Originally published on Advisor Perspectives, December 17, 2017

I help advisors convert prospects into clients, often restructuring the way they communicate. Here are three costly but common errors. To keep the clients you worked so hard to convert you can’t afford to make these errors.

Portfolio construction

One of the first issues you confront with a new client is how to invest their portfolio. If you are an evidence-based advisor, there’s already an understanding that you’ll use low-management-fee index funds, exchange-traded funds or passively managed funds.

Previously, this exercise was simple and straightforward. When I wrote The Smartest Investment Book You’ll Ever Read in 2006, I recommended three index funds from Vanguard.

The advent of factor-based investing and alternative funds has made “passive” investing more complex, but that doesn’t mean every client requires a portfolio that incorporates this thinking or these funds.

One of the advisory firms I coach uses a single core fund for almost all clients. When I inquired why, he told me that he explained the pros and cons to his clients and many of them felt simplicity was a significant benefit to them. He said: “They love getting a statement with one line item. They tell me that, for the first time, they understand their investments.”

It’s possible these clients are sacrificing higher expected returns for simplicity, but isn’t this their decision and not yours?

Few advisors present choices to their clients in this manner.

Number of meetings

I recently improved the bottom line of one of my clients significantly by making a simple suggestion.

The advisor told me he was “tapped out” and couldn’t take new business. One of the reasons was that the number of meetings he had with clients was taking an inordinate amount of time. I asked how often he met with his clients. He said he had quarterly meetings with every client.

Then I asked him if he knew how often his clients wanted to meet him. He responded with a blank stare.

I suggested he send out a survey asking a number of questions. Among them was this one: “How often would you like to meet with me?”

The replies shocked him. The overwhelming majority of his clients wanted no more than one meeting a year. A significant number wanted no meetings. They were fine with reviewing the reports he sent and calling him with questions.

With many of these meetings no longer on his schedule, he resumed taking new business.

Referrals

I recently heard a presentation by Dan Allison, a marketing consultant, on the subject of referrals. His research indicates the reason advisors don’t receive more referrals is surprisingly simple: They don’t ask for them.

It can be awkward to ask for referrals and equally uncomfortable for clients, who may have legitimate concerns about providing them.

Allison’s suggestion is to ask new clients how they wish to handle this subject. Would they prefer you not raise it with them? Or are they fine with your making it part of your meeting agenda?

All of these issues fall under the rubric of communication skills. How are yours?