It feels bad to let go of longstanding clients, especially if they trusted you when you were still green.pixelfit/iStockPhoto / Getty Images
About eight years ago, George Hartman, a coach and consultant to financial advisors, was called into an advisor’s office.
The advisor was struggling – burnt-out, behind on his work and on the verge of calling it quits. The problem was immediately clear to Mr. Hartman, chief executive officer of Market Logics Inc. in Toronto: disgruntled clients had been waiting an hour to be seen.
The root of the issue? The advisor was managing a solo book of business of more than 220 clients, many of whom barely contributed to his bottom line.
This story highlights the tension between two of Mr. Hartman’s core beliefs: every client deserves service, and every client relationship should be profitable.
“As you can see, they bump up against each other periodically,” he says.
There are plenty of reasons advisors let clients go: some are combative, others unresponsive or chronically late with paperwork. Some demand far more time than others. But often, it boils down to a more fundamental issue: the client simply is not profitable enough to keep.
Charlene Wolthuizen spent 20 years in financial services before becoming a professional coach for advisors. She says this inflection point is common.
Advisors reach a point where they say, “Wow, I need to sit down, see if I’ve got the right type of clients – and if I can do a good job for them,” says Ms. Wolthuizen, business coach with the Personal Coach in Kelowna, B.C.
Here are a few strategies Mr. Hartman and Ms. Wolthuizen recommend to help advisors make client-centred and business-savvy decisions.
Dive deep
Examining your book is about more than just looking at the assets under management. How many products does a client have? Insurance? Is it a multi-generational family with children who may become clients? The assessment can be complex.
Mr. Hartman recommends ranking clients from top to bottom in terms of revenue contribution.
“What [advisors] often find is that there’s a very small number of clients at the top that contribute most of the revenue, and there’s a larger number at the bottom that doesn’t,” he says.
Then, advisors should assess what it costs to serve those clients. Do you invite everyone to, say, a Blue Jays game and rent out a suite, even if some clients bring in $10,000 and others $100 in revenue? It’s time to rethink that practice.
Segment clients
It feels bad to let go of longstanding clients, especially if they trusted you when you were still green. So, start with segmentation – a practice that’s widely agreed upon in theory but not always followed in practice, Mr. Hartman says.
Categorize clients as A, B, C or D based on value. Then, define the level of service for each tier. An A client might receive four meetings annually and an in-depth financial plan update. A C client? Perhaps one Zoom check-in and a quarterly newsletter. The idea is to align resources with revenue.
Train your staff
Segmenting only works if your staff knows the plan. Mr. Hartman points to the overworked advisor he helped. The solution was not simply to remove clients, but to train the team to protect the advisor’s time.
Receptionists were coached to screen calls, ask the nature of the query and prioritize appropriately.
“If it was something simple, such as an address change, then obviously someone other than the advisor can take care of it,” he says.
Technology helps, too. Client relationship management systems can log preferences, automate outreach and streamline service delivery.
Let some clients go
Eventually, tough choices may be necessary. Mr. Hartman calls it “graduating” a client.
One option is to raise your fees and let natural attrition do its work. Another is to transfer smaller accounts to a junior associate – especially if succession planning is on the horizon.
“Your C client can become someone else’s A or B client,” Mr. Hartman says.
Do it with care
If a conversation is required, keep it kind and respectful. Mr. Hartman suggests a disarming approach.
“Don’t blame them, blame yourself,” he says. “Say, ‘I apologize for having to do this. However, the nature of our work has changed, and we can provide advice only to a limited number of people with special needs. As a consequence, we have to reduce the size of our client base. I would be happy to introduce you to the person that I would want if I were in your situation.’”
Make room for exceptions
Before cutting ties, pause. Some clients may be more profitable down the line.
“Maybe they don’t have a lot of assets under management, but they’re a young doctor with a long career path ahead of them,” Ms. Wolthuizen says. Or perhaps they’re the “queen of referrals.”
The decision often comes down to more than numbers.
“It’s a subjective evaluation,” Mr. Hartman says. “You’re allowed to make exceptions for exceptional people in exceptional circumstances.”