5 Common Financial Advisor Complaints

In a perfect world, advisors serve a client base that’s loyal, engaged and beyond satisfied with the services they receive. In reality, it’s not unusual for advisors to receive a complaint at some point during their career. Some of the most common financial advisor complaints stem from poor investment performance, high fees and lack of communication.

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Client Complaints Can Hurt Feelings and Business

Receiving a complaint from a client can be frustrating, especially if you believe you’ve done your absolute best to meet their needs and provide a valuable advice. It may even cause you to doubt your abilities or question whether the client is worth keeping.

More significantly, client complaints can also result in:

Damage to your brand reputation
Fewer referrals or fewer prospects seeking you out
Existing clients switching to a new advisor

You could also become subject to regulatory scrutiny if a client files a complaint with the Financial Industry Regulatory Authority (FINRA). While FINRA encourages advisory clients to reach out to their brokerage or advisor first to seek a resolution, clients may choose not to do so for various reasons.

Client complaints should always be taken seriously, but especially when they reach a regulatory agency. If you’re found to have violated regulatory guidelines following a complaint, you may be subject to fines, suspension or a loss of securities licenses.

5 Common Financial Advisor Complaints (and How to Avoid Them)

A financial advisor meets with clients to resolve their complaints.

Why do clients complain about their financial advisors? There’s no single answer, as every client’s experience is different. Below are five common complaints that financial advisors receive.

1. Poor Communication

Poor communication can kill a client’s experience, leading to a complaint or, in the worst-case scenario, a client who leaves your firm for another advisor.

Some of the things that could lead to a complaint include:

Taking too long to respond to client calls, emails or texts
Cutting clients off or talking over them during your conversations
Failing to actively listen to what clients are saying
Calling or emailing too frequently for the client’s liking, which could be perceived as “spamming” behavior

You can also run into issues if a client misunderstands or misinterprets what you’re communicating or finds one of your communication methods challenging. A poorly designed automated phone system, for example, can have clients running in circles while trying to get through to a human.

Here are four general ways to avoid communication complaints:

Ask clients for feedback about how they prefer to communicate and their expectations for receiving callbacks or emails.
Develop standard communication policies and procedures that define a specific period for returning client calls/emails.
Communicate with clients in writing as often as possible so there’s a clear paper trail of everything that’s shared.
Use note-taking apps to record client meetings and conversations so you have a written account of what was said that you can refer back to if needed.

2. High Fees or Lack of Transparency Surrounding Fees

The typical financial advisor fee is around 1% of assets under management (AUM). That’s an industry-accepted standard, but it doesn’t prevent clients from complaining about the fees that you charge.

Complaints about fees can arise if the client:

Doesn’t feel that they’re getting enough value for the money they’re paying you
Believes that you’re not disclosing all of your fees
Views your fee structure as too confusing

Clients may also be more inclined to complain about fees if they feel you’re pushing a particular product or service to earn a higher commission. Your clients want to be viewed as people with goals they need help reaching, not dollar signs.

Four general ways to avoid fee complaints include:

Review your fee structure through the eyes of your client to assess its overall transparency and how easy it is to understand.
Answer questions about fees fully and truthfully, with examples illustrating how your fees work and what they will cost the client.
Audit client accounts and ask yourself if the fees you’re charging are justified by the services you provide, and the amount of time spent with each client.
Engage with clients who attempt to negotiate fees to determine what it is they feel they need, but are not getting.

3. Poor Investment Performance

As an advisor, it’s your job to give advice, but you don’t have a crystal ball to tell you exactly how the market will perform. Underperformance is a common source of financial advisor complaints among clients who expect high returns but end up disappointed with their portfolios.

There are varied reasons an investment underperforms. Changing interest rates, natural disasters and geopolitical events – all of them can send the market flying off the rails. And when that happens, it’s natural for clients to come to you for answers on what went wrong.

How to avoid performance complaints:

These types of complaints may be unavoidable, so it’s helpful to know how to handle them should they arise. Here are four tips for dealing with client complaints about performance:

Analyze the situation to determine what led to the outcome the client is complaining about.
Be empathetic and understanding, ready to explain to the client why their investment underperformed.
Remind the client that ups and downs in the market are normal, and that it’s important to look forward to the next steps.
Encourage optimism and let the client know that you’re there to help them navigate the setback.

4. Unethical Behavior/Noncompliance

Clients trust you with their financial assets because they expect you to act ethically at all times. You may find yourself dealing with a regulatory complaint if a client perceives your behavior as unethical or noncompliant.

Registered investment advisors (RIAs) are held to a fiduciary standard, meaning they must act in the best interests of the clients at all times. RIAs are also subject to strict SEC compliance rules.

Even if you consistently hold yourself to the highest standards, clients could still complain if they feel you haven’t disclosed something that you should have, or that you discriminated against them in some way. In cases like these, documentation can be key to proving that you’ve followed the appropriate standards of care and duty.

To avoid ethics/compliance complaints, consider these four tips:

Develop privacy policies and cybersecurity policies to ensure that client data is secured and protected.
Regularly review compliance requirements to ensure that you and your firm are adhering to all regulatory guidelines and monitor compliance trends to stay ahead of emerging issues.
Disclose conflicts of interest if they arise and take all steps necessary to minimize or eliminate them.
Implement policies that firmly discourage discrimination based on race, gender, ethnicity, disability, age, religion, level of education or wealth and train your employees to recognize biases that could lead to discriminatory behavior.

5. Miscellaneous Financial Advisor Complaints

Clients can complain about anything if they like, throwing you for a loop if the complaint is unexpected. For example, you might have clients who complain about:

Receiving holiday cards or gifts that are not to their liking
Tax bills turning out higher than expected, despite your careful calculations
Appreciation events that they can’t attend due to scheduling issues
A slow-loading website or mobile app
“Ugly” décor in your firm’s office space or limited parking outside your location

When you get these kinds of complaints, it’s important to handle them cautiously. Saying the wrong thing could cost you a client. Instead, listen to what the client is telling you to determine if the complaint is valid. If it is, ask yourself if it’s something you can change or is worth changing to improve the client experience.

Bottom Line

An advisor meets with clients, having successfully avoided complaints.

Complaints are a part of doing business, and successful advisors are well-versed in how to navigate them. Understanding what your clients need and expect from you can help you avoid these types of financial advisor complaints.

Tips for Growing Your Advisory Business

As an advisor, marketing might be one of your biggest complaints. Let’s face it, marketing is time-consuming, and it can eat up a sizable chunk of your budget. If you’re looking for a better way to market your business, you might consider partnering with a professional platform. SmartAsset AMP helps you connect with leads and equips you with the tools you need to follow up. Schedule a demo to learn how you can leverage it to grow your business.
Asking clients to share their opinions on what they do or don’t love about your firm can help you better understand what leads to complaints. Creating a simple client satisfaction survey and letting them share their views anonymously can provide you with valuable insight about where you could improve.