There will come a time when you have a client or group of clients that no longer fits the definition of your “ideal” client. As a business owner, you have a choice to make. You either let a client stay and continue to provide them with the same level of service as in years past, or you make the difficult decision to cut ties with them. There are a myriad of reasons that have brought you to this decision.
- You have matured as a business owner.
- You have gravitated toward a specific client niche.
- You have seen a tremendous amount of growth.
Regardless of the reason, working with the wrong type of client can have serious consequences for your business. You will not maximize your profitability, you will not have a collaborative team, your business will not be scalable, and your mental and physical health will be negatively impacted.
Although there are many resources that exist to help you craft a plan to define and create your ideal client profile, there is not much discussion about what to do when there is a misalignment and how to gracefully refer a client away from your practice.
Effects of misalignment
It’s no secret that a negative working relationship with clients is bad for business. You are stressed trying to meet their needs, or perhaps you are not devoting enough time and effort to them because your focus has shifted toward a demographic that requires a different type of servicing or expertise. Whatever the reason, if you find yourself reacting negatively to the mere mention of a client’s name, you are likely already aware of the mental drain.
Due to the nature of your work, you must provide consistent and timely service -— but at what cost and how long will you accept it? If you find yourself thinking about how difficult a particular relationship is and you cannot shake that feeling, it would be wise to inventory exactly why you feel that way and what, if anything, you can do to alleviate the stressor associated with the situation.
The potential effects on your business may be obvious. Perhaps you experience excessive fatigue, maybe you become overly agitated after an interaction with this client, or you always feel like you have to walk on eggshells to make them happy.The threat to your business is real and should not be ignored.
Your clients are an extension of your sales team, and one or more negative experiences can generate significant shockwaves affecting both your brand and reputation. This is an especially difficult position to be in when most of your business is generated through referrals within family or friend circles. Information travels swiftly through groups, whether positive or negative.
If the information shared up to this point is resonating, it may be time for you to take inventory across your book of business. The decision to move a client away from your practice is no easy task and mixed emotions will surround this decision. If you find yourself hesitating, even slightly, you will want to consider and reflect on why this choice is the best one for your own health and the longevity of your business.
There are benefits and risks with every scenario, but it comes down to your “why.” If your why is strong enough, then it might be in your best interest to follow through.
Begin by taking an inventory of the relationships that you currently manage. What are the unique qualifiers for you that might encourage you to consider referring your client to another advisor? Although the assets under management or planning fee might be part of your considerations, you will want to also ask yourself two other specific questions: First, do you enjoy working with this individual, and are you able to provide them with enough value based on their needs and the level of service that you currently offer your clients?
Next, what else would you consider as a deal breaker based on your current model and how do you decide if a prospect is a good fit or not? These same questions should be included as part of your metric to move a current client to another advisor within your firm or outside of it.
Ready. Set. Refer.
Your client list is ready — now comes the delicate task of explaining why and how your practice is evolving and why it is in the client’s best interest to work with another advisor who can better serve their needs.
This message should be succinct and empathetic, as this was a tough decision for you and your client. Whether you have defined your “ideal” client or not, informing clients that you are no longer best for them and referring them to another advisor lets them know that you always have their best interest at heart.
Maintaining a short list of two to three advisors to call upon during this period is critical for a smooth and successful transition for your client(s). Making note of and understanding the unique differences between each advisor in terms of their tenure, areas of expertise, and niches that they serve can help you make an informed decision prior to the referral. This is in the best interest of all parties involved.
Checking-in with your list of advisors is crucial as time passes to ensure you are up to date with any changes regarding their ideal client. Don’t just assume that no changes have occurred because you haven’t heard from them. In this case, proactively managing the relationship will help avoid confusion and bad referrals in the future.
Whether you choose to refer non-ideal clients to another advisor, or you decide to expand your service model by hiring a junior advisor to service these clients, the decision should not be taken lightly. You should always have the best interests of your clients in mind.
If you feel something is not right with the relationship, it is likely your clients are feeling it too. You have an opportunity to course correct, instead of letting the client relationship quietly deteriorate and receiving the outgoing ACAT. Which will you choose?
Meg Hanington is a cofounder of Beacon Partners, a consulting firm that helps mid-career independent financial advisors improve their financial planning and wealth management businesses.