Some clients seek a second opinion when they're looking for a broader product offering or feeling anxious about their portfolio performance, but relationship issues with advisors are an even bigger driver.tumsasedgars/iStockPhoto / Getty Images
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Whether as a result of miscommunication, unclear expectations or market performance, some clients may be motivated to seek a second opinion from another advisor about the financial advice they’re receiving.
For the advisors who are contacted to review an existing plan, these requests are a chance to listen, understand and emphasize the client experience, while moving the focus away from the past.
Why clients seek another opinion
Daniel Frost, financial advisor and certified cash flow specialist with The Frost Group at Raymond James Ltd. in Medicine Hat, Alta., says second-opinion requests arise commonly when clients are looking for a broader product offering or from clients who feel anxious about their portfolio performance in a challenging market.
But relationship issues between advisors and clients are an even bigger driver.
“I would argue it’s maybe 20 per cent performance-based and 80 per cent relationship-based,” he says. “If somebody’s seeking a second opinion, likely they’re not being communicated with, they’re not being understood.”
Indeed, 59 per cent of full-service wealth management clients have a financial plan, according to the J.D. Power 2024 Canada Full-Service Investor Satisfaction Study. About half (55 per cent) strongly agreed when asked if their advisor understands their financial goals and needs. The 45 per cent who didn’t strongly agree were three times more likely to switch advisors, the survey found.
In one recent situation, Mr. Frost met with prospective clients who had a financial plan created by another advisor. “The guy never talked to them again,” he says, and the clients decided not to stay after being left to their own devices.
As such, Mr. Frost says, second opinion engagements should focus on what clients are missing. While understanding client history is important – such as how they felt about products they’ve held and what they didn’t like about previous advisor relationships – helping clients discover where they want to go is key.
For example, in addition to setting expectations with clients about what they’re looking to get out of the relationship, Mr. Frost also uses an advice assessment designed to get them thinking about risk, income, cash flow and estate planning instead of just products and performance.
Andrea Thompson, founder and certified financial planner with advice-only firm Modern Cents in Toronto, says when a client arrives seeking a second opinion on their financial plan, she encourages them to go back to their previous advisor with questions to see if they can rectify their issues.
“Ultimately, they have established a relationship, they have done a lot of work to date to do that and it can often just be that perhaps there wasn’t the right level of clarity in the discussions that led the client to feel confident around the result,” she says.
If a follow-up doesn’t solve the issue or if the problem is in another area, there may be an opportunity to step in, she says.
For example, Ms. Thompson was approached recently by a prospective client who was feeling frustrated with their former advisor and seeking a second opinion.
The discussion ended up revealing a mismatch between client and advisor, which she says is difficult to rectify. While the client felt the advisor wasn’t communicating well or understanding their needs, the client didn’t understand that their advisor was running a business based on model portfolios. This more general framework was unlikely to result in the tailored service addressing the individual needs the client was looking for, she says.
“In this case, the second opinion is less about the plan and it’s more about listening to the client and understanding what’s actually behind the lack of trust in that relationship,” Ms. Thompson says.
Professional considerations
In most cases, moving forward with a second opinion is a matter of starting from scratch, Ms. Thompson says, as it’s impossible to know what discussions took place with the previous advisor and what assumptions were used.
“We’re not going to look at and critique the work of the advisor as the primary mechanism to solve it,” she says. “We’re going to have our own relationship and our own engagement with the client to try to understand what’s been lacking and how we can get them to that result.”
Similarly, Jason Evans, an advice-only certified financial planner with Evans Retirement Planning in Winnipeg, says it’s important to move the focus of a second opinion meeting away from the previous advisor.
“I’m not trying to criticize the other advisor,” he says, as there may be constraints in the products and services they can offer. “Or, sometimes, the client’s portfolio isn’t large enough to warrant a comprehensive plan and they don’t have the option to charge the client directly for that time to make the plan.”
Instead, his attention is on the client’s concerns and identifying potential issues or places in a retirement plan where it would be beneficial to add detail or make adjustments.
“That’s my focus. And then if there are some red flags that I notice at that point, I can propose making a plan for them from scratch,” he says.
“I’m just trying to make sure the client’s needs are met and concerns are addressed.”
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