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Building the Business 101: Saying Goodbye to Clients

Lessons we've learned when clients leave--on their own or at our request.

Veena A. Kutler and Annette F. Simon, 05/24/2007

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.

Into each advisor's life step clients who are on board for a while and then move on, as well as prospective clients who never make it past the initial consultation stage. In this article, we explore our experiences with client departures. Next month, we will discuss prospective clients who never become clients either by their choice or by ours.

Saying Goodbye
If only we had stepped into this business five years ago knowing that 1) not every client is a good fit for our practice and 2) it is our job to set realistic expectations of what our service is and is not. Perhaps, then, we would never have lost or "resigned" a client. But in reality, we started out eager to build our business and to fashion our service to please every potential client who walked in the door. The predictable result was that we ended up working with a number of clients who were either unprofitable for us or less than fully satisfied with the service we provided, because they were constantly expecting something more or different than what we were doing.

Over the years, through trial and error, we've learned a lot about defining and communicating our service, identifying clients who are a good fit and keeping them happy over time. We have also accepted that no matter how perfectly we refine our service and set expectations, people's lives and minds change and having some clients leave is to be expected.

In our years of practice, clients have come and gone for a variety of reasons. Each time we've lost a client, we've learned something new, and the result is that we have developed a fairly well-defined client departure process.

Clients We "Resigned"
About two years into our partnership, we realized that the service we were providing was beyond the needs and capacities of some of our clients. We had refined our process and begun to focus our expertise and services on a single service: comprehensive planning and asset management for all clients. One-time plans and short-term engagements were no longer offered to prospective clients, as we poured our energies into serving a small client base comprehensively. This service demanded extensive work on our part, but was what our target market needed and sought.

The business grew steadily, and we began to impose higher minimum fees for new clients out of necessity. Raising our fee minimums seemed to be the only reasonable way to manage our limited resources--time and money. By doing so, we restricted our client base to those we could profitably provide our comprehensive service to and generated the revenue we needed to hire staff to help with our demanding workload.

Unfortunately, close to a third of our existing client base at the time was paying less than our new minimum. And in several instances, these less profitable clients were also demanding more resources than our newer clients who had signed up for a service that had been more clearly defined and understood in the initial consultation process.

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