Close Close

Retirement Planning > Retirement Investing > Income Investing

The Undead Rise Again

Your article was successfully shared with the contacts you provided.

Chances are you will have this copy of the magazine in hand on or about Halloween, with its various ghostly phenomena. I would suggest that there is another ghostly phenomenon frequently breathing its foul breath in your face. It’s there year-round. It is the undead idea that you can increase revenue by getting rid of “non-ideal clients.”

Since 1992, I have been trying to drive a wooden stake into the heart of this idea. I have written four major articles in Research on it and have mentioned it another dozen times or so. Yet it still rises, undead and destructive. My friend John Bowen, writing in Financial Planning, has dragged the undead corpse out once again. While I have failed (so far) in my efforts to kill it off, I’ve wounded it. And I’m ready to have another go at it.

For the complete case against book pruning, go to For now, here is a summary of the case. This notion that getting rid of clients is a good thing is:

1) A guaranteed income reduction plan. I have long since lost count of how many people I have spoken to over a period of many years whose income went down after severing client relationships. The reason this bad idea won’t die, and wanders through the world of the undead, is that it takes about two years for the effects of the amputation to work its way through your business. If book pruning were like sticking a paper clip into an electrical outlet, with its consequent and immediate ZAP, no one would preach it. But sadly, it takes a while to corrode your business.

2) Crummy ethics. A watchword today is “trusted advisor.” You focus daily on creating and maintaining a trusted advisor relationship. Yet many of the clients Bowen and others would have you toss to the side of the road are the people that helped you come to the party when you were a pup. Perhaps you opened an account 15 years ago on a cold call. No one forced you to take the account. And now the little old lady who extended you her trust needs help. And you are going to sell the clients who helped you because they are no longer “ideal”? You are going to build trusted-advisor relationships, but first breach the trust with others? You are going to sleep at night?

3) A deep hole of intense ill will. Suppose you call your plumber, Savage Plumbing. A pipe breaks and you need help. After looking up your record, you are told in a voice dripping with sugar, “I’m so sorry. You are not a preferred client and we sold your account to Aw Ful Plumbing.” How many of your friends would you tell about what Savage did to you? Now granted, Savage Plumbing wouldn’t put it in those terms. Undoubtedly, the bag of dung you got handed would be wrapped in perfumed paper. But you would know what’s in the package, wouldn’t you? Your clients will also know they have been handed that same foul package when you follow the routine John recommends as the best way to say “Goodbye.”

Special request: John Bowen uses survey data to help prove his point that getting rid of clients is a good thing. I think he surveyed the wrong people. The correct sample would be FAs who got rid of clients. What effects did that act have on your clients, your business and you? If you did the deed, especially if you did it at least two years ago, please do not pass go, but proceed directly to: I will send a free copy of my new book to the first 50 people who did the deed AND complete the survey. I will write up the responses in a future issue of Research.

Should You Keep All Clients?There are valid reasons to get rid of clients. “Non-ideal” status is not one of them.

The three categories of clients who should be pushed overboard are.

1) Jerks. These are the people you just cannot bear to talk to because of their rude, ill-mannered “communication skills.” At my company, if someone swears at one of my staff, or is continually verbally abusive, they get a “manners enhancement” discussion with me. If they don’t immediately straighten up, they are listening to the proverbial dial tone, never to hear from us again. Life is too short to spend any time dealing with these folks regardless of whether it’s Bob Big or Les Little.

2) People who mostly will not follow your advice. The key word is “mostly.” You are in the advice business, and if the relationship between you and a client is such he or she will rarely take your direction, that client should go somewhere else for help.

3) People who will not communicate with you should be encouraged to reform or gently nudged to go elsewhere.

The Case for Book PruningIn “Time to Say Goodbye” (Financial Planning, September 2008), John Bowen writes:

“Consider CEG Worldwide’s recent research on advisors’ success. We grouped 2,094 advisors using two primary criteria: whether their net income was more or less than $300,000 and whether they served more than 150 clients, or 150 or fewer.

“One group of advisors — those with net incomes of more than $300,000 and 150 or fewer clients, on average — clearly excelled. This select group, representing a mere 12.8 percent of all advisors surveyed — earned an average net income of about $416,000. The next best group earned only $386,000, and these advisors had to serve more clients to generate that smaller income.

“Clearly, the select group of advisors has figured out how to generate high incomes from relatively few clients. Other advisors would be wise to emulate these top advisors by working with fewer but better clients.” (Emphasis added.)

There is a huge hole in this argument. The people who should have been surveyed are the people who actually threw clients off the truck and lived to tell about it. Just because one group has a smaller client base and makes more money is not at all evidence that shrinking your client base will help you increase your income. The smaller client base of bigger clients could be the result of superior investment skills, or even superior prospecting skill. The more affluent FAs could have prospected a high-net-worth market to begin with and so required fewer clients to meet their own income goals.

Case closed.

Another SolutionLet’s pose the question: Why would someone you accepted as a client become “non-ideal”? Could it be a problem with you, not the client?

I have been told but cannot completely verify this datum: In the major firms, where the book pruning movement originated, most complaints and legal problems come from small clients, not big ones. That was the origin of book pruning. Get rid of your potential problems.

OK. Then let’s ask: Why would small clients be such a source of trouble?

Most likely answer: The advisor doesn’t pay any attention to them. All of the focus goes to Mr. Big. Then the little guy, not getting any communication, service, or attention gets so upset, he or she files a complaint.

So the wet blanket thrown over this smoking mess is the idea that your revenue will go up if you get rid of all the little guys you have ignored.

Let me propose an alternate solution. What if you actually develop a team, and that team has primary responsibility to contact and maintain relationships with everyone. No one slips through the cracks. No one gets ignored. Now granted, Mr. or Ms. Big should get extra attention, but there is a minimum amount of attention that every person you have accepted as a client should receive. I have fully outlined this in my white paper, “Client Relationship Retention.” If complaints and problems come from people who are ignored, wouldn’t the solution be, “don’t ignore them”?

What about this idea? You are worth $1,000 an hour in gross revenue to your firm when you meet with and talk to clients and prospects about investing. If you are doing that full time, you should be generating around $2 million per year. That’s a lot more than what John Bowen is talking about. And you can do that with “the little guys.” I know advisors in parts of the country where there aren’t any big guys. Yet there we see multi-million dollar production from well-organized teams.

So — if you are considering hurling a bunch of your small clients under the bus, go take a cold shower and then study the issue before you act.

Bill Good is chairman of Bill Good Marketing Systems in Draper, Utah; see


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.