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Building the Business 101: Never Getting Past Hello

Despite initial screenings, sometimes prospective clients choose to go elsewhere. The reasons vary, but they highlight how important it is for both the planner and client to find the right fit.

Veena A. Kutler and Annette F. Simon, 07/26/2007

This monthly series of articles describe the many steps and occasional missteps we have taken in building our financial advisory business, Garnet Group LLC. Currently, Garnet has eight staff members, more than 90 clients, $300 million in client net worth under advisement, and offices in Bethesda, Md., and Boston. Veena Kutler, CFA, and Annette Simon, CFP, are the principals managing the Garnet office in Bethesda.

In our May column, "Saying Goodbye to Clients", we wrote about clients who left our practice--either by our choice or by theirs. This month, in response to reader requests, we discuss prospective clients who met with us but did not become clients.

We've all had prospective client meetings that have not ended in new client relationships. Sometimes, during the preliminary phone screening it becomes obvious that there is no fit. At other times, the initial screens indicate a potential fit, but during a face-to-face introductory meeting, we feel a lack of chemistry or a mismatch between the expectations of the two parties. And there are prospective clients who appear to like us, to understand and want our service, but who decide against working with us. Often, this last group has left us scratching our heads wondering what went wrong.

Our Prospective Client Process
Regular readers of our column know we have adopted much of the E-myth philosophy;  whenever possible we develop systems and repeatable action sequences for handling recurring needs and events. Since we regularly receive phone and e-mail inquiries from new prospective clients, it only made sense to create a standardized method for managing  client qualification and sales (yes, we know "sales" is a dirty word). Our steps are:

1. Initial telephone screening
When potential clients call, our client service manager, Andrea, provides a brief description of our services and invites them to take a look at our Web site. She informs them that our client relationships include both asset management and financial planning and that generally clients use both these services. While we do not enforce a minimum asset level, we do have a minimum annual retainer fee that Andrea reveals to all prospective clients. She also helps them self-select by explaining that clients with a net worth of $x or more tend to derive the greatest value from working with Garnet. We helped Andrea develop a written script for this exchange. Over time she has become more familiar with the process, and she now handles these calls in a comfortable, conversational manner.

Often, this is as far as things go. The prospective client may say, for example, "$750,000! I wish I had that kind of money," or "I just wanted to work with someone for a couple of hours." If this is the case, we provide referrals to the find-a-planner section of the NAPFA Web site or to colleagues who provide the service they are seeking. The conversation ends efficiently on both sides. When there seems to be a possible fit, Andrea will forward the call to one of us (or schedule a time when we can call them back) for further screening.

2. Client questionnaire
We ask prospective clients to complete a three-page questionnaire prior our initial consultation meeting. Why? We don't charge for this first meeting, which often lasts one and a half to two hours. By gathering some general information ahead of time, we can often identify prospective clients who seem unlikely to benefit from our service. Further, this again allows clients who are not really motivated to work with an advisor (because it involves gathering data and focusing on their finances) to self-select.

3. Initial consultation meeting
Held in our conference room, this meeting provides an opportunity to get to know the client's personal and financial situations and hear the client's concerns. At the same time, we can tell the client about Garnet and our backgrounds, process, and philosophy; we end with an estimate of the annual retainer fee. As mentioned earlier, the meeting can be lengthy, but it provides an opportunity for both parties to get a good sense of the other and assess the fit between us.
4. Follow-up
Within a few weeks after the consultation, Andrea checks in with the prospective client to ask whether they have any unanswered questions. We follow up again a month later, informing the prospect that we hope to have the opportunity to work together but that we don't want to be annoying or intrusive, so we will not call again unless we hear from him or her.

Would-Be Clients Who Wouldn't Be
After conducting many initial consultation meetings together, the two of us have developed a rhythm and a pretty accurate sense of how the meeting is going. Usually, after the meeting we'll discuss the likelihood that  prospective client will choose to work with us. Most of the time we are pretty close in our assessment--but people are all different, and we've made a number of very wrong guesses.

A few who choose not to work with us include:

  • A nice young couple who loved our Web site and our answers to their questions on the phone. They eagerly scheduled a consultation with us. Unfortunately, we had a strike against us when they walked in the door. They noticed that our office building is very close to the headquarters of a large defense contractor--which was politically incorrect in their book.
  • A recent widow who was offended by the inclusion of a co-client line on our initial consultation form. We assured her that it was just a form and that we indeed have single, divorced and widowed clients, but she said it was thoughtless to use a form that reminded her she no longer had a co-client. We sympathized and tried to put her at her ease, but she could not get past her first impression that we were insensitive. Shortly thereafter, we added the words "if applicable" to the co-client line on our form. 
  • Another widow who seemed to like us and to be actively seeking a trusted advisor to help her understand and gain control over her own financial life. She revealed that she had never had the need or opportunity to understand financial matters, which had always been handled by the men in her life--first her father, then her husband, and now her son. She asserted that she was ready to learn and was not certain that her son even had the knowledge needed to advise her well. At the end of the meeting, she told us she planned to sign our agreement and become a client; she was looking forward to working with us and becoming better educated financially. Shortly afterward, however, she called to tell us that her son was appalled that she was hiring someone to provide a service that he could perform for free. The relationship ended before it began.
  • A couple who arrived late for an end-of-the-day meeting and without notice brought along their eight-year-old son. The boy was (rightly so!) bored to tears and the parents distracted--we were not off to a good start. Halfway through the meeting, the executive suite that we were using at the time closed for the day. We were forced to leave the conference room and continue the meeting in the lobby of the building. Needless to say, this was not our finest hour and the meeting did not result in an engagement. PAGEBREAK

Unlike these examples, many times we had no idea why folks we thought would be great clients did not sign on. However, we have begun to follow up with some of the clients who have not chosen us. We simply ask them whether they have chosen to work with another advisor and to shared what factors influenced their decision. By doing so, we've learned that a good number of prospective clients never commit to working with any advisor. Those who chose another advisor have had a variety of reasons: a sense that our service is more than they need or want, the strong recommendation of a friend or colleague, a preference for a different investment style. In the end, they didn't choose us because we're not what they were looking for.

Sometimes, after the initial consultation or early in the relationship, we decide not to work with the client. A few we passed on include:

  • A busy entrepreneur who after becoming a client and beginning to move his money to our management refused to take our phone calls or answer our e-mail. We called and e-mailed him several times but were repeatedly "handled" by his assistant and told that he was busy or traveling. After several weeks, the client called in a fury. He noticed that the market was up and that we had not yet invested his money. When reminded that he had ignored our calls to resolve problems with his account transfer paperwork, he insisted that we should have taken care of things without bothering him. At the time, this was a sizeable client relationship for us, but one that was clearly doomed to fail. As soon as we hung up the phone, we sent him a resignation letter by registered mail and refunded his fee. We knew trouble when we saw it!
  • A woman who seemed to be a good fit and was especially eager to work with a female advisor. Before signing the contract, she wanted to return with her husband, who she warned us could be difficult. We agreed. because we prefer to meet with both spouses before beginning a client relationship. Her husband came to the meeting in attack mode, informing us that we should consider ourselves to be on probation, that we would be required to provide frequent, extensive reports, and should expect his oversight. We interrupted his tirade to inform them that we could not work with them. We did not see a fit between his expectations and our service. The wife burst into tears, and we witnessed a painful marital spat before they finally left. We were very relieved to walk away from that relationship.
  • A young woman whose initial consultation form and conversation with Annette encouraged us to meet with her. Five minutes into the meeting, she revealed that in addition to the assets she had told us about, she had very substantial debt and relatively low income. She was pleasant and personable, and we would have enjoyed working with her, but our minimum fee was far beyond her means. When we explained this to her and offered referrals to advisors more suited to her needs, she insisted that she liked us and was perfectly willing to pay our minimum fee. We stood firm and told her that we couldn't work with her. It just didn't feel right.
  • A corporate executive who after agreeing that he and his wife would like to become clients returned our contract with significant revisions penciled in. After some discussion, we told them that we wouldn't alter our contract and declined to work with them.

In hindsight, could we have made these relationships work? Sure, but each would have required many changes to our process and caused stress. Ultimately, they would have reduced our growth and profitability. Moreover, clients who weren't a fit for our service had the potential to find another advisor who could provide just what they needed. They are better off as well with a more suitable advisor who is pleased to have their business.

Lessons Learned

  • Meeting with inappropriate prospective clients wastes your time and theirs.  Screen, screen, screen.
  • It may not be you and it may not be them. Not every new or prospective relationship works. Identify mismatches early and move on.
  • Let prospective clients know that you are interviewing them as they are interviewing you.  It's expensive in terms of time, stress, and potential liability to take on a client who really doesn't fit.
  • Don't be afraid to follow up with prospective clients who did not choose to work with you. They can provide valuable information that might make a difference the next time a similar client walks in your door.
  • Life is much more pleasant to both the planner and client when the fit is right. Slower growth is okay if it means the right growth.

We Want to Hear from You
E-mail us at dc@garnetgroup.com and share your comments. Unless otherwise specified, all comments are on record, may be used in future columns and be attributable to you. In addition, let us know about practice management topics you would be interested in having us explore in future columns.

Our next topic, suggested by a colleague, will be explored in our next two columns. We will discuss different approaches to client relationship management in an office with several professionals: service by a team or by one advisor. We will first discuss our approach in the two Garnet offices. In the following month, we will see how other planners handle these logistics.

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