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It’s Time for Inventory: Annual Client Re-Engineering

Philadelphia—“I just spent an hour solving a problem for a very low-revenue client, embarrassingly low, especially when I discovered he no longer worked for the company whose owner is a good client,” mused Michael. He confessed, “I know what I should do, but these people need my help.”

Well said, Michael!Being the son of a social worker, I can assure you that helping is an admirable trait that more people should embrace.However, Michael, if he is a true professional who takes practice management seriously, is running a business.He’s a financial advisor, not a financial social worker.

Therefore, Michael was not defensive when I suggested that, like every businessperson, he should conduct inventory at least once a year.For advisors, this inventory is the client.

As I explained to Michael, this annual inventory exercise is designed to clear bandwidth in order to focus on relationship management and relationship marketing (spending more time with affluent clients and penetrating their centers of influence).The key is to frame this exercise around alternative options for clients meeting any of the three following criteria:

  • They provide little or no revenue.
  • They have no upgrade potential. (They’ll never provide much revenue.)
  • They aren’t a center of influence who can introduce you to potential high-revenue (affluent) prospects.

This doesn’t necessarily mean that you’re firing these clients; this would be a disservice and damaging to your reputation.Your objective in re-engineering your client base is threefold:

1. Raise the bar regarding the level of personal service you provide your affluent clients.

2. Free up time so you can spend more time on a social level with your affluent clients. (Our research tells us this significantly increases your ability to penetrate their COIs.)

3. Ensure these smaller clients receive the time and attention they were promised. (Most advisors only reactively service smaller clients.)

The following are three tracks that have proved successful for advisors we’ve coached through this re-engineering process.

Keep them within your firm. Most firms have a program designed for veteran advisors to hand off smaller clients to another advisor at their firm.This requires finding an advisor who is committed to providing the level of advice and service you want for these clients.

You should introduce these clients to their new advisor in person or by telephone, explaining that you’re taking your business in another direction and want to ensure that they are served well.If you’re handing off a lot of clients, you might consider sending a letter that communicates the change.

Some firms have call service centers for this purpose.If you decide to use this track, be careful of the clients you select—typically those you don’t have a relationship with, or who are difficult. If the service center doesn’t communicate this change, you need to draft a short letter communicating such.

Make a clean break. If your firm doesn’t have a call service center, or for some reason you choose not to go down that track, you can still make a clean break by sending a letter explaining how your business has changed; you’re taking a different direction and will no longer be able to service them.Here is where you want to wish them well in finding a new advisor.

This letter is only for clients who aren’t really clients.You don’t want to recommend alternatives because you don’t want to be involved. But you do want to free yourself from any liability that comes with you remaining the advisor of record.

Keep them within your practice. This is the most popular track with advisors, although it isn’t necessarily the best for clearing bandwidth.This is where a joint production number is created with a junior advisor (often more than one) who is now responsible for managing these smaller client relationships for a percentage of the production.

The challenge with this approach is that although you’re not personally managing the relationship, your support staff is likely to remain involved, and your name is still on the statements.In other words, for the small amount of revenue generated by these bottom tier clients, you’re still legally on the hook if any problems occur.On top of that, you’re now managing a junior advisor.

We recommend this track only when there is enough revenue to justify both the legal exposure and time and attention these clients will require of your support staff.In other words, these clients aren’t really bottom tier since they’re still profitable.

To make this annual inventory exercise practical, you must take the time to categorize your smaller clients beyond the reports generated by your firm.Most likely they will fall into one of the following categories: clients who aren’t really clients (you don’t even know who they are); clients who still are clients; clients who are directly connected to a top client or COI; and clients you simply don’t want.

Yes, I can hear what you’re thinking: “What if you’ve never talked to them and don’t know whether or not they have any potential?” Well, then they’re not really a client.If you want, you can call them and profile their potential over the telephone.We don’t consider this a good use of an elite advisor’s time; this should be a carrot left to the advisor taking over these relationships.

The first time this annual inventory exercise is tackled, it’s a bear—emotional hard work.But from then on, this annual inventory exercise becomes much easier; the categorization of clients is ongoing, you’re familiar with the tracks you use to keep your bandwidth clear, and those emotional speed bumps that Michael was wrestling with are gone.

If you are planning to conduct an off-site retreat for year-end, make sure you download a copy of our sample agenda. click here.

Also, if you haven’t already - join The Oechsli Institute’s Group on LinkedIn!

Once again, we want to thank all of you who have e-mailed comments and questions to us. We will continue to do our best to answer each one.

If you would like to learn more, please visit

If you have any topic suggestions or special requests, please contact Rich Santos, publisher of Registered Rep. and Trusts & Estates magazines, at [email protected].

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