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Building the Business 101: Readers Comment on "Saying Goodbye"

Other advisors struggle with client departures.

Veena A. Kutler and Annette F. Simon, 07/05/2007

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 May, we wrote about our experiences with client departures, discussing client engagements we had resigned, as well as clients who decided to leave our practice for various reasons. That column generated a lot of feedback, some of it heated, and of sufficient interest to allow us to dedicate this month's column to discussing our readers' views. Next month, we will continue the topic as previously planned by writing about prospective clients who don't advance past the initial consultation meeting.

Background
When we began writing our monthly column last year, we set out to fill a niche--practice management articles written by practitioners actively engaged in growing a financial advisory firm. There was plenty of practice management advice offered by consultants, former advisors, and advisors with mature, stable practices. We try to speak from the point of view of owners and managers who are in the trenches of a growing business--facing daily challenges and making occasional mistakes. We also try to cover topics that are significant in the growth and development of a successful financial advisory business, but seldom addressed (perhaps because of their sensitive nature), including client relationships that don't work out.       

As we finished May's column, we wondered if it might push some readers' hot buttons. As columnists, we need to be brief and concise in our articles while focusing on the advisory viewpoint. It occurred to us, though, that our tone could be misinterpreted by some and that our comments might be considered cavalier toward clients. As you read on, you will see that this is indeed how at least one reader saw our column. Happily, reader response to the "Saying Goodbye" column has been overwhelmingly positive. Many advisors welcomed a frank discussion of this touchy subject and generally agreed with our conclusion: An advisory practice needs to make tough decisions, establish rules and--while placing the client first--value its own viability and long-term growth. It turned out to be our most popular column to date--rising to the No. 1 spot on MorningstarAdvisor's most read articles list for more than a week and continuing to stay near the top of that list at this writing. That's practically a lifetime in the Internet world!

Readers' Comments
Most advisors we heard from thanked us for sharing our practice management approach and confessed that they too struggle with similar issues. We have excerpted some comments below: 
 
A reader named Steve wrote:

"Thanks for your insights. It never ceases to amaze me, after spending 24 years in this mostly wonderful field, the amount of constant review, re-education, evaluation, and 'tweaking' that is necessary. Although our firm has three principals (all CFPs), four associate advisors (one CFP), and five support staff, we seem to continually 'fall into the client acquisition trap.' We have our set minimums, but circumstances often dictate our choices vs. your 'key learning'...never waiver."

Steve continues on to say that his firm is considering dropping its insurance practice and transitioning to fee-only.  He asked for our opinion on this.

Since none of us at Garnet began on the brokerage side of the business we can't speak specifically to the challenges of giving up commissions.  However, we do believe that adopting a fee-only business model will bring more focus to Steve's firm which appears to be what he is hoping to accomplish. In our experience, clients understand the benefits of the fee-only approach and feel we are really on their side because their fees are our sole source of compensation. 

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