Advisors: What Was Your Walk Away Moment?

Nov 16, 2017

walk away

As we move toward the end of the year, a number of advisor conversations are turning to what worked or didn’t in 2017.  For many, when they get to the “didn’t work” part of the conversation, the overriding theme is “I knew better but…”  Here are a few scenarios:

  • Advisor A: who had a client ask him to manage half of his assets, while the client self-managed the other half.
  • Advisor B: who built his practice with farmers and ranchers, then found himself working with two ultra-wealthy clients that were taking all his time.
  • Advisor C: who was amazed when he got a call from an $80MM lottery winner.  He was managing only $35MM at the time.

Each of these advisors got to a point where either they were fired, or they fired the client. On paper, or with the benefit of hindsight, it is easy to say they should have never taken on the client. But how do you prepare yourself?   What can you do to identify your walk away moment?

Why walk away?  Two sides of a bad relationship

Each scenario was a challenge for the involved advisor, one that upset their business. It is easy to see the advisors side of the bad relationship, what we often miss is the other side. The effects it has on the office:

  • Staff – The staff has to deal with major interuptions that an ill-fitting client brings to the table.  Requests that are outside of normal process and procedures take time to learn and process. It drags down efficiency and because it is new, opens up to potential for mistakes
  • Marketing and client relationship management – Time spent on ill-fitting clients takes away from marketing and new client acquisition for many advisors. What could the advisor be doing better with his/her time?
  • Revenue – For the advisor who lives in an AUM world, we know that with planning, onboarding etc., the revenue earned is back loaded over time.  In other words, your time upfront with a client is earned back over the years from the advisory fees. A short-term relationship typically does not pay for itself
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Avoiding in the first place

One of the challenges for most advisors is to understand their target.  I have often written that creating a persona or an avatar of your ideal client as the way to specialize your practice, and to focus on a niche. Some advisors however, are not ready for that level of specialization and a few may not go that deep. No matter where you come down on identifying the ideal client, I think it always starts with a few things:

  • What is the target? Simply stated, in the broadest terms possible, everyone in the “class” of people that you want to work with. The class could be the type of business that you find most interesting such as legacy planning or income planning or it could be retirees in general, etc.
  • What is the ideal? Again, in broadest terms, what do they value, or what will they value from your relationship?
  • What is the deal breaker? What will they not value, or what would cause you to walk away?

Note:  Each of these is a subset of the others. The “deal breaker” is a subset of your ideal clients; the ideal clients are a subset of the target.  Knowing the deal breaker before they walk in the door makes it easy to say no, or to direct them to someone else that can fit their needs.

What Happened Next

The client fired advisor A after a year. The client’s reasoning, “I know you outperformed me but I just can’t give up managing my own assets. I guess I’m not much of a delegator.”  All of Advisor A’s pre-work, planning and effort was wasted.

Advisor B terminated his relationship with the ultra-high net worth cleints. He found them a home with another advisor that had a more investment-focused service model. The staff was thrilled to go back their type of clients – ones that appreciated planning and were less demanding.

Advisor C could not compete with the constant second-guessing by competitors and family members trying to get a foothold into the $80MM lottery winner’s life. Every waking moment was spent defending and babysitting the assets and the client. He gladly went back to his recently ignored book right after the new advisors fired him.

We all know when something does not feel right.  Maybe we should be prepared beforehand, in writing, so we are more prepared to walk away when it doesn’t.

John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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