In a recent Pershing survey about financial advisors’ time management, advisors said they would fire an average of 13% of their clients. Mainly they worry about these clients’ effect on profits (or lack thereof), or about the time they must spend with these people or the clients’ attitude. (Who wants to deal with somebody who is high-maintenance?)
According to the survey, 19% of advisors in the bank and insurance channels said they would fire their clients, while 12% of advisors at independent RIAs and broker-dealers would and 11% of advisors at the wirehouses would.
But “would fire” and “will fire” are two different things.
“I don’t think advisors do it that often,” says Kim Dellarocca, Pershing’s head of practice management and segment marketing. But if advisors don’t sometimes cull their client lists, they end up with time management problems, she says.
“Firing” is a provocative, if not harsh, word, and “transitioning” clients has a better ring. Either way, Dellarocca says it makes sense for advisors to evaluate which clients are still a good match for them, particularly if their practices have evolved to focus on a certain niche—say, doctors.
Dellarocca says advisors should use the “80-20” rule, which presupposes that 80% of a firm’s profits come from 20% of its clients. They must ask themselves: What role do the unprofitable 80% of clients still serve? And can advisors build their businesses around the profitable 20%?
Cutting ties with clients isn’t easy. How you do it is important, Dellarocca says.
“You can explain to them how your business has evolved, and that you’re focusing on getting them to a place where they can be served best.” Advisors might hand over a client to a junior advisor at their firm, for example, or transition the client to another firm.
The online survey of 357 advisors, entitled “Time is Money: Advisors Could Use More Hours in a Day,” was conducted by Harris Interactive.