If there’s one thing in life that’s never easy, it’s saying good-bye.
The process isn’t any easier for advisors, who are sometimes forced to drop one or more of their clients.
There are several reasons why this might happen, says one industry veteran.
An advisor-client relationship might end “if the client wasn’t being forthcoming with all of their financial information, or not allowing the planner to do a full analysis of their finances,” says Léony deGraaf of deGraaf Financial Strategies.
But the onus isn’t always on the client’s willingness to disclose information. For some advisors, a client might be dropped if they fail to meet some of their advisor’s own requirements.
“Some advisors have a minimum account size,” says deGraaf, one of WP’s Top 50 Advisors. “As their books and account sizes grow, they may drop some of their smaller account holders.”
Just as is the case with other aspects of the industry, there is a best practice for advisors to inform their clients that the honeymoon is over.
“It definitely needs to be done formally in writing,” deGraaf says. “I would state the reasons for the relationship not working out as planned, and I would ensure that the client receives that in a timely manner. I would probably send it via registered mail so that I would have some verification that the client did receive it.”
The advisor must also be prepared to face questions from the ex-clients, as they may react negatively to the news
. They must do so in a professional manner and offer alternatives if possible, suggests deGraaf.
“If a client were to respond negatively to that, I would try and perhaps find another advisor who would more suitable for that client, whether it be a junior advisor to take over smaller accounts, or another place to look for an advisor,” she says.
Eliminating clients from their books can ultimately be avoidable for advisors. It’s often a question of whether or not the relationship will function from the start.
“I think ensuring that you and the client have a good fit right from the get-go is the most important way to avoid this,” says deGraaf. “Your level of engagement should formalize what the relationship is going to be, which will hopefully avoid any speed bumps at that stage of the plan, rather than further along in the relationship.”