Skip navigation

Prodigious Heirs

Most brokers squander their inherited clients. Diligent advisors can build a practice out of them

Raymond James & Associates advisor Mark Thompson won over a $1.9 million dollar account from a broker who had left the firm with a single letter. He simply wrote the client asking if his life insurance policy had been updated. When the client learned from his broker that his ex-wife was still his beneficiary, he was as good as in the Thompson fold.

While not quite all in a day's work for Thompson, it comes close. He signs up 90 percent of the inherited clients that departing brokers leave behind, and his incredible retention rate has enabled him to build a practice with 265 clients worth a total of $150 million.

Thompson's success at keeping inherited clients in his firm's stable is all the more remarkable when you consider the averages. Ninety percent of clients leave a firm when their brokers do, according to Philip Palaveev, senior manager with Moss Adams, a Seattle accounting and consulting firm specializing in working with financial advisors.

The exodus makes sense, too. Chances are most clients, like most people, will go with those in whom they already have confidence. “Trust is the No. 1 factor in selecting and staying with an advisor,” says Palaveev.

Even if the broker is a touch slow, as in the case of Thompson's former colleague, clients may not be interested in any broker working at his old firm.

The Drip Method

How can you make the most of inherited clients? Thompson calls his system the “drip” method. It's about persistently paying attention to all the details, like checking to see if all the account information is up to date and accurate. That gives the new broker many reasons to contact clients and over to press the case for them to stay and to build up accounts.

The key element is speed. The old advisor, undoubtedly, will communicate with clients about his or her departure as soon as possible. An advisor inheriting those accounts has only a matter of days in which to introduce himself and try to make an appointment to meet face-to-face.

“You don't have the luxury of time,” says Ivory Johnson, director of financial planning for the Scarborough Group in Anapolis, Md., who counts among his 400 clients 300 that are inherited.

With the clock ticking, though, advisors need a strategy for whom to call first. That means ranking the clients from most to least important. Johnson, for example, arranged clients according to asset level, picking the top 10. “I made a point of calling them within 24 hours,” he says.

Other screens are useful as well. For example, if an advisor has a particular focus on, say, retirement plans, college savings or clients in a specific industry, then those clients should go on top. Similarly, any indication that the clients and the advisor have mutual interests — anything from being an amateur pilot to involvement with a certain charity — should also affects where that person is placed on the list.

Whether or not the client agrees to a meeting, advisors need to follow up with a mailing immediately. Thompson sends a letter introducing himself along with a packet containing articles he's written and biographical information. Johnson mails information about the firm, as well as a special brochure that goes beyond basic company material, including his biographical details. Advisors should call again a few days later to try to arrange a face-to-face appointment.

Questions and Answers

At the first meeting, the best course to take is getting clients to talk about themselves. “I want to ask probing questions and listen to their stories,” says Robert Mecca of Robert A. Mecca & Associates in Mount Prospect, Ill., who says he's kept 80 percent of his inherited clients, building a practice with 140 accounts. He learns just what clients may have liked — or disliked — about their previous advisor, then he makes it clear that he intends to do better. If, for example, communication was the problem, then Mecca will ask when they want to be contacted and how.

Some advisors hone a standard series of questions that will get clients to open up. David Tornetto, a financial advisor with AXA Advisors in St. Louis, who counts among his 525 clients about 300 that were inherited, asks three questions at a first meeting: “What did you like and dislike about your previous rep?” “What are the expectations regarding service and performance that you need to see for us to continue this relationship?” And, “If we were having a conversation five years from today, what would need to happen for you to be completely pleased with our service?”

He recalls one client who was so impressed by the last question — saying he'd never been asked that question before — that he almost immediately decided to go with Tornetto. The AXA advisor listens carefully to each response, bringing up other issues until he's able to see if there are any questions the client might not have brought up — worries about a child with learning disabilities, for example, or a sick parent.

At the same time, advisors can use the first meeting to unearth areas where the previous advisor might have fallen down on the job. An easy one is finding out if the clients' holdings reflect their goals or risk-tolerance levels.

“The best thing you can do is raise questions,” says Thompson. But, he warns, advisors need to prepare in advance so they know how to respond diplomatically if they discover the old rep performed badly.

“Apologize for the previous experience and tell them you don't operate that way,” says Hellen Davis, who runs Indaba in Tamp, Fla., a firm providing coaching to high-performing representatives. “You can turn a client around.”

That Special Something

The surest way to win points, however, is to go above and beyond the call of duty. That may entail adjusting standard fees. In his first meeting, for example, Thompson goes through a 20-page questionnaire with the client, then produces a comprehensive financial plan, plus a retirement cash-flow analysis for free — a service for which he usually charges as much as $2,500.

Traveling to meet a client, especially beyond commuting distance, is another good way to demonstrate commitment. It not only shows how important his business is, but also tells the client that he's going to get great personal service.

“The level of service you give can make all the difference” says Gregg Mekler, senior vice president of investments for Piper Jaffray in Minneapolis. He points to a high-level executive and inherited client who lived halfway across the country and hadn't had a face-to-face meeting with his advisor for months. Mekler and a partner flew out to win him over in person.

The first meeting is more than likely only the beginning of a campaign. Advisors suggest maintaining contact through mailings and email. Thompson makes a point of staying in frequent touch for 24 months.

“If you can continue to stay in touch, chances are they will do business with you some time within three to five years,” says Davis.

The Importance of A System

That, of course, requires installing a system. Thompson has a three-person team to work on retaining these new clients. One member will do a portfolio analysis, while another is responsible for regularly sending appropriate research reports. Even if you don't have the luxury of assigning that many people to the task, you can still institute your own system, scheduling times to contact clients on their calendar, like at the beginning of tax preparation season.

An extra dose of communication isn't only an effective tool for wooing clients that haven't switched. It's also a good idea for solidifying those relationships. For the first year or so, Steve Mannato, an advisor with William Tell Financial Services in Latham, N.Y., meets face-to-face or over the phone with inherited clients every other month, instead of the twice-a-year sessions he usually holds. “That's just to let them know I'm thinking about them,” says Mannato, who says he has a 90 percent retention rate. “The way I can gain their trust is by keeping in constant contact with them.”

The payoff is not just a new client but an account that gets built up over time. The $1.9 million account Thompson manages for the divorced man started out at $100,000 and took 18 months to reach its current level, while the executive that Mekler wooed from afar has increased his account to over $5 million in two years.

“We showed him we would follow through on the level of service we promised,” says Mekler. “We had to walk the walk.”

One step, or drip, at a time.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.