Nolan said that not enough advisers terminate bad client relationships out of fear of losing revenue or finding a more appropriate client to replace the one they have let go.
“So they’ll do things for them at cost or even below what it costs them to produce on the premise that one day they’ll turn into a very profitable client,” he said.
“But for some of them, that day never comes and the advisers can never really convert that client into paying what they should for the advice that they’re receiving.”
Other advisers may have a skewed perception of the value of the advice they deliver to clients which leads them to undervalue their service offer.
According to Nolan advisers should reassess the short-term value of their client books to retain their business value moving forward.
“Advisers lose sight of how much value they provide clients and prospects every time they offer an opinion or clarify a technical issue for them,” Nolan said.
“Clients will pay for quality advice, but advisers need to remind themselves how much value they really provide.”
Removing difficult clients can also present advisers with the opportunity to build a strong portfolio of clients that are more suited to that practice.
Nolan also said allowing advisers within a practice to terminate difficult clients can often boost the morale within a business.
“It’s a great demonstration of believing in your team and involving them in the business,’” he said.
“I’ve worked with so many advisers now who have said that the morale and spirit in their office just goes through the roof when their own team knows they’ve got the power to say they don’t want to do business with that client anymore.”
My accountant, solicitor, Dr, personal trainer, dentist, etc would all cut me loose if me being a client resulted in them losing money.
How can a planner be trusted to provide sustainable and profitable strategies for clients if they don’t employ the same in their business?
I agree it is easier said than done, but it still needs to be done, perhaps over a few steps or a transition period? If clients are for-warned about such changes in the future (i.e. pay more for an ongoing relationship or don’t have one) then they have time to consider this. Also, most advisers have more hesitation about this than clients. If clients are getting service and value and quality advice from the relationship, most will happily pay a higher fee to maintain that. I think the worry is primarily in the planners mind, perhaps from worry that the client isnt getting all that much value and therefore wouldn’t be prepared to pay more?
This is one of the banes of an planner’s life. The great benefit of being independent is being a trusted advisor and being involved in and caring about your clients lives, but sometimes you can lose sight of the bottom line. All well and good for Russell Investments to say ‘cut them loose’, they probably aren’t as invested in their clients lives.