Why Clients Switch Advisors During Market Volatility (And How You Can Prevent It)
When markets get choppy, financial advisors often shift into “defense” mode, focusing primarily on calming anxious clients and protecting existing relationships. And rightly so.
While it’s crucial to provide reassurance during volatile times, focusing exclusively on damage control can cause advisors to overlook opportunities for growth through referrals and new client acquisition.
But why focus on growth during market turmoil? Because, ironically, volatile markets are exactly when clients are most likely to reevaluate their financial advisors and consider making a switch.
Recent research clearly supports this trend, revealing a significant uptick in advisor-switching activity during market downturns.
The Data Tells the Truth
Historically, advisors have seen annual client attrition rates averaging around 10–15%. Cerulli Associates reported that during the height of the COVID-19 pandemic volatility (2020–2021), advisor-switching rates skyrocketed, hitting as high as 38% – nearly triple the typical rate.
The 2022 bear market brought a similar wave. According to a 2023 YCharts survey, an astonishing 75% of U.S. advisory clients either switched advisors or seriously considered it; up sharply from just 48% the previous year. Even more startling, 54% actually made the change.
North of the border, Canadian investors followed suit. According to EY Global Wealth Research, by the end of 2022, nearly half (45%) indicated intentions to switch or move their financial services providers within three years – a 24% jump from previous years. Notably, 17% specifically cited “market volatility” as the primary reason for reevaluating their advisory relationships.
Clearly, volatility doesn’t just shake up markets, it shakes up client loyalty, too.
Which Clients Are Most Likely to Move?
Interestingly, not all clients react the same way during volatile markets. High-net-worth (HNW) and ultra-high-net-worth (UHNW) investors show a particularly strong propensity to reconsider their advisory relationships during uncertain times.
EY Global Wealth Research indicates that nearly 40% of UHNW clients (those with over $5 million in investable assets) planned to switch advisors within three years, compared to roughly 25-30% among mass affluent investors (those with less than $1 million).
From J.D. Power – Younger generations also demonstrate a higher likelihood to switch during volatility. Millennials and Gen Z investors lead the pack, with 27% indicating they would definitely or probably switch firms within the next year. Many younger investors maintain relationships with multiple advisors, creating more opportunities – and greater willingness to shift assets when expectations aren’t met.
Why Are Clients Really Leaving?
Market downturns amplify dissatisfaction, but the core reasons clients leave often come down to communication, personalization, and perceived value.
- Communication Shortfalls:
In volatile times, clear and frequent communication becomes critical. Yet, according to Spectrem Group, 62% of investors cited advisors “not communicating in the way they expect” as their main frustration.
Even worse, Spectrem Group discovered that nearly half of clients reported hearing nothing from their advisors during the pivotal March 2020 market crash, precisely when reassurance mattered most. Lack of timely, proactive communication is especially problematic for wealthy clients; EY research notes that 61% of high-net-worth clients would switch advisors if their calls weren’t promptly returned. - Missing Personalization:
Clients increasingly expect advisors to offer value beyond just portfolio management. Yet, a staggering 64% feel advisors fail to demonstrate sufficient value outside of investment returns (Spectrem Group).
Despite overwhelming demand, 91% of clients desire estate planning advice, and only 22% receive this guidance from their advisor (Accenture).
Simply put, advisors who don’t deliver personalized, comprehensive advice risk losing clients seeking more tailored relationships elsewhere. - Performance and Fees:
Poor investment performance certainly triggers dissatisfaction, but it’s rarely the sole cause of advisor-switching.
Instead, clients increasingly question fees when market returns falter. Accenture found that 55% of investors believe they could outperform their advisors’ net returns by investing independently.
If clients sense that performance isn’t justifying their fees, especially during downturns, the likelihood they’ll switch rises significantly. - Digital and Tech Experience:
While digital tools alone rarely prompt switching, inadequate technology amplifies existing dissatisfaction. ThoughtLab revealed 49% of investors prioritize a strong digital experience, expecting easy access to consolidated account views. Advisors who fail to meet these baseline expectations risk frustrating already anxious clients, pushing them closer to the door.
Seizing Growth Opportunities Amid Volatility
Volatile markets aren’t just threats – they’re significant growth opportunities. Advisors who proactively communicate, deliver genuinely personalized advice, and clearly justify their value and fees tend to retain clients better and even attract dissatisfied investors from competitors.
Here’s how you can turn volatility into growth:
- Enhance Communication:
Don’t be the advisor hiding under the desk or relying too much on group email messaging. Be proactive. Reach out frequently, offer clear guidance, and personalize your approach. Remember, 78% of clients say consistent communication keeps them loyal (Spectrem Group). - Make Yourself Available:
Let your clients know that you’re never too busy to see if you can be a resource for others they care about.
One way to say this could be… “Laura and George – We’ve found that during these market conditions, many folks become anxious about their savings and investments. Their confidence in their plan can wane. If you’re ever in conversation with someone who has become worried and questioning their current situation, please feel free to introduce me to them. We take a very low-key approach. We just want to make sure that people are touching all the right bases. And if appropriate, we’ll explore to see if we might be a great resource for them.”
Important Point: Be sure you use the words “to see” or “might.” Those are your qualifying words. While you offer up a little of your time as an extension of your service to your clients, you don’t want to take on clients where the match isn’t a win-win. - Explore Specific Opportunities
This can be a great time to genuinely express care for others you know are in your clients’ lives. “How are your sister and brother-in-law doing right now? Do you know if they’re being served well? Assuming we come up with a comfortable approach, can we explore a possible introduction to them – to ease their concerns and/or confirm they’re still on the right track?”
The word tracks I provide are meant to give you a sense of what you might say. I expect you to adjust these to your personality and style.
Bottom Line
Yes, markets can feel intimidatingly unpredictable. But the data clearly illustrates that when volatility spikes, so does the potential for client movement.
Advisors who seize this opportunity to demonstrate proactive leadership and personalized value won’t just protect their relationships, they’ll win new ones.
Want to find the precise RIGHT WORDS to use?
Check out The Language of Referrals:
https://referralcoach.com/language-of-referrals/
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