How to fire problem clients
Breaking up is hard to do. And it’s even harder for financial advisors who feel the need to cut ties with an active client.
As any advisor will quickly admit, it’s not easy landing a new client. Most investors of means are already spoken for and the mere idea of signing all those papers to move an account will often spook a potential client back to his or her current advisor — even an underperforming one. Inertia, alas, may ultimately be the most powerful force in the wealth management industry, ranking up there with compound interest.
Bringing on new clients is also not inexpensive. According to a 2020 Kitces Research survey of more than 800 financial advisors, the average total cost for a financial advisor to acquire a new client is a hefty $3,119.
That said, the report’s author, Michael Kitces, notes that a significant portion of that amount is the “time cost” to the financial advisor themselves, an average of $2,600 worth of time spent, or 83% of the total cost of client acquisition, while only $519 is typically spent on hard-dollar marketing costs.
In other words, talk is not cheap when it comes to customer acquisition, so the decision to cut bait on a client is not one to be made lightly.
“Often, the reason for firing a client comes down to our ability to serve them well. Considerations for determining next steps include if our values align, if they fit our business model, are our personalities a good fit for each other,” said Laurie Humphrey of Granite Financial, which is part of Osaic. “If not, then the question arises: are they better suited for a different type of practice instead of with ours?”
Andrew Crowell, vice chairman of wealth management at D.A. Davidson, says that while finding clients is
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