Other advisors struggle with client departures.
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.
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!
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.
Steve and others considering this transition should visit the NAPFA site to see when they are running their Basic Training and Transitioning to Fees sessions. Typically both are held several times each year in a variety of locations.
Warren Mackensen, a veteran NAPFA-registered financial advisor and the developer/owner of the ProTracker CRM system, wrote to say that he enjoys our column and agrees whole-heartedly with our client termination process. He also provided an excellent suggestion that we plan to implement in the future:
"The only thing that I would add is that we give our clients a Client Task List from ProTracker that shows all the open items that we recommended but were not accomplished while they were clients. That way, they cannot come back to us at a later time and say that we didn't get something done. If something was not done, it generally is because they didn't act on the recommendation while they were our client. They also know what they need to act on while they move ahead in life."
Not a Fan
We received a lengthy e-mail from Russell:
"While I agree with the basic concepts in this article, experiences and policies, I differ significantly on philosophies and execution. This is based on my 35 years in the financial services industry. I find the tone of your firm's perspective to be one where the client's needs are secondary to the firm's needs. I would never terminate a client relationship over the phone, any more than I would begin a relationship with a client over the phone. (Is one more important than the other? Think about it from the client's perspective.) This struck me as a way to duck out of fully confronting the task at hand. Remember, this is a client you agreed to take on. Step up to the plate a second time if you need to end the relationship."
All of our in-person client meetings are conducted during business hours and at our office. In order to attend, our clients have to take time off work, arrange for child care and otherwise disrupt their normal schedules. In view of these factors, we feel it is more considerate to make phone calls rather than asking clients to come in so that we can terminate the relationship. On the flip side, we have a few clients who are located outside of the Washington region, and others who are too busy to travel to us. We meet regularly with these clients by phone and feel that they are receiving the same benefit from our work together as those clients who come to us for in-office meetings. Bottom line, from our perspective, phone calls are not necessarily inferior to face-to-face meetings.
He also writes:
"It really left me scratching my head on how you could be qualified to do the important work you do for your clients. There was a lack of basic common sense in how you initiated your practice, and I think that there are some remaining applications of common sense that still need to be implemented at your firm."
Russell goes on at some length to discuss aspects of his practice and his approach to client relationships. He works hard to get to know his clients, show them that he really cares about them as individuals, not as accounts, and to be there for them and their families in times of need. It struck us that his attitude toward his clients actually sounds much like ours, and we commend him for it.
With regard to the tone of Russell's lengthy e-mail, we were taken aback by what at first glance appeared a diatribe. No one likes to be attacked or insulted. However, after reflection, we concluded that some of his negative comments reflect misinterpretation of our practice; others suggest an old-school attitude that dictates advisors must maintain a façade of expertise at all costs and can't admit to a lack of knowledge in any arena.
We are, in fact, very willing to admit that despite our combined 30-plus years of financial service experience, and many years of schooling, there are things that we don't know. Sometimes it seems that the more we learn, the more we realize the magnitude of our ignorance! Each of us, as advisors, parents (in our cases), and human beings, grows and learns over time, to the benefit of our clients, our colleagues, our families and our lives. In five years of running our business together, we think we've come a long way--but we know we have much further to go. Our whole purpose in writing our column is to share our growth process with others and to open up an exchange that allows the profession to learn from all of our shared struggles and successes.
If it takes a village to raise a child, it surely takes a community to grow and refine an advisory practice and to build a profession. We certainly don't have all of the answers, but we'll do what we can to keep the conversation going.
Please keep your comments coming our way. We may not be able to respond individually but will try to do so in our column. Let us know when you write if we have permission to quote you by name. You can reach us at firstname.lastname@example.org.