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September 20, 2017 at 01:15 PM
In my blog last week, I wrote about the bad karma created by “pre-screening clients,” because nobody likes to hear that they “aren’t good enough,” and consequently aren’t going to think — or speak — well of an advisor who sends that message.
Instead, I suggested that advisors take all prospect meetings. If someone isn’t a good fit for your firm, actively help them find an advisor who is. The good will you generate will more than make up for your “wasted” time.
Today, I’d like to talk about the other side of that problem: what to do about clients that your business has outgrown and have become unprofitable to service. Until recently, most independent firm owners simply kept those clients on, considering them a form of pro bono work.
(Related: The Four People Advisors Need on Their Team Before Trouble Starts)
However, these days, with many owners focusing on either substantial growth or increasing business value for an eventual sale, the “pro bono” model is becoming less acceptable. And, as resources are allocated elsewhere, service quality tends to fall — obviously a lose/lose. Here are some alternatives, along with pros and cons of each.
Set them free. This is by far the most popular solution because it requires the least amount of, well, everything; time, effort, resources, capital, etc. Unfortunately, like many “easy” solutions, it also falls pretty far into bad karma territory. In fact, it has every element of the above-mentioned “pre-screening” approach, with the added negative that these are usually people with whom you and your firm have had long relationships.
While it’s tempting to simply look at how much you’ll save every year by not working with these clients, that figure will undoubtedly be over-shadowed by the amount of ill will you’ll generate in your community.
