“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.



> Firing A Client
Advisor: In a recent column, you provided some tips on how to terminate an employee who isn’t adequately doing the job for which he or she was hired and you have no confidence he or she will develop.

But what about the client who is no longer desirable and shows no sign that he or she will improve? How do you fire him or her?

Coach says: You spend so much time in this business trying to attract clients, it almost seems coun-terintuitive that you might want to fire any of them. But the truth is that every advisor eventually reaches the stage with some client when they say, “This just isn’t working and has little promise of getting better. I need to terminate this relationship.”

This doesn’t necessarily mean the client is a bad person. It could also be that there is no longer a fit between you and the client. Regardless, experience shows us that you are likely to hesitate or avoid the decision because:

> the client generates a significant amount of revenue that you are reluctant to give up;

> the person is well connected among your other clients or in your community and you are worried about the negative fallout;

> you are afraid to hurt his or her feelings, or;

> you simply don’t know what to say.

Let’s look at each one of these situations more closely:

> The Client Generates Significant Revenue. The very fact that you would even consider terminating a relationship with someone who contributes substantially to your income is telling. It indicates that the situation has reached the point at which you consider that revenue to be inadequate compensation for whatever is causing you to feel the way you do.

Typically, in this situation, you would deem the client’s “pita” factor (pain in the assets) is too high: they take up too much time, make too many demands, are rude to staff, disagree with you, criticize the work you do for them or have unrealistic expectations. Despite your best efforts, nothing seems to please them.

If that is the case, I recommend a frank and to-the-point approach such as this: “John, I have been thinking about our relationship, and it is clear that it is not working. We do not have respect for each other, which is a condition I insist upon with all clients. My team and I will be happy to assist you in making the transfer to somewhere else of your choosing.”

Note that there is no offer to refer the person to another advisor. Why would you refer such a client to anyone? And there is no apology. Nor are you accepting responsibility for the breakup. If you want to soften the blow, you can add: “I regret that it turned out this way.”

Be prepared for the client’s response to range from agreement to outrage, much the same as what you might expect from an employee you are terminating.

Although the client will often concede that the relationship isn’t meeting his or her expectations either, they may also want to argue with you. Avoid debate. Decide beforehand what your response will be if the client asks for a second chance. These don’t usually work out and you will eventually have the same conversation again at some point in the future.

> The Client Is Well Connected. This is really much the same issue as the client who generates a lot of revenue, except you calculate that the price you’ll pay for firing the client may include loss of business or prestige from others.

You will take this into account in reaching your decision, which probably means, in the case of such an undesirable client, that your “breaking point” will be higher. That shouldn’t change your decision, but it might delay it.

Keep in mind, however, that someone who is rude, inconsiderate or disrespectful to you and your team probably doesn’t have as much influence with others as might first appear. In firing this type of client, use an approach similar to that used in the first scenario.

@page_break@If it isn’t a situation of a failed relationship, but one in which there is no longer a fit because the client wants to do things you can’t do or won’t do, or because they no longer meet your client profile, the best approach I have seen is to “graduate” the client.

Your conversation starts something like this: “John, it appears that we have reached the point at which our practice can no longer meet your needs. You would like to [insert client need, such as buy penny stocks, trade in and out of your account daily, make investment decisions without consultation] and, regrettably, we are unable to do that under our current structure. In your best interests, I believe it is time for you to graduate to another firm that has the facilities and capabilities you require. I would be happy to introduce you to an advisor I know and respect who is better equipped to give you the service you need.”

This may be a longer conversation than one in which you are happy to let the client go — and in these situations, advisors will often apologize for not being able to serve the client as desired. Stick to your decision, but follow the same advice provided with respect to terminating an employee: decide with your head; implement with your heart.

> You Are Afraid To Hurt Their Feelings. This most commonly occurs when you have decided to “upgrade” your clientele and a current client no longer meets your profile, but you are reluctant to let them go because you genuinely like them. The advice here is not to make it about them; rather, make it about a change in your business model or strategy.

You might say: “John, we have just completed a thorough review of our business plan and have determined that in order to meet the long-term objectives we have set for our practice, we can no longer try to be all things to all people. We must focus our resources on [insert ideal-client profile here, such as people who have assets of $250,000 or more, are self-employed professionals, etc.]. In doing so, we will fall short in serving others who don’t fall into that category, and we don’t believe that is fair to them. For that reason, we would like to work with you to find an advisor who can give you the level of service you deserve. We have someone in mind — can I tell you about them and why I think you would be a good fit together?”

This one is often tougher than other situations because the client is frequently someone who was important to you in the early days of your practice. You have simply outgrown them. Assuming you are adamant about letting them go, be firm but kind.

Alternatively, there is nothing wrong with keeping a few clients who no longer “fit” — just because you like them!

> You Don’t Know What To Say. Just as terminating an employee is difficult, so is ending a client relationship, even if you are relieved to do so.

Write down the reasons for your decision prior to the conversation to give you confidence that you are doing the right thing. Decide on your stance, which will be firm, factual, kind and compassionate.

Prepare your “script,” not necessarily to be repeated word for word, but to give you “talking points” so you don’t have to search for what to say at the time and can deliver your message assertively and confidently.



> A Marketing Budget
Advisor: What percentage of my revenue should I be spending on marketing?

Coach says: Regrettably, most advisors do not reinvest a sufficient portion of their revenue to build their brand and profile in their community.

The work I have done with advi-sors indicates that most invest only 1%-3% of gross revenue in marketing. I think there are several reasons why advisors devote so little to such an important component of their businesses.

One reason is that the payback is difficult to measure. American retailer John Wannamaker put it best, when he said: “Half of my advertising works — I just wish I knew which half!”

Although there is much more to marketing than advertising, the point is that it’s always difficult to tell which parts of a marketing program are generating revenue — and which are not.

Another reason is that there are too many places to spend money in a practice — such as on staff or technology — that demonstrate their usefulness every day. Marketing is intangible and deemed to be of a lower priority, even though its long-term value could be enormous.

Most advisors say they have “tried” some marketing in the past without the success hoped for, so they are skeptical of its effectiveness. But one misguided marketing effort is no excuse to reject marketing altogether.

In contrast, it is not uncommon for top-performing advisors to commit 10%-15% of their revenue to marketing. Still, it is not the amount that matters as much as how it is used.

Even a smaller proportion consistently applied to a diversified marketing program that appeals to the type of people you want to attract will have positive and tangible results. IE



George Hartman is president and CEO of Market Logics Inc. and a senior coach and facilitator with the Covenant Group. Send questions, comments and opinions on any aspect of practice management to george@marketlogics.ca.