The #1 Worst Practice: Getting Rid of Clients

Here's what your peers think about the spooky advisor practice known as book pruning.

I knew that book pruning was not in the best interest of clients, but I nonetheless bowed to management pressure. I regret to this day the decision to turn my back on clients who had placed their faith and trust in me. -- Financial advisor with a national wirehouse 

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One of my daughters, Nicci, has a delightful way of threatening her kids when a threat is required.

She says, “I’m going to count to one.”

I’m going to borrow that. Instead of telling you the 10 worst practices in client marketing. I’m going to tell you the worst.

I have railed about it in the past. As a matter of fact, this will mark my 20th anniversary of trying to drive a wooden stake into its heart. As we approach Halloween, a comparison to the undead is certainly apropos. This thing will not die.

What pushed me over the edge and caused me again to attack this "strategy" was a single line in an article published on AdvisorOne, "What's your Practice Worth?" by James Green. If you are within 10 years of retirement, read the article. Then go visit FP Transitions.

This is the company in the financial services industry that brokers the sale of financial services practices. The owners, David Grau, Sr. and Jr. are the best in the business. And if you are wondering what your practice might be worth, you should by all means get in touch with them.

Here is the line from "What's Your Practice Worth" that launched me, once again, on my quest.

The factors that can detract from a firm’s value, he said, were:

  • A lack of nonsolicitation agreements for employees;
  • A higher-than-average client age, such as when the average age is in the 65-70 range;
  • A greater amount of asset concentration among clients, such as when a firm falls prey to the Pareto 80/20 rule …

There it is: The “Pareto 80/20 rule” which countless gurus, coaches, speakers and even companies have embraced and to which legions of financial advisors have fallen prey.

The choice of the word “prey” is spot on.

My first attack on this principle was in 1991. I published an article in Research Magazine which undoubtedly has the longest title ever. “Never Never Never Give up a Client Unless He or She Becomes a Jerk.”

I have compiled all of my Research articles on book pruning in a white paper and so will not repeat those arguments against it here. But please, if you are considering lopping off part of your client book, go get “The Case against Book Pruning” and read it. It’s free for the taking.

More Evidence

In the balance of this article, I’m going to let some of your peers talk to you. These comments are from an ongoing survey. The people who responded did it.

By the way, if you have already done the pruning, I would love to know the outcome, positive or negative. When you pick up “The Case against Book Pruning” you can take the survey.

Here you go with what a few of your peers think about this undead practice.

 

# Clients removed from book 

Primary benefit

Biggest negative factor on business

Biggest negative factor on you personally

If you had to do it over again, would you?

Effect on business after 12 months

51-100

Did not have to open accounts at new firm for unproductive assets.

Negative word of mouth from some of those I chose not to pursue.

I felt like an ass.

Absolutely not.

Business was down a lot.

More than 200

Virtually started over after nine years.

Revenue.

Client disappointment.

Absolutely yes.

Business was up substantially.

(This person is no longer a financial advisor.)

300

Less time with talkative clients.


Missed some of the interaction.

Probably not.

Business was about the same.

25-50

Hmm, still trying to figure that out.

Fewer clients.

I had generally prospected within a single, large corporation. Once word got out as to what was going on, a number of clients that I retained were upset with my decision to prune my book.

I knew that pruning was not in the best interest of clients, but I nonetheless bowed to management pressure. I regret to this day the decision to turn my back on clients who had placed their faith and trust in me.

Business was about the same.

200

Felt back in control of my life and my time.

It was difficult to not talk to some of the people who helped me when I really needed their accounts.

It did not feel good at the time, at least until it was done.

Absolutely yes.

Business was up some.

25-50

A lower amount of time fielding calls and monitoring smaller portfolios.

Negative talk in a small town. I was good for you then, but not now.

Perception of being too big for my britches, arrogant, and out of touch.

I probably would not.

Business was about the same.

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Bill Good is Chairman of Bill Good Marketing®, Inc. His company, based in Draper, Utah develops systems to help financial advisors have the time and money to pursue their important goals in life. He writes a regular column for Research magazine and a regular blog for AdvisorOne.

# Clients removed from book

Primary benefit

Biggest negative factor on business

Biggest negative factor on you personally

If you had to do it over again, would you?

Effect on business after 12 months

51-100

Did not have to open accounts at new firm for unproductive assets.

Negative word of mouth from some of those I chose not to pursue.

I felt like an ass.

Absolutely not.

Business was down a lot.

More than 200

Virtually started over after nine years.

Revenue.

Client disappointment.

Absolutely yes.

Business was up substantially.

(This person is no longer a financial advisor.)

300

Less time with talkative clients.


Missed some of the interaction.

Probably not.

Business was about the same.

25-50

Hmm, still trying to figure that out.

Fewer clients.

I had generally prospected within a single, large corporation. Once word got out as to what was going on, a number of clients that I retained were upset with my decision to prune my book.

I knew that pruning was not in the best interest of clients, but I nonetheless bowed to management pressure. I regret to this day the decision to turn my back on clients who had placed their faith and trust in me.

Business was about the same.

200

Felt back in control of my life and my time.

It was difficult to not talk to some of the people who helped me when I really needed their accounts.

It did not feel good at the time, at least until it was done.

Absolutely yes.

Business was up some.

25-50

A lower amount of time fielding calls and monitoring smaller portfolios.

Negative talk in a small town. I was good for you then, but not now.

Perception of being too big for my britches, arrogant, and out of touch.

I probably would not.

Business was about the same.

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