Firing a client is a difficult choice that can be a step toward a more profitable business, says Jennifer Black, an advisor with Dedicated Financial Solutions in Mississauga, Ont.
Black knows the magnitude of such a decision because she speaks from experience.
Clients who take up too much of your time relative to the revenue they generate or are otherwise incompatible with your business plans can be a costly drag on your practice.
Black offers some tips on how to let a client go, gently:
> Offer a clear explanation
Perhaps you have decided to let go a client who brings in a low annual revenue to your practice. Or, you might decide to fire a client who seldom responds to your communications, whether by phone or email.
Whatever the reason, Black says, you should have a clear explanation as to why the relationship no longer works.
Wherever possible, Black says, avoid putting the onus for the breakup on the client.
When the separation is planned well, the client can still leave with a positive impression and could later refer you to other, more suitable prospects.
> Be straightforward
There is no need to beat around the bush, Black says. Just be simple and straightforward with your client.
For example, you might tell your client that you’ve experienced significant growth in your practice and that you are unable to provide a level of service that the client deserves. As a result, you have had to take a look at the practice and make some tough decisions regarding certain clients.
“It was from a business perspective and a business decision,” says Black.
> Consult your compliance department
Before letting any clients go, be sure to let your firm’s compliance department know what you are planning and why.
Perhaps a compliance officer will offer guidance on how to transfer these assets to another advisor within the firm and how to make a seamless transition. Notifying compliance will also enable the firm to address any legal concerns it might have.
> Offer an alternative
If you are planning on letting a client go, you should avoid leaving that client with the feeling of being abandoned.
Black recommends having another advisor on hand who would be willing to take on such clients.
“You [should] give [the client] an option and support them,” Black says.
When Black trimmed her roster, she was able to transfer some her old clients to another advisor with whom she had worked for many years.
“It was a mutually beneficial,” she says. “We both were able to grow — and our clients were happy for us.”
This is the third instalment in an occasional series on improving profitability.
Next: Building your practice from the top.