Deliver Bad News to Your Clients the Right Way

Inevitably, there will be moments in your career as a financial advisor when you have to deliver bad news to clients. Whether you are facing a replay of the Brexit vote that left markets in turmoil or have made a mistake that cost your client money, it is critical that you communicate the news in a way that increases the chances that you will maintain a positive relationship with the client.

When a Crisis Happens, You Need a Plan

One reason that delivering bad news can be so stressful for many advisors is that they do not have a plan for addressing a problem proactively when it happens. That lack of a plan can lead to feelings of panic, which can in turn contribute to disorganized communication that actually increases client anxiety and dissatisfaction rather than leaving them reassured that you are able to take charge in a difficult situation. In the worst-case scenario, poor communication of bad news can cause clients to leave your firm.

Seven Tips for Communicating Bad News

You can better communicate bad news to clients by keeping the following tips in mind:

  1. Do not delay or ignore the problem: Communicate bad news to clients as quickly as possible. Delaying communication on important issues will erode client trust.
  2. Be calm and direct: Don’t couch your bad news in jargon, bury it in the fine print or offer overly complex or technical explanations. Communicate bad news as simply and directly as possible so that you can be sure that clients understand what is going on. Even if you are feeling overwhelmed or panicked, make sure to remain professional. Straightforward communication will help reassure your clients even when the news they are receiving is bad.  
  3. Treat the bad news with the seriousness it deserves: Bad news can take many forms. While you don’t want to make a minor issue more serious than it really is, you also don’t want to minimize a truly important problem. Don’t make jokes, downplay a serious issue or make a big error seem like no big deal in a misguided attempt to reduce conflict or save clients from fear.  
  4. Be accountable: If appropriate, take responsibility for your mistakes or those of your staff. Do not try to push the blame onto someone or something that is not the real source of the problem. While it is hard to admit mistakes, your clients will appreciate your honesty.  
  5. Offer a solution: Let clients know what you are doing to manage a negative situation. If the markets have declined precipitously, take the opportunity to reiterate your investment philosophy and the importance of focusing on the long term. If there is a problem with a client’s account (for example, personal information has been compromised or stolen), explain what you are doing to fix the problem and prevent it from happening again in the future.  
  6. Customize your communication: In some cases, bad news can be delivered via an email or letter that you send to all your clients. In other cases, you may need to communicate bad news in a personal message, over the phone or even in a one-on-one meeting. For example, say that one of your advisors has left the firm suddenly. You may share the information of the employee’s departure with all of your clients via an email, but if that advisor worked closely with certain clients, you may need to first communicate the news to them directly via a brief email or phone call.  
  7. Treat your clients and their concerns with respect: Every client will react to bad news in a different way. After you deliver bad news, offer your clients the opportunity to share their feelings or ask questions. Understand that they may be feeling emotional or vulnerable. Allow them space to vent if necessary, reassure them as much as possible, and don’t get defensive.  

No one enjoys delivering bad news, especially to clients. But preparing yourself and your firm in advance can help minimize the pain. While you can’t predict when bad news will hit, you can deal with it effectively by having an idea of what you will do when a crisis does occur.