When to Fire Bad Clients and How to Better Serve Good Ones

Remember that old question, “Would you like to hear the good news, or the bad news?” When it comes to firing bad clients, it’s all good news, because releasing them will free up your time to provide better service to your good clients.

The Definition of a Bad Client

So what defines a bad client versus a good client? Financial Planning1 recently asked financial advisors just that.

It’s definitely not how much money they have. Advisors said they typically get a great deal of joy out of helping clients, using their unique approach to financial and retirement planning, and building a relationship over time based on mutual respect and trust.

When things start to go south, they pointed out some of the following client behaviors which caused them to call it quits and pull the plug:

  • Rudeness, threatening behavior, clashing personalities, or too many demands

It takes two to tango, yet some clients get so upset and demanding—or downright rude—that your staff is afraid of them, or so upset by their phone calls that it’s just not worth it.

  • Overspending

You cannot help a client who won’t stick to the plan. Advisors dump clients who are spending all their assets in a self-destructive or irrational manner.

  • Family drama

Financial advisors typically deal well with diverse opinions between spouses or family members. But sometimes, when those relationships are toxic or filled with animosity, there is no dealing with them and advisors cut the client loose.

As one advisor put it, “The willingness to terminate a relationship is usually in the best interest of the client, the firm and most importantly the existing clients,” says advisor Richard Colarossi of Colarossi & Williams in Islandia, New York. “I need to spend time with clients that subscribe to the way I do business and have productive relationships with, not battling with issues I cannot address.”

 

Ways to Screen for Trouble Before It Starts

There are ways to screen out prospects so you won’t have to fire a bad client later. Advisors identified five things to watch out for2 in a potential client prospect meeting:

  • Their finances are admittedly a total mess, they’re heavily in debt, they have lack of understanding about financial matters
  • They’re too focused on fees, will only give you a small piece of their assets, or ask you for a discount
  • They chase performance, want to beat the market, expect crystal ball, can’t resist the next hot investment, or have fired multiple past financial advisors because of unrealistic expectations
  • They won’t let the planner plan, they micromanage their portfolio, and may have managed their own or used a family member to manage their money in the past
  • They’re not likable, are rude know-it-alls, do not listen, or don’t delegate to others

“It is better to break off the engagement than to suffer a painful marriage and a predictable divorce,” says George Gagliardi, a planner in Lexington, Massachusetts.

 

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How to Better Serve Good Clients

Once you’ve reduced your client roster to the cream of the crop, you’ll have the time to find ways to improve what you do for them. Here are some suggestions.

A recent survey by U.S. Trust3 found that 87% of wealthy investors (with investable assets of $3 million or more) had advisors, but only 16% had wide-ranging discussions about wealth planning goals and issues.

Wealthy clients specifically want discussions and advice about the following topics:

  • Estate planning
  • Trust options and implications
  • Strategic philanthropy
  • The use of family wealth and how to align it with important values and goals
  • Teaching children and heirs financial skills

The U.S. Trust study identified that meeting the priorities of women and millennial children is hugely important. Women are now equal or primary income-earners in 40% of high-net-worth (HNW) client households; and 38% of HNW women overall and 48% of millennial women take the lead or contribute equally to important investment decisions.

The survey pointed out that women and millennials are extremely interested in investing with companies that take responsibility and have good track records regarding the environment, social issues and governance (ESG investments.) They also uncovered that art collecting—or the financially-driven buying and selling of art—has become of strong interest for a new breed of HNW millennials.

 

Other Things Clients Want

Clients remember more about how you make them feel than anything else. They want to feel that you understand them and listen to them. They want to talk about things you might have in common, like sports teams, politics, climate change, literature, music, grandchildren, or even just the weather. The goal is to make your clients feel that they belong at your firm. Regardless of how much money they actually have, most clients at advisory firms worry that they don’t have enough money to fit in with the other clients.4, 5

Clients want you to address more than investments and retirement. They want you to provide advice about their other financial concerns, like aging parents, long-term care, other insurance they might need, how they can pay for college, or how they can pay for a family wedding. And remember, it’s important to address both spouses—do not fall prey to the “marginalized wife” syndrome.6

Respect people’s time, don’t be late to appointments. Try to simplify financial concepts. People care about themselves, not you, so focus on their needs and connect with them. Concentrate on forging a long-term relationship. Ask probing questions and listen—don’t just talk.7

Be prepared for client meetings, look clients up and see what they’re posting on their social media accounts. Call them ahead of time and ask them if they have specific issues they want you to address. Tailor your discussion to their concerns. Consider inviting their tax and estate planning professionals to your meeting.8

For other ideas, practical tips, and help with implementing processes to improve your financial advisory practice, call Shurwest at 800.440.1088.

 

For financial professional use only. Not for use with the general public.

Sources:
1  Financial Planning, “Why these advisors fired their clients.” Financial-Planning.com. https://www.financial-planning.com/slideshow/why-financial-advisors-end-client-relationships (accessed August 6, 2018).
2  Financial Planning, “‘This is not going to work’: Screening out problematic clients.” Financial-Planning.com. https://www.financial-planning.com/news/this-is-not-going-to-work-screening-out-problematic-clients (accessed August 6, 2018).
3  Think Advisor, “5 Topics Wealthy Clients Are Clamoring to Discuss With Advisors.” ThinkAdvisor.com https://www.thinkadvisor.com/2018/06/27/5-topics-wealthy-clients-are-clamoring-to-discuss/ (accessed August 6, 2018).
4  Financial Planning, “How to build trust with skeptical HNW clients.” Financial-Planning.com. https://www.financial-planning.com/news/how-financial-advisors-can-gain-high-net-worth-clients-trust (accessed August 6, 2018).
5  Think Advisor, “Good Client Experience Really Is About … the Clients.” ThinkAdvisor.com http://www.thinkadvisor.com/2017/12/06/good-client-experience-really-is-about-the-client?eNL=5a2997b2160ba0d62759d313&  (accessed August 6, 2018).
6 Forbes, “Money Concerns And People That Financial Advisers Ignore.” Forbes.com https://www.forbes.com/sites/nextavenue/2017/10/10/money-concerns-and-people-that-financial-advisers-ignore/#10093c527f6f  (accessed August 6, 2018).
7  Think Advisor, “10 Sales Behaviors That Prospects Hate.” ThinkAdvisor.com http://www.thinkadvisor.com/2017/08/31/10-sales-behaviors-that-prospects-hate?eNL=59a9c527150ba00a749d9f6e& (accessed August 6, 2018).
8  Investment News, “8 ways to enhance client meeting.” InvestmentNews.com http://www.investmentnews.com/gallery/20170818/FREE/818009999/PH?utm_source=Morning-20170821& (accessed August 6, 2018).