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Competitor-proof your clients

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When you’ve just won over a new client, it’s a great feeling to know you’ve made a convincing case for your expertise, your company and your products.

But once you’ve started working with that client, what’s to keep him in the fold – or any of your other clients for that matter? How can you ensure that your hard-won business won’t become another advisor’s new find? Here, some of the experts share their secrets for creating clients who’ll never leave. Some of their ideas are intuitive. Some may surprise you.

In brief, top ideas include:

  • Identifying the cream among your crop of clients.
  • Treating them royally to ensure their loyalty.
  • Getting to know them as people, not paychecks.
  • Asking them what they want.
  • Fine-tune your products to meet their needs.

Without looking at your portable computer or reviewing a computer printout, you probably can tick off a list of your top clients – the ones who generate sizeable revenue for your firm. But it doesn’t hurt to check your understanding with some numbers. Duncan MacPherson, co-founder of Pareto Systems Inc., a British Columbia-based company, points out that typically 80 percent of an advisor’s business comes from 20 percent of his clients.

In fact, MacPherson named his company – specializing in business development, practice management and marketing solutions – after Pareto’s Principle. Vilfredo Pareto, an early 20th-century Italian economist, observed that 80 percent of his country’s wealth is held by just 20 percent of the people, and his “80/20 rule” has been applied widely since then to a variety of business situations.

Doug Carter, president of Carter International, a California-based training and development company, and the author of “Clients Forever: How Your Clients Can Build Your Business For You,” slices the pie another way. In the course of his work in England, Australia, Canada and the United States, he’s found that just 8.7 percent of the client base provides 50 percent of the business.

Whatever precise share of your clients is providing the bulk of your business, identifying that significant share and concentrating your efforts there obviously would get you the biggest return, most experts agree.

“If 80 percent of the business is generally from 20 percent of the clients, then an advisor has to be sure he’s investing 80 percent of his time with that 20 percent. It starts with who, not what,” MacPherson says, adding if an advisor has 500 clients, he may not want to competitor-proof the entire list, but the 100 “who carry the weight.”

This raises the delicate issue of whether an advisor should pare down his client list to the essential share that does the heavy lifting, so to speak.

MacPherson believes strongly in right-sizing a client list. “I’ve seen people go from 800 clients to 150 and still double their business,” he says. By focusing on top-producing clients, an advisor should see sizeable payback.

Peter Montoya, who heads the financial services marketing firm that bears his name, also leans in the “small is beautiful” direction – it’s better to have fewer, high-quality clients. Still, it’s not easy to pare down your client list, he admits.

“It’s like when you were in your 20s and you couldn’t face breaking up with your girlfriend, although it would be better for both sides,” says Montoya, whose business is based in Tustin, Calif. “Breaking up is hard to do.”

Carter, too, suggests advisors drop some clients – although not because they’re financial lightweights, but because they’re no fun. “Most people have at least one client … who brings in a substantial amount of money, but is a pain in the neck,” he says. “You hate meeting with them. That’s financial prostitution. Get rid of them.”

There are experts, however, who advocate keeping clients regardless of their bottom line. Bill Good, chairman of Bill Good Marketing, based in Utah, wrote in Research magazine that an advisor never knows where next year’s top 20 percent will come from. An inheritance or promotion can transform a minor client’s financial prospects, Good notes in his article entitled “Never, ever, ever give up a client.” He also maintains that dumping the little guys is a crummy thing to do and merely drives business to the competition – discounters, low-loaders and no-loaders.

“Smaller accounts can be very profitable if managed correctly. Don’t abandon them. Don’t give them away,” Good writes.

Don’t assume
Whether you trim your client list or not, much of your success with clients depends on the relationship you develop with them, the experts say.

“Often, advisors lose great clients because they take them for granted,” MacPherson says.

“And the longer a relationship evolves, the more things are taken for granted.”

When MacPherson works with an advisor to build a practice, he teaches the concept of the “loyalty ladder” and its three types: at the bottom, customers who do business with a variety of financial services professionals in addition to their financial advisors; in the middle, clients who make their advisors their personal CFOs; and, at the top of the loyalty ladder, advocates, clients who not only give their advisors all their business, but talk up their advisors to others.

“They’re dream clients,” MacPherson says. “They feel so strongly about you that if they don’t tell their friends about you, they’re doing their friends a disservice.”

MacPherson then asks the advisor he’s counseling to create a matrix of services offered and which class of clients receives which services. “Advocate” clients get the full treatment, while those farther down the ladder receive appropriately fewer services. “It’s not disrespectful, it’s mindful,” he explains. “You can’t be all things to all people, but you can be all things to some people.”

The personal connection is particularly important with your best clients. “The chemistry you have with clients is just as important as your competencies as a financial advisor. Your ability to make money (for clients) is a given – but chemistry is based on a foundation of trust,” MacPherson says. To build trust, an advisor must get to know all he can about his clients.

Carter agrees that too often advisors know a lot about their clients’ finances but little about the people behind the money.

Does Client A spend winters in Florida, belong to Rotary, run marathons or have children? Advisors should develop the kind of personal background about clients that can underpin a personal relationship.

“If you can’t answer those questions, you’re not as tight with your clients as you think you are,” Carter warns.

Most of Carter’s work with advisors centers on strengthening the client relationship. He also recommends an advisor write letters of appreciation to clients – not just after a sale or a portfolio review, but when the client doesn’t expect it. Similarly, he suggests calling clients just to check in, not to make a pitch. These unexpected contacts can be “very profound,” he says. Clients see “they matter, they count and they would be disloyal to take their money someplace else.”

Montoya, who also advocates lavishing the most attention and services on advisors’ best clients, says the biggest mistake advisors make is failing to invest in some kind of client relationship management platform to help organize their practices. CRMs, which can be Web- or software-based, provide a tool to track each client’s phone calls, letters, meetings and requests, and can remind advisors when a contact is due. CRMs also can store those personal details about clients’ families, hobbies and interests that help advisors build better relationships.

Just ask
Sometimes, clients fly the coop without explanation, leaving advisors wondering what went wrong. The simplest way to avoid mystery defections, Montoya says, is to ask your clients how you’re doing in their eyes. That can be challenging, because while most advisors will say they want to know if something is wrong in their practice model, it can be hard to face criticism.

“You don’t want to hear about it, but you need to hear about it,” Montoya says.

He suggests a financial planner ask clients to fill out surveys about the practice and its services. While consulting or practice management experts can offer guidance for creating a good survey, you may be able to “do it yourself.” Some Web sites, such as, allow you to set up simple surveys free of charge, Montoya notes.

Creating an advisory board is another great way to get client feedback, Montoya says. He suggests a six- to 18-member board consisting of clients plus professional referral sources such as tax attorneys, accountants and estate planners. He recommends launching an advisory group with A-level clients whom the advisor knows well and whom are comfortable with the advisor, then gradually bringing in B- and C-level clients as time goes on. Meetings can be monthly, quarterly or yearly, and can cover any topics the advisor wishes, from marketing approaches to specific services.

Montoya warns that surveys and advisory boards can give advisors feedback they’d rather not hear or think is unimportant. He’s heard advisors say they’ve been told, “Your office is too far away,” or “Don’t wear loafers.” But, he adds, it’s vital to listen to everything – there will be useful information that can be used to improve the practice and build business.

“Of all the ideas I give – and I give hundreds – [the advisory board] is the one that is most often adopted and continually used,” Montoya maintains. “It’s far and away the best way to get input.”

Competitor-proofing your practice is possible, if you build personal relationships with clients, provide them with the services they need and ask them to help you improve what you do. Building trust through communication, appreciation and predictability can pay off by creating clients who never leave.

Or, as Carter puts it, “If the relationship works, then your work is no longer work.”


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