Firing someone is never easy. Thankfully, I’ve never had to fire a client in my career as a CFP®, but colleagues of mine and firms where I’ve worked have had to make this difficult decision.
Our goal as financial advisers usually is to build our client base, not reduce it, so letting go of clients seems counterintuitive. But there are situations where it’s the right thing to do, and sometimes it’s what is best for both the adviser and the client.
Below I address six scenarios and circumstances where I believe a financial adviser should fire a client.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
1. The client is a do-it-yourselfer who wants free advice
Let’s say a client is constantly doing their own research online and leverages their company benefits related to financial planning. But then the client expects you to listen to what they find for confirmation — without compensating you for your time and advice. In the meantime, the existing assets you do manage don't compensate for the additional amount of time the client seeks.
As CFPs, we operate in a highly regulated and ever-changing industry. This includes how firms make money. My current firm, for example, either takes commission, charges for the assets we manage, or bills by the hour for financial advice.
It’s important for financial advisers to remind ourselves that our advice is a key component of the job and that client interaction should be accounted for. Disclosure of fees is also essential, so the client knows exactly what services are billed.
We shouldn’t be in the business of offering free advice and confirmation for a client attempting to act as their own adviser.
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2. The client doesn't appear to need or value your services
Availability is important with advisers and clients. If a client is regularly not available for meetings or continually fails to give you the necessary information to be able to provide appropriate analysis, it may be best to part ways with that client.
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3. The client is repeatedly rude and unprofessional to the office staff
Some advisers may not agree with this point, but if clients aren't able to be respectful to employees, this is a deal breaker for me.
That said, firing a client should be a last resort. I believe the best solution for dealing with an unruly or disrespectful client is to discuss it with your colleagues and managing director. Approach the matter in a diplomatic way, get feedback and input from your staff and try to form an action plan to remedy the situation. Perhaps that’s a conversation between the client and your managing director. Maybe moving the client to a different adviser will help.
Of course, there’s no one-size-fits all solution. The goal is to build a great culture and work environment. If a particular client is contributing to a toxic workplace, it may be best to part ways. And this may end up being the best thing for all parties involved.
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4. The client exhibits unscrupulous, immoral and/or unethical behavior
There could be situations where a client’s finances demonstrate immoral or unethical practices. At the end of the day, we all want to sleep well at night.
Although, I don’t have a personal example of firing a client for unscrupulous behavior, I have encountered a client who had questionable line items in their budget, but the client then moved to another adviser.
As financial advisers grow in their careers, they can be more selective about the clients they work with. Usually it amounts to dollars, but it’s not — and should not be — only about income and asset level. It’s important to work with clients with the right intentions and those who want to do things the ethical way.
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5. The client doesn't fit your ideal client profile
We are going through new ownership and rebranding in my current firm. In order for us to best serve our clients, we have gone through the exercise of defining our ideal client base. Unfortunately, some of the existing clients don't fit this description.
It’s important to keep your ideal client base in mind when pursuing prospective clients or re-evaluating existing ones. This is a “win-win” for the adviser and the client because you can focus your services to best fit your clients’ needs.
In this scenario, you’re not necessarily “firing” a client in the traditional sense. The client simply might not fit what your firm is looking for, and therefore it would be a disservice to the client to keep them on.
A solution here may be referring the client to a different adviser or firm that can better meet their needs. Usually when you approach it this way, the clients are very understanding, because they recognize you have their best interest at heart.
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6. The client is only interested in investments and outperforming the stock market
This client usually doesn't appreciate asset-class diversification and the long-term finance perspective of investing to achieve one's goals.
You can't consistently outperform the market. Therefore, this client will never be satisfied and doesn't value your holistic planning services.
Making the decision to fire a client is not always easy, especially when you are working to build your client base.
But if you have a client who is rude or unethical, doesn’t need you or solicits free advice, or doesn’t fit your ideal client profile, letting them go could be the best judgment call you make for both your business and the client.
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