Patrick Dougherty, the founder and president of Dougherty Wealth Management, says frustrations emerge when advisors are not selective in choosing clients. A bad client creates tension not only for the advisors but for all staff members who come in contact with him.
Dougherty's advice is to be discerning when considering prospects in these five groups:
1. Doctors. "You have to work with them so they believe it is their idea, so they come up with the decision you want them to come to," says Dougherty. While not all doctors are like this, it is common to hear advisors describe doctors as "know-it-alls" or people with a "God complex" who think they are better than you.
2. Engineers. Dougherty finds this group to be more high maintenance than others. "They want to know every detail," he says. "If you are really good explaining things, they might be OK to work with, but they have the question 'why' all the time." He maintains that it is easier to work with this personality type when you recognize it and know what the client expects.
3. Inheritors. People can develop an entitlement attitude when they grow up with wealth and be difficult clients, especially if they belong to the generation that didn't build that wealth. Dougherty explains, "The first generation worked to earn money and respect their wealth. They want to hire someone to help them keep it. Some of the second-generation children also worked for the wealth [and they hold the same values.] Trust fund kids don't understand the value of money. They just want to know how much they can pull out to live their lifestyles."
4. PITAs. This group is affectionately known throughout the industry as the "pain in the @$$" clients. "It is never worth making the revenue you are making off of them, as they are just trouble. They are just not very nice," says Dougherty. "I left them all at Merrill Lynch, as they are the opposite of what a planner wants." The sooner you can recognize a PITA client and show him the door, the better off the firm will be.
5. Windfallers. These are people who come into a lot of money suddenly: lottery winners and young athletes, for example. Those who did not earn their money and now live above their means usually do not have enough to save. He believes the withdrawal rate of 4% or less is a relatively safe play for not running out of money. But even with that type of advice, some individuals just do not have the discipline and are not worth keeping.
The General Rule For Keeping Clients
Dougherty's secret to knowing who to work with comes down to 1.) time, 2.) expertise and 3.) desire. If he sees prospects that are missing just one of those three factors, he can add value. "You are not going to keep a client long term if you are not providing value," Dougherty says. "Every time I brought on a client that had all three things, it didn't work out well." Dougherty admits that these are principles of Nick Murray's that he learned years ago, adding, "It has worked really well."
Who Not To Take On As Clients
There are exceptions to every rule, and this article is not meant to advise discriminatory profiling. However, it is helpful for advisors to know they should not take on every prospect just because he has a pulse. They should be selective, since their decisions not only impact the bottom line, but also their happiness, which might mean more in the long run.
Mike Byrnes founded Byrnes Consulting to provide consulting services to help advisors become even more successful. His expertise is in business planning, marketing strategy, business development, client service and management effectiveness, along with several other areas. Read more at www.byrnesconsulting.com.