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The Boomerang Clients

As most of you know, I’ve been writing regular articles pointing out the various disruptions in advisor businesses due to the pandemic: with enhanced client communications, with the dynamics of having everybody working remotely, and soon with the various unexpected challenges to rebalancing and tax-loss harvesting protocols during a rapid fall and rise again in the markets.

But recently I talked with an advisor who pointed out another challenge: an almost crushing burden that falls—unexpectedly—on the founder or principal during uncertain times.

This advisor told me a story that is familiar to everybody.  Over a 10-year period, as the firm grew, he hired three younger advisors.  As he attracted more clients to the firm, he would gradually introduce them to these junior advisors, and eventually would come the day when he was no longer responsible for those client relationships. 

The conversation with the client would go something like this:  “Over the past few years, you’ve gotten to know [younger planner], and he’s gotten to know your financial situation as well or better than I do.  We’re going to make him your primary advisor going forward.  But if you ever need to reach out to me, I want you to know I’ll be there for you.”

That worked really well.  The principal advisor had off-loaded all but 40 client relationships; the other advisors were handling the day-to-day financial affairs of 50 clients each.  Things were going smoothly, as expected.

And then the pandemic hit, and so did the unexpected.  Those clients all boomeranged back to the older, wiser advisor who they still saw as their primary relationship and the calm voice in the storm.

“The first five to seven weeks of this [pandemic], I don’t think I’ve ever worked more,” says the advisor.  “I was on the phone all day every day, with clients I hadn’t talked with in years, and with my associates.  My wife would bring in sandwiches, saying: you haven’t eaten in nine hours.”

The market conditions would have created a high workload all by themselves: the advisor cited rebalancing, keeping the staff work coordinated when everybody was working remotely, and sending out an accelerated schedule of reassuring communications. 

But the biggest change was clients who wanted to talk with him—and nobody but him—even if it was only to hear that everything was under control.  The second biggest change was coaching younger advisors who had no direct experience with 2008-9 or 2001-2, on how to respond to their own flood of client communications.  “Most of it was them coming to me with this or that client issue, and they were right 95% of the time,” he says.  “But they needed to talk through it with me.  They needed the encouragement and the blessing.”

I have heard a lot of advisors lately bragging about their clients, about their fortitude and (a kind of reverse pat on their own back) about how well-trained their clients are for this or any other downturn.  Some principals may not—yet—be experiencing this phenomenon. 

But as we move deeper into the financial, economic and health-related uncertainties ahead, I suspect that the boomerang client issue is going to tax many principals who mistakenly believed that they had successfully transferred client relationships to their competent team of advisors.  Those clients never felt like their relationship with the trusted founder was ever severed, and in times of crisis, that’s who they naturally look to for reassurance.

Count this as one more of the unintended, unexpected consequences of the pandemic that helps us realize that things are never quite as they seem on the surface.