The client takeover

Is swooping in to rescue an abandoned client the right thing to do? And if so, when is the right time to do so? Advisors share their thoughts on this controversial topic.

Advisors are sometimes forced to make that tough decision and drop a client. But, what happens when another advisor – all eyes on opportunity – swoops into the rescue?

Dropped clients may be left scratching their heads, feeling like flocks without a shepherd, but all is not lost for them. Once back on the market, they are fair game for another advisor, who may be more apt to take them on.

But is this practice a conflict of interest for advisors?

“Absolutely not,” says Bill McElroy of the William Douglas Group Inc. “If an advisor drops a client for whatever reason, I do not think the new advisor should be concerned at all about taking on the new client. But I would dive deeper into why the relationship ended with the other advisor before I would consider taking on the client.”

Dropping clients isn’t an easy decision, nor is it one that advisors should take lightly. But as McElroy explains, these kinds of decisions are often commonplace in the industry.

“As your business grows, your time becomes more valuable, and it is only natural for advisors to reconsider the relationships they have with some of their clients,” he says.

There are a number of reasons why an advisor would do so, and just as many things to consider before pulling the plug.

Often, the client-advisor relationship influences the advisor’s decision to let the client go and reduce his/her book size. “There might be issues between the advisor and the client,” says David Spence of Canfin Financial Group. “They might not be getting along, or the client might not be taking recommendations or second-guessing (the advisor).” (continued.)


But that’s not always the case, especially with smaller clients, who tend to be more respectful of the advisor, their time and advice, McElroy says.

“I myself still have many smaller clients that have been with me from the start, and I would never consider sending them away unless the relationship became toxic,” he says. “Most smaller clients respect your time and realize they are not big accounts.”

Timing can play a key role when coming to a ‘lost’ client’s rescue? Spence recommends first establishing whether you and the prospective client are on the same page. The last thing you want to do is take someone on, who has already lost an advisor, to find out you are not the right match either. It’s about “discovering whether or not they can do the same things to satisfy the client,” he says.

In general, McElroy says there is no stigma against dropping a client, as long as the, perhaps, unexpected news is delivered in a professional manner.

“People understand that they may be better served elsewhere, if they are not a good fit. It’s really better for everyone; you just have to handle the situation properly.”

Spence, agrees, adding that the personal approach often works best. “I would say that a personal phone call, followed up by a written letter would be the best practice in this case,” he says.

To appease the situation, McElroy suggests sending the client on their way with a few referrals to replace you and your advisory services.

"If someone has been with you for a long time, I think you owe them this courtesy at the very least,” he says.

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