ELITE ADVISOR BEST PRACTICES

Let Go of Non-Ideal Clients

The right way to release clients who no longer suit your business

By Jonathan Powell

Key Takeaways:

  • You most likely have clients who aren’t ideal for your business and need to be released.
  • Letting go of inappropriate clients will free up much-needed time and energy and improve your financial results.
  • Selling these clients to outside financial advisors is typically the smartest strategy.


Once you have created a profile of your ideal clients, you will have a filter to assess all your future clients and prospects and determine whether they’re right for your practice. This is a hugely valuable tool in the process of becoming an elite financial advisor.

However, your efforts will almost certainly reveal that there are clients you currently have who aren’t well-suited to your new approach. That means you may want to release some or all of these non-ideal clients. Here’s how to do it the right way.

Benefits of releasing non-ideal clients

Letting go of existing clients can be a scary proposition, so it’s helpful to remind yourself of the advantages you will enjoy by no longer working with your less-than-ideal clients. For example:

  • You will free up a tremendous amount of productive time so that you can focus on your existing ideal clients as well as on building your business to attract additional ideal clients.
  • It will improve your self-image dramatically. When you work with only top clients for whom you can add substantial value, you’ll feel energized, inspired and free for the first time in a long time.
  • Focusing your practice on select clients sends a strong message to your top existing ideal clients that you are devoted to serving them and their needs.
Your options

When it comes time to disengage from non-ideal clients, there are four typical options to consider and assess:

1. “Quiet file” the clients. Many financial advisors create a “quiet file” of clients they would like to stop working with. The financial advisors stop doing any proactive work with these clients in the hope that the clients will no longer contact them but that their recurring revenue trail will continue. Trouble is, this approach usually backfires because these clients continue to demand time and energy disproportionate to the business they offer.

2. Hire another financial advisor to serve the clients. This is another route commonly taken by financial advisors. However, like the first option, it does not address the fundamental problem. Advisors often hire a junior financial advisor for tens of thousands of dollars in salary whom they then must train and supervise. This not only costs the advisors money but also consumes a fair amount of time, which costs them even more money—all to service clients who were not profitable to begin with.

3. Transfer the clients to a financial advisor in your office. If you own your firm and already have this person on staff, this option is not fundamentally different than hiring a new advisor. If you’re an employee of a firm, however, it might make sense to transfer these clients to another financial advisor within the company. Compensation for this transfer is sometimes accomplished using a revenue-sharing code with another advisor.

4. Sell the clients. This final option is the best approach in almost all instances. By selling all your non-ideal clients to a financial advisor outside your practice, you will have complete closure and the opportunity to turn your full attention to your highly profitable ideal clients and prospects. If you’re an independent financial advisor, it will typically be relatively easy for you to package a portion of your client base and sell it to another independent financial advisor. If you’re an employee, your firm should have the flexibility to sell a portion of your client base internally. In effect, you would be selling a portion of your book of business and should receive either ongoing revenue or possibly up-front money.

Critical success factors

If you opt to transfer or sell your inappropriate clients, ensure a trouble-free transaction by following these steps:

  • Time the transaction well. The best timing for beginning the release process generally is about 90 days after you’ve established your new approach focusing on ideal clients. By that time you’ll have built sufficient confidence in your new process so that you’ll feel comfortable releasing a portion of your clients.
  • Establish close client contact. Meet with clients with larger accounts in person to explain the sale or transfer, and use phone meetings for contacting smaller clients. Follow up the telephone calls with a letter that also includes a change of broker of record and/or a new advisor agreement—whichever is required. Call all clients two weeks after mailing the letters to verify that they received them. This way you can answer any questions and ask when you can expect to receive the consent forms.
  • Get compliance assistance. Seek help either from the compliance office of your broker-dealer or, if you’re an RIA only, from your own legal counsel. Pay special attention to your company’s privacy policy to ensure that all provisions are followed properly.
Conclusion

Letting go of clients isn’t the most natural or easy process. But it’s the best way—and usually the only way—to truly devote yourself to building a world-class business.


About the Author

Jonathan Powell is a managing principal at CEG Worldwide, LLC in San Martin, California. Working with many of the nation’s top financial firms, he enjoys helping financial advisors transform their professional and personal lives by implementing CEG Worldwide’s research-backed principles.