can help,” the survey authors said. “Nearly 9 of every 10 clients answered that they consider their advisors’ communication frequency and style when deciding to retain their services, and when making referrals—the lifeblood of many advisory firms.”

The survey found that 77% of clients would be more confident in, 78% more likely to keep, and 81% more willing to refer an advisor who communicates more often or more personally.

The attorneys at Lewitas Hyman were formerly senior attorneys in the SEC’s Division of Enforcement. We have also represented clients in regulatory matters while working at Morgan Stanley and in private practice at some of the world’s largest law firms. Therefore, we understand the complexities that come with being the subject of a regulatory inquiry, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a free consultation.