Not all your clients can be good ones. But what should an advisor do when a client becomes too difficult?
In this month’s roundtable, three top advisors share their advice for dealing with problem clients.
(For part one of this roundtable, see: How to attract the right clients)
Q. If you’re like most successful producers, you have had a certain number of clients who, quite frankly, cause more issues and problems than they are worth. Have you experienced these kinds of difficult clients in your own practice, and if so, have you ever taken practical steps to “weed” them out of your client base so that you can focus more on your ideal client base?
William J. Rossi, CFP, ChFC, partner at Koss Olinger Financial Group: Since part of our ideal client profile is a person who is nice and pleasant to work with, we rarely have the unfortunate situation of dealing with a challenging or high-maintenance client. Some do require more hand holding than others, but that is part of why we are selective up front. We know what we are getting into and whether it is worth it or not. There are many clients we do not take on each year if they aren’t the right fit for our firm. This helps us manage growth and maintain the highest level of service to our current clients.
Jason J. Dudum, LUTCF, chief executive officer of Dudum Financial: Every financial advisor at some point will have clients who are more challenging than others. Personally, I don’t like to remove a client ultimately from my practice. Instead, I find one of my associates who may have more time to dedicate to their needs. Some may want to talk more on the phone or are more high-maintenance, but I’ve never thought I should walk away from a client. If I can use someone in my office to serve them, then they are still getting the help they need and I am still making the revenue at a more manageable cost.
Mark Jones, president of Remington Insurance Group Inc.: We have inherited some clients over the years who I consider very high maintenance. Administratively, they are a burden and tend to exhaust our resources. Ironically, they often appear to be very successful, until a pattern starts developing. They get behind, then struggle to pay premiums near the end of grace periods, borrow constantly, and tend to over-extend themselves on a regular basis. The interesting fact is, their income is not the problem — it’s their individual mindset and unrealistic living standard. Some are very well educated with advanced degrees, but they’re financial disasters. They write checks they can’t cash. You’re always hoping they will change and develop some sound financial strategies, but I’ve found that if a pattern is set, it usually doesn’t change. You hit a point where you have to give them the insurance company’s toll-free number because you’re unable to provide any further service. It rarely happens for us to get that point, but it does create some sense of relief.
Q. Some agents I know categorize their clients into A, B, and C clients, based upon their fit within the agent’s practice. In your own practice, have you ever had to let go of some of the C-level clients, who were not the best fit, so that you could concentrate on better serving your A-level clients? And can you talk a little bit about the practical steps you took in letting those C-level clients go, and in retaining the A-level clients?
Dudum: I have never had to get rid of my C-level clients. Instead, I have associates who will handle their needs and requests. This allows me to focus more of my time on the A-level and B-level clients.
To transition a C-level client to my associate, I have a conversation first with them over the phone. I share with them that I would like to continue working with them but I am going to pass some of their requests to another associate to handle. But I’ll be in the loop about everything going on. If they have a problem with that, then I would need to consider letting them go.
Fortunately for my firm, we have not had any problems. I retain my A-level clients by making sure I never have more than 25 A-level clients. I choose the number 25 because I try to reach each of my A-level clients personally through email or a phone call once a month.
Jones: I know of very successful producers who literally use this technique annually, and it can be ruthless. This is usually motivated and measured by the premium generated or the potential for future growth. We haven’t, only because we’ve had C clients marry a potential A referral/prospect who has become a great A client. We’ve had C clients inherit some substantial wealth and come to us for solutions.
See also: People before profits
I believe you have to exhaust all reasoning to let go of a client. We’re in a relationship business, which means we should provide a superior level of service that keeps clients attracted to us. Too often I’ve seen a C client, believing in what we do and not having the resources to take action, end up as a solid B or A client. You just never know who it could be.
So if it appears to be a dead-end street, make very, very sure there’s not a new development on the horizon that could create a boulevard.
Rossi: It is always hard to let go of clients who do not fit our firm or to whom we cannot add value. About seven years ago, we imposed a minimum asset base. If a client is below it, they can consolidate accounts — if any — to get to the minimum, or they can pay an annual planning fee. If they do not want to or cannot do any of those options and if they do not know another advisor in whom they have confidence, we are committed to assist them in finding one so they are not left without help.
This allows us to continue to provide high-quality, proactive service to our core client base and retain our clients. We have a firm-wide stated goal to maintain a 98 percent retention rate. Service to our current clients is our top priority.
Q. Any further thoughts?
Jones: The adage “work within your age group — five years younger and five years older — and with people in your social and economic status” is so very true. The “millionaire next door” truly exists. They are relationship-oriented and relish good consistent service. My best advice: Work with clients you’d be proud to introduce to your family.
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