Advisors often underrate the joy of saying “no” to bad clients.
The 80/20 rule is well known by planners: 80 percent of our revenue comes from 20 percent of our clients. We’re not as focused on the 90/10 rule, primarily because I just made it up.
That rule indicates that 90 percent of aggravation in our practice life comes from 10 percent of our clients, that is, bad clients or bad projects. And, by “bad” I mean something a tad more painful than the pain that comes from jamming a sharp stick in your eye.
Because we control the variables, new projects and new clients, an understanding of the 90/10 rule can actually increase our happiness. Still, this strategy means we have to be strong and not select those 10 percent clients or matters.
One incident I remember quite vividly: a potential client (let’s call him “Ted”) with substantial net worth requested I advise him on the most effective method to use the lifetime credit at year-end. I emphasized to Ted the need to put a strategy in place, if he wanted to do so before year-end, as soon as possible so that we could get it done in time. He promised he would get right back to me as to whether to proceed or not.
On Dec. 23, my receptionist frantically tracked me down to indicate that Ted was on the phone and needed urgently to talk to me.
The conversation went something like this:
“Lou, this is Ted. I’m riding on a chairlift at Snow Valley right now and chatting about estate planning with the dude in the chair next to me. Just met him on the way up the mountain. He indicated that his estate planner recommended blah, blah, blah strategy for use of the credit. I want to know why we’re not doing that. You never suggested that. What were you thinking, or not thinking? Explain yourself!”
I had this vision of the chairlift crashing down. My response, instead, went something like this:
“Ted, at this point, we’re going to have to decline your representation. I enjoyed meeting with you [a prevarication, but probably allowed under the ‘politeness allows for mendacity’ rule], but I won’t be able to handle your matters. Have a nice ski trip. Bye.”
In hanging up the phone, my mood couldn’t have been better.
Use Common Sense
Usually, listening attentively during the initial telephone call or sending out a questionnaire and reviewing the responses carefully will provide clues as to client matters for which a “no” should be immediate.
Listen carefully to the buzzwords and concepts that may make you want to dismiss a potential client. These include:
1. The prospect has had too many advisors before you and may even refuse to name them. Or, worse, he wants to consult with you about how and why he shouldn’t pay his prior advisor.
2. The prospect thinks all previous advisors are “idiots” or makes otherwise derogatory statements about advisors in general.
3. The prospect can’t demonstrate he can pay for the cost of your services, balks at paying a retainer and/or asks for a special reduced rate or payment terms up front.
4. THE PROSPECT WANTS TO BE NOT JUST A PRIORITY, WHICH ALL CLIENTS ARE, BUT THE SOLE AND PRIMARY PRIORITY. WITH THESE CAPS, DOES IT SOUND LIKE I AM SCREAMING AT YOU? SORT OF LIKE HOW THIS CLIENT MAY SOUND.
5. You don’t agree with the prospect’s legal position.
6. You don’t believe the prospect is being truthful.
7. The prospect is VAV (vindictive, angry and vengeful).
8. The prospect is a family member.
9. The prospect indicates he knows his stuff, what he wants to do and just wants the advisor to do the front-end work for him.
The Right Emoji
Life is short and should be accompanied by smiles, not frowns. We’re in control of this emotion, and adherence to the 90/10 rule will have a strong influence on getting us to the happy face.
This is an adapted version of the author's original article in the June issue of Trusts & Estates.