Client resolution: Strategies to keep frustrated clients happy

(April 2003) It’s an advisor’s dream for his or her practice. Clients come in for their scheduled annual and quarterly meetings — on time, no less — listen to the advice being offered and decide to fully implement the advisor’s suggestions and then merrily go on their way.

The truth, however, lies somewhere short of this fantasy. While most clients are pleasant and trusting of their advisor and the advice offered, some can be confrontational. In a down market, with an impending war, it’s no wonder clients might be nervous, irrational or even rude. Advisors, armed with conflict resolution strategies, are more apt to keep their clients happy — and to keep them as clients.

When an advisor believes conflict is arising, Felicity Somerset, a partner with Janus Global Consulting Inc., says asking questions and listening are the advisor’s best tools. “Uncover what is beneath the disagreement,” she says, adding that the advisor may not be aware of new circumstances in the client’s life or her current world views. As the advisor, you have to set expectations at the onset of your relationship with your client. “You need to actually sit down and say: ‘I will be able to deal with your portfolio well if…’ and then ask ‘What do you need?'” This will prompt the client to better explain his feelings, and express statements such as “I don’t understand my quarterly statements” or “I wish you called more often.” Come to an agreement about what you both need, Somerset explains.

“It’s the advisor’s responsibility to find out who the client is, what he wants, when he is going to want it and then structure a portfolio that is going to get the client there, no matter what happens in the marketplace,” says Brad Campbell, regional director at Investors Group in White Rock, B.C. “You have to be very strong in your will and conviction to see the clients through it.”

Richard Burke, a CFP and chartered accountant at Berkshire Investment Group in Victoria, says one of the ground rules he sets with clients is that they cannot abdicate their investment responsibilities to him. “You can delegate but you can’t abdicate,” he explains. He believes that when communication problems arise, it’s usually because neither the advisor nor the investor took the time to communicate — be it what was happening in the market or with the choice of investment.

By setting expectations at the beginning of the relationship, the advisor can hopefully eliminate some problems down the road. And if the client wants more than your business model suggests? “Our whole industry is based on customer service,” says Vijay Parmar, a vice-president and branch manager at RBC Dominion Securities in Vancouver. “Every client is different, with different needs.” If the client wants additional meetings, for example, the advisor, if she wants to keep the client, needs to determine whether it is a compromise that can be made.

“Flexibility is really important,” Somerset adds. “Even when you have set those expectations, you have to have a little bit of give sometimes.” Clients will sometimes catch you at awkward times, or be more needy during difficult or transitional situations, she notes. Under special circumstances, make sure the client knows they are being treated differently because of the situation. Tell them that once the situation is resolved, they can expect to return to your normal business practice.

There are times, however, that letting the client go is the only solution. Shane McMahon, a financial advisor at S.M. McMahon Financial Inc. (Cartier Partners) in Vancouver, says he divides clients who may need to be fired into three groups.

The behaviour client: These are the ones who habitually cancel appointments, show up late or just don’t show. McMahon follows a three-strikes rule, and after three occurrences, he will send them a letter. “It reads that it would be in their best interest to seek advice somewhere else,” he explains, adding that he will mention their punctuality and no-shows as the reason for the letter. “I don’t recommend anyone else. I leave that in their court because I don’t want to dump them on any of my colleagues.”

The philosophy-difference client: Though McMahon hasn’t had many, sometimes clients want to speculate on where the market is going. McMahon, on the other hand, is a big believer in asset allocation. “[This type of client] is usually interested in the latest and greatest trend of the day, be it buying gold, right now, or real estate,” he adds. “It’s a legitimate question to ask if there is any gold in the portfolio. But when they want to deviate from the asset allocation, and move to extreme speculation that is a red flag.” McMahon will sit down with these clients and explain exactly how asset allocation works and why it is his strategy. “It is my ultimate conviction that if the client isn’t willing to bend, I am willing to lose that client.”

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The PITA (pain in the a— ) client: This term was coined by Dan Richards in 1998. A PITA client focuses on the negative, McMahon explains, whether it be the current markets or the financial plan. “They are the high-maintenance clients,” he adds. “The administration staff spends more time with them and they are typically at a lower dollar figure than other clients.” The PITA client is also focused on media reports, McMahon says. “They are easily swayed in any given month on any hot topic.” Hot topics will prompt more phone calls or e-mails, costing too much time and effort. “We will eventually politely refer them to another advisor, where they might meet that advisor’s profile,” he says.

Richard Burke has also fired clients. In one case the client had been in some relatively aggressive funds and she wasn’t happy. After picking some similar but less aggressive funds, she still wasn’t happy. “If you are ever uncomfortable with this, we can put you in money market funds,” Burke had told the client. The client then started constantly calling Burke, asking about her funds and suggesting that she might be better off in GICs at a bank. Burke decided to end the relationship by writing her a letter. “I told her she had made those comments before and that, in her case, I thought it would be more appropriate for her to be at the bank in GICs,” he says. After that, the client decided to leave.

In the end, it comes down to whether the advisor believes the relationship is worth keeping. “A relationship with a client is no different than any other relationship,” adds John Karn of John A. Karn and Associates in Ottawa. “If you put the other person first, you will do well. It’s my job to listen, communicate and find out what the issues are and determine a collective solution that is focused on their needs.”

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Are your clients more disgruntled these days and if so, do you have an effective strategy or tip for dealing with them effectively? Let us know in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

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This article was originally published (under the title “Know your client: Client resolution”) in the April 2003 edition of Advisor’s Edge magazine, a sister media property of Advisor.ca in The ADVISOR Group. To register for a free one-year subscription or to view archived Advisor’s Edge articles, please click here.

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Jennifer McLaughlin is associate editor of Advisor’s Edge and can be reached at jmclaughlin@rmpublishing.com.

(04/16/03)