There are ways to break the news constructively and communicate
that you're looking out for your client's best interest
Dec 5, 2019 @ 12:04 pm By Joni
Youngwirth
The recent InvestmentNews Top
Advisory Firm Summit presented findings from benchmarking studies and research
on trends in the industry. The good news? Many firms seem to be embracing best practices for choosing and keeping the right clients,
from setting ideal client standards and minimums, to segmenting clients and
aligning services with these different segments.
The not-so-good news? Firms both large and
small struggle to end relationships with clients who are no longer a good fit.
Why?
Why advisers hang on to poor-fit clients
Well, for starters, we're human. It doesn't
feel good to tell people you aren't going to help them anymore. So many don't.
There may be some other influences — subconscious or not:
It's seen as a lifelong relationship. Our personal value systems affect our
perception of responsibility, especially when it comes to helping individuals
pursue goals that impact their standard of living. Staying "married"
to the wrong client is unfair to your other clients, however, as well as to
your team.
No data tell them otherwise. Some advisers simply don't know their profitability per household. The
process requires energy as well as access to technology to support the
analysis. Not taking the time to understand your book can stifle your firm's
growth.
Wishful thinking. Maybe that D client will inherit a large
sum of money and turn into an A client. It could happen, right? This logic is
similar to staking your retirement savings on winning the Mega Millions jackpot
(the odds of which are 1 in 302 million).
Looking out for your client
If you need to move on from a client
relationship, there are ways to break the news constructively and communicate
that you are looking out for your client's best interest:
The services we offer today don't align well
with your needs. If your firm
caters to clients with complex estate planning needs, and you frequently pull
in the estate attorney, insurance agent, and CPA, the client with a savings
shortfall is like a fish out of water. Ask yourself whether your firm can truly support this kind of client. Do
you attend conferences that focus on supporting clients who will run out of money during
their lifetime? Are you aware of and involved with health and human services
these clients can take advantage of? If not, you're not the adviser for them.
To help these clients transition, consider offering your services pro bono for
six months while they search for a new adviser.
Our fees are not cost-effective for your
financial situation. If your firm
focuses on comprehensive planning and charges a fee for that work, some clients
may not want or need to pay for those additional services. Recommend the client
transfer accounts to another firm that offers a more cost-effective solution
and be sure to offer suggestions for where the client might look.
We put respect for our clients first. Explaining you are dedicated to ensuring
that no client of the firm subsidizes the work for another client is a way of
communicating that the firm loses money on that client. Assure the client you
are eager to facilitate a seamless transition of assets to another firm. If the
client still wants to stay with you, communicate that certain services would be
scaled back in the future.
We're transitioning you to a new adviser. Some advisers delegate D clients to a
new associate adviser. The approach is risky, however, as it often leads to the
associate adviser's dissatisfaction and even departure from the firm. A list of
clients you don't have strong relationships with is not much better than a
phone book. If you do wish to pursue this approach, commit to making 20% of
client calls together. You can delegate the rest but temper your expectations
of the ultimate outcome.
Ending a client relationship will never be
easy but choosing to work only with those clients for whom you can provide
exceptional quality will help you improve both your professional and personal
well-being. Whenever you have a difficult conversation, remember to stay positive,
focus on your strengths, and offer a collaborative solution.
Joni Youngwirth is managing principal of
practice management at Commonwealth
Financial Network.
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