When a client proves to be a poor fit for a planning practice, a smart planner lets that client go. An even smarter planner screens potential clients before committing.
Many practices employ electronic tools as a first line of defense, using web sites and emails to clearly describe the services they offer and the types of clients they serve.
"If they like what they see, I schedule a call with them where I find out more about their circumstances," says Craig Larsen, president of AHC Advisors in St. Charles, Illinois. "If they may be a fit, we then schedule an in-person meeting to help them learn more about us, and we learn more about them. If they still like what they hear, then we schedule a second meeting to go over our investment philosophy and approach in detail. At that meeting it is pretty clear to everyone if we are a fit for each other."
“It is better to break off the engagement than to suffer a painful marriage and a predictable divorce.” – George Gagliardi
As they have these conversations, Larsen and planners like him are listening for the answers to potentially deal-breaking questions.
Does she need what you’re selling?
If a planner is a dermatologist but the client needs a surgeon, metaphorically speaking, the relationship won’t work.
"I don't require that potential clients be financial experts, but when they say, 'My finances are a complete mess,' a red flag goes up,” says Cathy Curtis, owner of Curtis Financial Planning in Oakland, California.
"If they mean that they don’t understand investing or what to do with their 401(k) accounts, that’s fine. If they mean that they are on the edge of bankruptcy or have tons of credit card debt, those aren't my areas of expertise. Their problems just aren't in my wheelhouse."
Is he too focused on fees?
Prospects who want to argue about fees before they're even clients aren't usually worth a planner's efforts, says George Gagliardi, a planner in Lexington, Massachusetts.
After whining about Gagliardi's fees, he says, these prospects often suggest, "'We'll give you a small piece of our assets.' That’s a small price for a large headache, plus now they can mimic my setup in the rest of their portfolio,” he says. "I'm a professional and would like to be treated as such."
Clients who try to negotiate Curtis's fee may also try to get more than she offered, or expect a direct discount. The worst fee-sensitive clients may end up stiffing you for your fee. "That's a disaster," Curtis says — and good reason to screen carefully up front.
Is she chasing performance?
"If all they care about is performance, that's not going to work," Gagliardi says. "Trying to meet clients' financial goals with risk-managed returns is what I do. A guy came up to me at a town function and said, 'Can you beat the market in good times and not get hurt during bad times?' No, and that’s not my job."
“Some folks are just plain difficult.” – Erika Safran
People who can't resist the next hot investment or want to guess what the market will do are also a problem, says Scot Stark, owner of Stark Strategic Capital Management in Freeland, Maryland. "There are people who yearn for you to forecast the future, and I have colleagues who do that, emphasizing the outlook for the Fed, the economy, and so forth," he says. But prognostication isn’t what Stark does.
Like most planners, Gagliardi says he wants to work with clients who can take the long view. "When someone looks at a week’s performance and freaks out, and won’t listen to a reasonable discussion, it tells me that this is not going to work," he says.
Performance chasers often reveal themselves in stories about their former planners. Ask whether a prospective client has worked with an adviser before. If so, what happened to that relationship? Some people fire multiple advisers, Curtis says, due to unreasonable expectations for portfolio performance.
Will he let the planner plan?
Socially responsible investing preferences are one thing. Micromanaging is another. "A guy came in and said that his wife knows about this stuff and doesn't like this fund and that fund," Gagliardi says. “I can tailor a portfolio, but this was an early warning sign.”
Curtis asks prospective clients how they’ve been managing their money thus far. "If they say their father or their brother has been managing it, that's a huge red flag," she says. "The money will move over and all of a sudden they will tell me that I can’t sell this stock or that stock, because their father bought it for them."
“If a prospect treats any of the staff rudely, then we don't work with them. Period.” – Craig Larsen
Stark cringes when he meets know-it-alls. Correct them, and they’re offended. "These people are usually men, because men are usually more macho about their money. You want clients who are delegators and good listeners," Stark says.
Do you like them?
You don’t need to be friends with your clients, but you do need to like them enough to work with them.
"Some folks are just plain difficult," says Erika Safran, owner of Safran Wealth Advisors in New York. "Their expectations about their finances are clearly unrealistic, and the attitude with which they present their expectations can hint at future discord in our relationship. You raise your voice at a meeting and the meeting is over."
Larsen takes that policy a step further. "If a prospect treats any of the staff rudely, then we don't work with them. Period," he says.
It’s hard to turn away work, especially when your practice is relatively new. Stand firm, these planners say. "It's very difficult to turn away clients who could improve your bottom line, but if the cost to me and my practice is frustration, lost time and an unsatisfied client, then it is better to break off the engagement than to suffer a painful marriage and a predictable divorce," Gagliardi says.
