Your assignment for today: Give your client list a good look and ask yourself, "Should I really be working with everyone on this list?" If you're honest with yourself, you'll have to admit that probably at least a few clients - perhaps many - simply aren't right for you and your practice.

These clients will probably stand out. They're the ones who monopolize your time but generate scant profits for your business. They don't take your advice, but drag down your team's energy and productivity. Deep down, you know that you don't enjoy working with them.

Now is the time to release these people. It's better for them and for you. Here's the best way to get the job done.



The idea of shedding clients and the revenue they bring may sound reckless, especially in an uncertain economic environment. But working with non-ideal clients is holding you back from reaching your full potential.

Releasing clients who are not ideal for your business is one of the most important tactics we teach at CEG Worldwide, and it's a key step in taking an advisory practice to a higher level of success. There are several reasons for this.

When you stop working with less-than-ideal clients, you free up a tremendous amount of productive time for you and your team. Think about the one-offs you deal with or the extremely demanding clients who consume chunks of your day. If you take that time back, you can focus on serving ideal clients and finding new ones. In addition, avoiding unworthy clients can renew your energy and excitement for your job.

Remind yourself that less is more. If you boil down your business to only those clients who match your services and expertise, you can build an amazing practice with a relatively small client base. Indeed, when we segmented 2,094 surveyed advisors by incomes and the size of their client bases, we discovered the top earning advisors (average income: $416,000) served less than 150 clients.



How do you discontinue working with clients who aren't a good match for the type of business you want to build? There are four main techniques advisors tend to use, but not all of them make sense. Let's take a look at each approach:

1. "Quiet file" the inappropriate clients. This is the passive-aggressive method, and nearly everyone uses it to some extent. You know this technique: You stop doing any proactive work with clients you don't want to deal with, and you hope that they will no longer contact you (but that you'll keep them and the recurring revenue, of course).

This technique probably isn't working as well as you'd hoped. In fact, you are doing a disservice to these clients and opening the door for them to tell their friends and associates about your less-than-world-class service.

Until you admit there's a problem and do something about it, these clients will keep asking for your time and attention (or more likely your team's attention). Yet they won't provide you with enough business to compensate for all that expended energy.

2. Hire a new advisor to work with unsuitable clients. I see many planners take this step because they believe this approach gets the inappropriate clients out of the way. But, like the first option, it doesn't solve the main problem. Think about it: You hire a junior advisor, pay him or her a salary and spend time training and supervising that person. There's more time and money spent. And for what? Someone whose job is to spend time on clients who aren't very profitable or appropriate for your business. Not a brilliant business model, is it?

3. Transfer the clients to another advisor in your office. This option can work well in certain cases. Let's say you are an employee of a firm. It can make sense to transfer these clients to another advisor within the company. Compensation for this transfer is sometimes arranged by making a revenue-sharing agreement with another advisor.

One advisor in our coaching program employed by a regional brokerage firm chose to start working only with larger accounts he could serve profitably, while transferring smaller clients to other advisors. He transferred 56 of his roughly 140 clients to another advisor, but for two years kept nearly all the revenue those clients generated - giving him a two-year window to make the transition without hurting his fees. The move boosted his fee-only business to $45,000 a month from $33,000 a month immediately and gave him more time to focus on attracting affluent clients going forward.

4. Sell the business of the unsuitable clients. We have a winner! By selling all your less-than-ideal clients to an outside financial advisor who wants to serve these clients well, you will have complete closure and the opportunity to turn your full attention to your highly profitable clients and prospects. That's what happened to another advisor with whom we worked. By focusing on wealthier investors, he cut his client base to 162 from 300 but boosted his assets under management by $30 million.

If you're an independent advisor, it will typically be relatively easy for you to package a portion of your client base and sell it to another independent advisor. If you're an employee, your firm should have the flexibility to sell a portion of your client base internally. Effectively, you would be selling a portion of your book of business and should receive either ongoing revenue or possibly upfront money.



If you decide either to transfer or sell the business of your inappropriate clients, you'll need to carefully manage the processes. Meet with larger clients to explain the sale or transfer, and call those clients whose account sizes do not warrant individual meetings. Ideally, you should make these calls yourself, but if there is a large number and you don't have the time, have a staff member help.

Follow up the telephone calls with a letter. It's essential for the phone call - a more personal communication - to come first. Along with the mailing, you should also send a change of broker of record and/or a new advisor agreement - whichever is required to change the registration and to allow the buyer to receive the fees and/or commissions. Call all clients two weeks after mailing the letters to verify that they received them.

You might also want to set up a conference call with the principal advisor to whom you're selling or transferring the clients. This will allow you to introduce the new advisor, who can address any questions or concerns the clients may have about the arrangement. In addition, take the following steps to help ensure that the transaction goes smoothly:

* Keep all parties interested. Regardless of whether you're an independent advisor or an employee, it's important to ensure that there will be an earn-out provision - a final sales price pegged to a percentage of revenues during a set period - that gives you as a seller an incentive to make sure revenues stay high during the transition.

* Get compliance assistance. Seek help either from your compliance staff or your own legal counsel. Pay special attention to your company's privacy policy to ensure that all provisions are followed properly.

* Maintain good client service. Some clients will use either a transfer or a sale as an opportunity to explore other advisor relationships. To minimize the possibility of this, continue to provide all clients with excellent service.

Releasing inappropriate clients is a big step that can yield big results. Of our many coaching program clients who have taken this step, not a single one has regretted it. As it turns out, the clients ended up better off, too, since they were directed to advisors who wanted to serve them well.

Don't let the fear of letting clients go hold you back. Instead, let bold moves you can make now help your business succeed in the months and years ahead.


John J. Bowen Jr. is a Financial Planning columnist and founder and CEO of CEG Worldwide, a global training, research and consulting firm for advisors.

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