Mastering client servicing and offboarding: Insights for building smarter pathways
By Philip Leigh | 15 January 2025 | 7 minute read
In this blog I look at what’s helping – and what’s holding financial advice firms back – as they work on improving their client servicing and offboarding processes. I outline the considerations and benefits to be aware of when developing these processes, which are covered in depth in our guide for advisers, available to download now for free, here.
Client offboarding – what is happening?
Over the course of the last 12 months, industry commentary has alluded to a notable uptick in client offboarding. Our recent research sponsored by Hub Financial Services and Vanguard, supports these observations. It reveals that 72% of financial advice firms have increased the number of offboarded clients in the last 12 months. What’s more, nearly half of advisers expect to offboard slightly more clients in the coming 12 months, and a further 11% expect to offboard significantly more.
Consumer Duty is certainly a driving force, putting squarely into focus the need for firms to ensure that their propositions and operational capacity can fulfil delivering fair value and good outcomes to clients.
However, only 10% of advisers who responded to our survey said that they saw the Duty as directly leading to more offboarding. 40% said they see it as a way to set clear boundaries around their firm’s capacity and profitability, ensuring they can meet evolving client needs and service expectations as part of the ongoing relationship.
A financial advice firm may decide to have an offboarding conversation with clients when the services and proposition no longer appear to match client needs or provide value for money for the ongoing advice fee being paid by the client. As the results of our survey illustrate, the top reason why clients were offboarded was clients’ needs changing and no longer requiring advice. One adviser I spoke to said that their firm makes a point of informing clients that there ‘will’ come a point where the firm no longer adds value as the diminishing need for complex advice means client requirements shift out of scope of the level of service the firm aims to provide, as part of its proposition.
“We add value to clients making the pre to in-retirement journey because that is where we see the role of having in-depth conversations and ensuring we spend time understanding the pros and cons of every possible choice open to the client, in order to meet their goal of being able to retire comfortably and live the life they want to lead. When their journey becomes only focussed on product and having an ISA and a pension for example, that’s where we see value decreasing and where we would start having those conversations with the client”.
The second most common reason for offboarding is clients not meeting requirements for providing ongoing services. Often this means that the firm cannot demonstrate ongoing engagement with the advice process for those clients who continue to miss meetings or do not respond to key correspondence.
Firms we spoke to emphasised the importance of being confident in the level of engagement demonstrated by the client, to be sure that the services and investment outcomes they are providing are understood and recognised as suitable to client needs and relevant to meeting their goals and objectives.
“We do a lot behind the scenes to keep their portfolio and goals on track and evidence that we are doing so as is required of us, but if we can’t explain that to them or show them the result of it, then we’re not delivering value.”
The challenge for firms
There are a range of challenges firms may face when navigating the decision to adapt services or offboard clients altogether, but there are two factors in particular that shape how successful firms are:
- Not having the right data to paint an accurate picture of the client bank and gauge implications of offboarding
Our survey showed that firms that segment their client bank are almost twice as likely to have offboarded clients.
But only a comparatively small proportion of firms are implementing such processes. Further, 42% said they had an idea of the target client profile, but it wasn’t formally defined; a further 20% said they didn’t have a target client profile. Only 52% of firms segment their client base.
Firms we spoke to said cited three key barriers in capturing relevant data and implementing detailed client profiling processes: lack of clarity of the client bank, tension between stakeholders in defining the ideal client profile as well as lack of detailed characteristics-focussed data held on clients.
Without this data, firms struggle to gauge how suitable the range of services it delivers are to the client needs those services are intended to meet.
Of course, each firm is different; its internal staff relationships, its proposition, its clients and they way it intends to service them are unique. But the fact that under one third of firms are segmenting clients beyond more traditional factors such as AUM by looking at servicing characteristics, underlines the difficulties firms face in being able to accurately identify if, when and how services may need to be adjusted or which clients are less suited to their proposition altogether.
- The strong tether to client relationships
There are emotionally-led challenges too, typically driven by deep and long-standing client relationships and the sense of ‘duty’ to provide consumers with sound financial advice. A wariness around the outcomes clients may receive without ongoing financial is making some firms nervous about cutting formal ties with clients.
These concerns can inhibit firms from moving clients between service levels or offboarding them from the firm. As one adviser said to me: “we know some clients are not right for us, but we can’t turn our back on them when we feel there is greater risk of them getting worse outcomes by leaving them without advice”. The risk in maintaining the status quo of low-value and unsuitable relationships is that they lead to decreased profitability for the firm and questions around whether clients are receiving the most suitable level of service.
In order to mitigate these risks, some firms have developed more ‘transactional’ propositions to deal with lower value clients on an ad-hoc basis. But for those who don’t have the resources to build additional propositions, it can mean offboarding is seen as their ‘only option’, as they struggle to reconcile long standing relationships with the need to meet commercial operational and profitability and value metrics and objectives.
Building clearer pathways
Our research with firms who have successfully created offboarding pathways reveals that these challenges and fears are not insurmountable. With a granular look at the firm’s reason-for-being, a realistic assessment of operating capabilities and an openness to looking beyond ‘traditional’ segmentation and profiling factors to servicing characteristics, advice firms are well placed to be able to define and refine their servicing credentials and achieve the client outcomes they strive for.
The output of the research is a guide for advice firms. Its aim is to help advice firms make more informed choices and consider pathways they may have otherwise thought unsuitable or less feasible. It’s based on a survey of 300 advisers and a series of in-depth conversations with advisers and compliance consultants, containing 6 key steps we think it’s worth firms working through to develop best practice when creating and reviewing effective servicing and offboarding pathways.
As well as thinking about the data needed, the steps in our guide offer a reflective, pragmatic and practical lens on organisational, tech and process considerations that can lead to robust servicing and offboarding.
Does the firm have user-friendly, integrated tech to support client engagement, advice delivery, and data analysis? What are the goals of key decision-makers, and what ethos do they want to build around client servicing? How does this align with the types of clients the firm aims to serve? Is there a clear framework for identifying clients for offboarding, assessing individual outcomes, and communicating the process effectively?
In the guide, we also provide suggestions on how you might want to approach these considerations to make tackling them as effective as possible.
We hope our guide can help your firm break down barriers to building a picture of the client bank, ensure consistency in delivering against clients’ needs as they evolve, enable your firm to more confidently fulfil its Consumer Duty obligations and deliver the best client outcomes.
For more information on this or any of our research or events, please get in touch here.
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