When Bloomberg Wealth Manager magazine was launched in September 1999, I wrote a cover story called "How To Fire A Client." This idea certainly didn't originate with me. But over the last decade, it's become what I call, for lack of a better word, one of the "truisms" of financial planning: Every year you should fire your least profitable clients.
But today, many of these truisms are being questioned or even turned on their heads. It struck me the other day when I was interviewing Doyle Brown, a financial advisor in Reno, Nev., for a life planning book I'm working on with George Kinder. One of the first things Brown told me is that he often finds himself hearing bad advice at conferences. One idea he doesn't like is that planners should give their clients grades and eliminate those who don't get at least a "C." Brown has no asset minimum and has never fired a client for any reason other than being a pain in the neck. He continues to accept clients with assets under $50,000, as well.
After talking with him, I figured there might be other "truisms" that have turned into "contrarianisms." Sure enough. Dave Drucker in Albuquerque, N.M., whom I consider a trendsetter in financial services, tells me that even though larger has been recently considered better, a "sole practitioner" can indeed operate a very successful business that can also help her create the life she wants for herself.
I wondered if this means financial advisors are getting soft, that they are less the hard-edged businessmen and women they were a decade ago, eager to build big businesses with large infrastructures and complex succession plans.
More likely it means no one formula is sacrosanct today. More advisors are gaining the strength and confidence to set their own agendas, to develop "lifestyle practices" if it suits them, or to keep their practices small, something that Mark Hurley has questioned since he began publishing his studies on the future of the financial advisory business a decade ago. Hurley concludes that bigger is almost always better and that joining several large practices into an enormous network is better yet.
As I continued to interview advisors, I asked them for some "contrarianisms" and was rewarded with a few:
You don't have to have a succession plan. One planner told me she believes she can make a reasonable retirement income out of a declining practice. She plans instead to ratchet out of the business like a lawyer or accountant does. I hear some of you crying that that's immoral-that she's leaving her clients stranded.
I don't agree. Whenever I've been "handed off" by my dentist or doctor or even a yoga instructor to a successor, I've resented it and have never been happy with the replacement. (One time, unbeknownst to me, a cleaning lady I used found replacements and charged each one a finder's fee.) So I've always ended up searching for someone new myself.
Don't look only at top-end clients. Some of them can be a real pain. Also, they can be inefficient because they take a lot of your time and often demand you add services that may not suit you. Which brings me to the next point.
Avoid "service creep." Multifamily offices provide dozens of services. But that doesn't mean you have to. Don't keep adding services, letting your mission get bigger and bigger, just because a client wants them. You are the one deciding what's on the menu, whether it's financial planning, investments, life planning or insurance. It should be something you enjoy spending time with.